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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number 001-39782

 

4D Molecular Therapeutics, Inc.

(Exact name of Registrant as specified in its Charter)  

 

Delaware

47-3506994

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5858 Horton Street #455

Emeryville, CA

94608

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (510) 505-2680

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

FDMT

 

The Nasdaq Global Select Market

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  No 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth 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 pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 

The registrant was not a public company as of June 30, 2020, the last business day of its most recently completed second fiscal quarter, and therefore, cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date. The registrant’s Common Stock began trading on the Nasdaq Global Select Market on December 11, 2020.

The number of shares of Registrant’s Common Stock outstanding as of March 15, 2021 was 26,692,879.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement relating to the 2021 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. The proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2020.

 

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I

 

 

Item 1.

Business

1

Item 1A.

Risk Factors

72

Item 1B.

Unresolved Staff Comments

136

Item 2.

Properties

137

Item 3.

Legal Proceedings

137

Item 4.

Mine Safety Disclosures

137

 

 

 

PART II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

138

Item 6.

Selected Financial Data

139

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

140

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

152

Item 8.

Financial Statements and Supplementary Data

153

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

153

Item 9A.

Controls and Procedures

153

Item 9B.

Other Information

153

 

 

 

PART III

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

154

Item 11.

Executive Compensation

154

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

154

Item 13.

Certain Relationships and Related Transactions, and Director Independence

154

Item 14.

Principal Accounting Fees and Services

154

 

 

 

PART IV

 

 

Item 15.

Exhibits, Financial Statement Schedules

155

Item 16

Form 10-K Summary

158

 

 

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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:

 

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;

 

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

 

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

 

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

 

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

 

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

 

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

 

the timing or likelihood of regulatory filings and approvals;

 

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;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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;

 

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


ii


 

 

 

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

 

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

 

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

 

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

 

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

 

our financial performance; and

 

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

 

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 Annual Report on Form 10-K 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K.

 

 

 

 

iii


 

 

PART I

Item 1. 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 goals 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 the second half of 2021.

We believe our competitive advantages, combined with our highly experienced team, help to position our company to create, develop, manufacture and, if approved, 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.

1


 

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. We have not compared our targeted and evolved vectors to conventional AAV vectors in patients in clinical studies.

As we advance through clinical trials, we plan to evaluate the following potential design features of our targeted and evolved vectors and product candidates:

 

Tolerability:    Well-tolerated therapies with a low inflammation profile, low dose requirements and routine, safe routes of delivery

 

Biologic activity:    Effective delivery to targeted tissues, efficient transgene expression in targeted tissues, and/or resistance to neutralization by pre-existing antibodies

 

Routine routes of administration:    Routine, well-tolerated and minimally invasive routes of administration, including intravitreal, aerosol and intravenous delivery

 

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.

§ The Research stage involves (1) defining the Target Vector Profile then deploying Therapeutic Vector Evolution with our capsid libraries in non-human primates (NHPs) and using competitive selection to identify targeted and evolved vectors from our libraries that demonstrate the strongest match to the Target Vector Profile; then (2) optimizing our product candidates using the lead vector by conducting 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.

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 expect to report initial clinical data from this trial in the second half of 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. 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.

3


 

 

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 disease product candidate specifically designed to treat cardiomyocytes. We expect to report initial clinical data from this trial in the second half of 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.

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.

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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.

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

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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 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:

 

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.

 

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.

6


 

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 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.

 

2.

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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3.

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 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:

 

Targeted delivery to specific tissues by routine, well-tolerated and minimally invasive routes of administration

 

Improved transduction of target cell types and tissues

 

Lower toxicity with reduced inflammation

 

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.

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

9


 

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.

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. We have not compared C102 to AAV8 or AAV9 in patients in clinical studies.

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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 immunofluorescence 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 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.

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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.

 

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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 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

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cell specificity and strength in order to maximize tolerability and/or biologic activity, as 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 rational 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.

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.

 

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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.

§ The Research stage involves (1) defining the Target Vector Profile then deploying Therapeutic Vector Evolution with our capsid libraries in non-human primates (NHPs) and using competitive selection to identify targeted and evolved vectors from our libraries that demonstrate the strongest match to the Target Vector Profile; then (2) optimizing our product candidates using the lead vector by conducting 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 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. Enrollment has been completed in the dose escalation phase of this study, with six patients treated. The dose expansion phase of this study will enroll patients at the highest Phase 1 dose of 1E12 vg/eye. 4D-125 has been well tolerated without any dose-limiting toxicities. We expect to report initial clinical data in the second half of 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.

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Our product candidate, 4D-110, is enrolling patients in an ongoing Phase 1 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 in our natural history study, in which we have enrolled 55 patients, and have followed 47 of these patients for at least two years. Enrollment has been completed in the dose escalation phase of this study, with six patients treated. The dose expansion phase of this study will enroll patients at the highest Phase 1 dose of 1E12 vg/eye. 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 adRP. We expect to initiate IND enabling studies for 4D-135 in 2021.

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

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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 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 clinical trial. This is a dose-escalation and dose-expansion 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. Enrollment has been completed in the dose escalation phase of this study, with six patients treated. The dose expansion phase of this study will enroll patients at the highest Phase 1 dose of 1E12 vg/eye. 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. We expect to report initial clinical data from this trial in the second half of 2021.

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

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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 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.

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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.

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. This is a dose-escalation and dose-expansion 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. Enrollment has been completed in the dose escalation phase of this study, with six patients treated. The dose expansion phase of this study will enroll patients at the highest Phase 1 dose of 1E12 vg/eye. 4D-110 has been well-tolerated and has not resulted in dose-limiting toxicities. 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.

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

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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.

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

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dose therapy that could provide long-term efficacy in patients for whom compliance, or treatment resistance, is a problem.

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. In addition, in vitro studies of R100 versus AAV2 have shown superior transduction by R100 on human retinal cells. We have not compared R100 to AAV2 in patients in clinical studies. 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). In addition, R100 vector-based product candidates 4D-125 and 4D-110 have been administered to twelve patients at doses up to 1E12 vg/eye without dose-limiting toxicities or serious adverse events observed to date.

 

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

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remained off steroids for the remainder of the study. No adverse findings were reported in-life through 12 months of follow up. We demonstrated sustained transgene expression through detection of anti-VEGF activity in serial aqueous humor samples. 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 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) with evidence of sustained transgene expression through detection of anti-VEGF activity in serial aqueous humor samples.

 

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† 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 is ongoing in the retinal laser-induced CNV model in NHPs to assess efficacy, toxicology and biodistribution.

Development Plan

We expect to initiate a clinical trial in the second half of 2021.

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

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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.

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.

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Our lead product candidate, 4D-310, is currently in an ongoing Phase 1/2 clinical trial in adult patients with 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 as well as severely affected late-onset patients, including those with cardiomyopathy. We expect to report initial clinical data in the second half of 2021. 4D-310 received Fast Track Designation from the FDA in the 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 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.

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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 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.

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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.

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%.

 

 

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WT = wild type

KO = Fabry knock out mouse model

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 1.9-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 1.9-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

We are currently enrolling patients on a Phase 1/2 clinical trial. The first patient dosed in the first quarter of 2021. This is a dose-escalation and dose-expansion trial expected to enroll early onset classic Fabry disease patients and severely affected late-onset patients 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 the second half of 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 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

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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 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.

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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 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.

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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.

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

Isc = short circuit current, a measurement of Cl- movement through cell membranes

µA = microAmp

cm2 = square centimeter.

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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.

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.

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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.

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

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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 disease.

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), 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

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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 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 March 15, 2021, our solely owned patent portfolio includes seven pending U.S. non-provisional applications, seventy-one pending foreign applications, ten allowed foreign applications and six granted foreign patents. We expect that United States and European patents and the patent applications, 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.

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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 March 15, 2021, our in-licensed patent portfolio includes five granted U.S. patents and nine granted foreign patents or allowed foreign applications; each of these patents is expected to expire between June 2024 and June 2029. Our in-licensed patent portfolio also includes seven pending U.S. non-provisional patent applications and thirty-eight 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.

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

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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, sublicensable, 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”).

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 to 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,

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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.

Under the Amended and Restated uniQure Agreement, we granted uniQure an exclusive, sublicensable, 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, sublicensable, 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 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 uniQure 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

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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 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”) with one of the agreements covering AAV2 capsid mutants with novel properties for enhanced performance in gene therapy and the other covering AAV for enhanced gene delivery in the presence of neutralizing antibodies. Under both UC Agreements, the UC Regents granted us an exclusive, sublicensable 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

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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 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”), except in the event of a change of control transaction occurring prior to Acceptance or Acceptance occurring after April 29, 2026. 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. 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. Under the terms of the Funding Agreement, neither the $10.0 million investment in the Series C redeemable convertible preferred stock nor the $4.0 million of funding upon Acceptance are restricted as to withdrawal or usage.

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 and

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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:

 

completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s GLPs;

 

submission to the FDA of an IND which must become effective before clinical trials may begin;

 

approval by an IRB or ethics committee at each clinical site before the trial is commenced;

 

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;

 

preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials;

 

satisfactory completion of an FDA Advisory Committee review, if applicable;

 

a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

 

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

 

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 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.

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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:

 

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.

 

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.

 

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 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

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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 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

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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 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

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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.

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 may 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 Choroideremia 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.

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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;

 

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.

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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 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

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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 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 government 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.

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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 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

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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.

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

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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 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 December 31, 2020, we had 83 full-time employees. Of these employees, 61 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.

Corporate Information

We were formed on September 12, 2013 as a Delaware limited liability corporation under the name 4D Molecular Therapeutics, LLC. On March 11, 2015, 4D Molecular Therapeutics, Inc. was incorporated as a Delaware corporation. On March 20, 2015, 4D Molecular Therapeutics, LLC merged with 4D Molecular Therapeutics, Inc., with 4D Molecular Therapeutics, Inc. being the surviving entity. Our principal executive offices are located at 5858 Horton Street #455, Emeryville, California 94608, and our telephone number is (510) 505-2680.

Available Information

Our website address is www.4dmoleculartherapeutics.com. The information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K. The U.S. Securities and Exchange Commission (“SEC”) maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) are also available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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Item 1A. 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 Annual Report on Form 10-K, including our financial statements and the related notes and the section of this Annual Report on Form 10-K “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.

 

Risk Factor Summary

 

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. The following is a summary of the principal risks that could materially adversely affect our business, results of operations, and financial condition, all of which are more fully described in the section titled “Risk Factors.” This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.

 

 

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

 

We will require substantial additional capital to finance our operations. If we 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 or future commercialization efforts.

 

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.

 

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.

 

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

 

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.

 

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 substantially harmed.

 

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.

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

 

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.

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 $56.7 million and $49.3 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $135.7 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.

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;

 

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

 

continue our research and discovery activities;

 

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;

 

change or add additional contract manufacturers or suppliers;

 

seek regulatory approvals and marketing authorizations for our product candidates;

 

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

 

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

 

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

 

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

 

attract, hire and retain qualified personnel;

 

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

 

meet the requirements and demands of being a public company;

 

defend 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.

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.

We will require substantial additional capital to finance our operations. If we 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 or future commercialization efforts.

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 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 funding.

As of December 31, 2020, we had $276.7 million in cash and cash equivalents. Based on our current operating plan, we believe that our existing cash and cash equivalents will allow us to fund our planned operations for at least one year from the date of the issuance of the financial statements included in this Form 10-K.

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

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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:

 

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

 

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.

 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.

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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:

 

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;

 

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

 

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

 

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

 

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;

 

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

 

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

 

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

 

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

 

future accounting pronouncements or changes in our accounting policies.

For example, most of our collaboration and license revenue for the year ended December 31, 2020 was 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.

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

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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 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.

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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 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 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.

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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:

 

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

 

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;

 

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;

 

the COVID-19 pandemic, which has and in the future may continue to result in 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;

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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 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.

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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. Disruptions due to the COVID-19 pandemic that have and may in the future impact our business 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;

 

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;

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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, including the spread of new variants that have proven to be more contagious and deadly. 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 (such as the prevalence of new variants), 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 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;

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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;

 

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

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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

 

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

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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.

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.

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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 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.

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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 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

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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 funding 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, 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.

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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:

 

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

 

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;

 

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

 

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

 

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

 

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

 

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.

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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;

 

the potential and perceived advantages compared to alternative treatments;

 

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

 

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

 

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;

 

restrictions on how the product is distributed;

 

the timing of market introduction of competitive products;

 

publicity concerning our products or competing products and treatments;

 

the strength of marketing and distribution support; and

 

the prevalence and severity of any side effects.

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

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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.

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

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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.

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:

 

reduced control for certain aspects of manufacturing activities;

 

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

 

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.

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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.

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

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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;

 

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;

 

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;

 

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.

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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 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

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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.

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:

 

issue warning letters;

 

impose civil or criminal penalties;

 

suspend or withdraw regulatory approval;

 

suspend any of our clinical trials;

 

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

 

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

 

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

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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 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

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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 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:

 

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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