Overview
We are building a fully-integrated biopharmaceutical company focused on developing innovative cellular immunotherapies for the treatment of cancer. Founded on the vision that the use of human cells as therapeutic entities will drive one of the next important phases in medicine, we are developing cell-based cancer immunotherapies based on our CAR and high-affinity TCR technologies to genetically engineer T cells to recognize and kill cancer cells. We have shown compelling clinical responses in clinical trials using multiple cell-based product candidates to address refractory B cell lymphomas and leukemias, and we also have a number of ongoing trials exploring our platform in solid-organ cancers and in combination with various strategies to overcome the immune-suppressive effects of cancer. Longer term, we aim to improve and leverage our cell-based platform to develop additional product candidates to address a broad range of cancers and human diseases, including moving forward our preclinical product candidates that target additional hematologic and solid-organ cancers.
Cancer is a leading cause of death in developed countries. Cancer is characterized by the uncontrolled proliferation of abnormal cells. Cancer cells contain mutated proteins and may overexpress other proteins normally found in the body at low levels. The immune system typically recognizes abnormal protein expression and eliminates these cells in a highly efficient process known as immune surveillance. Cancer cells’ ability to evade immune surveillance is a key factor in their growth, spread, and persistence. In the last five years, there has been substantial scientific progress in countering these evasion mechanisms using immunotherapies, or therapies that activate the immune system. Immunotherapies are increasingly recognized as an important part of today’s frontier in the treatment of cancer.
A central player in cancer immunotherapy is a type of white blood cell known as the T cell. In healthy individuals, T cells identify and kill infected or abnormal cells, including cancer cells. We leverage two technologies—CARs and TCRs—to activate a patient’s own T cells so that they attack cancer cells. Through genetic engineering, we insert a gene for a particular CAR or TCR construct into the T cell that enables it to recognize cancer cells. Our CAR technology directs T cells to recognize cancer cells based on the expression of specific proteins located on the cell surface, whereas our TCR technology provides the T cells with a specific T cell receptor to recognize protein fragments derived from either the surface or inside the cell.
We are investing substantially in manufacturing processes that we believe will be commercially scalable for both CARs and TCRs, and have established a Juno owned and operated manufacturing facility in Bothell, Washington, that is manufacturing clinical trial material for certain of our clinical trials. We harvest blood cells from a cancer patient, separate the appropriate T cells, activate the cell, insert the gene sequence for the CAR or TCR construct into the cell’s DNA, and grow these modified T cells to the desired dose level. The modified T cells are stored for later infusion into the patient. Once infused, the T cells are designed to multiply, in a process known as cell expansion, when they encounter the targeted proteins and to kill the targeted cancer cells.
Our scientific founders and their institutions include world leaders in oncology, immunology, and cell therapy, and they actively contribute towards developing our product candidates and technologies. Collectively, these stakeholders share our commitment to bringing our product candidates to market and our vision of revolutionizing medicine through developing a broadly applicable cell-based platform. We have also entered into a number of strategic collaborations with commercial companies that we believe will help us manufacture and commercialize our product candidates around the world or develop additional or improved product candidates, including Celgene, Editas, Fate, and MedImmune.
Product Candidates in B Cell Malignancies
Our product candidates that are furthest advanced in the clinic are designed to treat B cell malignancies, with a particular focus on relapsed or refractory ("r/r") B cell aggressive non-Hodgkin lymphoma ("NHL"), r/r chronic lymphocyctic leukemia ("CLL"), and r/r B cell acute lymphoblastic leukemia ("ALL"). Relapse describes when cancer returns after initially responding to prior treatment, and refractory describes cancer that does not sufficiently respond to prior treatment. Our product candidates JCAR017, JCAR014, and JCAR015, as well as an additional early stage product candidate incorporating a fully human binding domain, leverage CAR technology to target CD19, a protein expressed on the surface of almost all B cell leukemias and lymphomas. Our CAR product candidate JCAR018 targets CD22, a different protein commonly expressed on the surface of B cell leukemias and lymphomas. Despite significant advances over the past two decades, lymphoma and leukemia are estimated to account for approximately 46,000 annual deaths in the United States.
|
|
•
|
NHL Progress and Strategy
.
JCAR017, in data presented at the American Society of Hematology meeting in December 2016 ("ASH 2016") from an ongoing Phase I trial in patients with r/r NHL, achieved a complete response in 12 of 20 patients, or 60%, with r/r aggressive NHL, all but one of whom had diffuse large B cell lymphoma ("DLBCL"), as of a data cutoff date of November 23, 2016. No severe cytokine release syndrome ("sCRS") was
|
observed and Common Terminology Criteria for Adverse Events ("CTCAE") Grade 3 to 4 neurotoxicity was observed in three of 22 patients, or 14%. These 22 patients all received lymphodepletion with fludarabine and cyclophosphamide ("flu/cy") followed by JCAR017 at dose level 1 (5x10
7
cells) in a single dose. The trial continues, enrolling more patients at dose level 1 and dose level 2 (1x10
8
cells). At the time of ASH 2016, we had two efficacy-evaluable patients at dose level 2. Both patients achieved a complete response and neither patient had evidence of sCRS or severe neurotoxicity. Juno intends to initiate a pivotal trial with JCAR017 in the U.S. in patients with r/r DLBCL in 2017, with the potential to support accelerated U.S. regulatory approval as early as 2018. Juno also intends to explore the use of JCAR017 in combination with MedImmune's investigational programmed cell death ligand 1 ("PD-L1") immune checkpoint inhibitor, durvalumab, and other immunomodulatory drugs. We have an ongoing Phase Ib trial exploring JCAR014 with durvalumab for the treatment of r/r NHL that we expect will provide insights into the potential of this combination.
|
|
•
|
CLL Progress and Strategy
.
In investigator-reported data presented at ASH 2016 from the Phase I portion of an ongoing Phase I/II trial with JCAR014 as of a data cutoff date of December 4, 2016, 15 out of 17 efficacy-evaluable patients, or 88%, with r/r CLL in the bone marrow at the start of the trial that were treated with flu/cy lymphodepletion followed by the two lowest doses of JCAR014 had a complete marrow response by flow cytometry at four weeks after infusion. The complete marrow response by flow cytometry at four weeks after infusion was similar in patients documented to be refractory to prior treatment with ibrutinib, a small molecule drug currently used for the treatment of r/r CLL, at 86% (12 out of 14 patients). Two of 24 patients, or 8%, developed sCRS and six of 24 patients, or 25%, developed severe neurotoxicity. Fourteen of the complete bone marrow response patients had a response assessment by IgH deep sequencing, a more sensitive measure than flow cytometry, with seven of 14 patients, or 50%, having no detectable disease. As of the data cutoff date, all seven of these patients were alive and progression free with follow-up ranging from two to 24 months. Encouraged by these data, we plan to file an investigational new drug application ("IND") with the U.S. Food and Drug Administration ("FDA") in 2017 in support of a planned Phase I/II trial using JCAR017, or a product candidate similar to JCAR017, for the treatment of r/r CLL. We believe that if the results of the planned trial are successful, they may support U.S. regulatory approval as early as the end of 2019. Based upon our preclinical and clinical experience to date, we believe that JCAR017, or a product candidate similar to JCAR017, has the potential to deliver comparable or better results when compared to JCAR014.
|
|
|
•
|
ALL Developments and Strategy
.
As described in more detail under "—Product Pipeline—Product Candidates in B Cell Malignancies—JCAR015" below, we experienced a setback in 2016 to our adult r/r ALL development plans when we observed a greater than expected incidence of severe neurotoxicity, along with five deaths from cerebral edema, in patients treated in our Phase II trial with JCAR015 in adult patients with r/r ALL, which we refer to as the ROCKET trial. The Phase II trial was placed on clinical hold by the FDA briefly in July 2016. In November 2016, the trial was again placed on hold and has remained on hold while we conducted an investigation into the toxicity. Through the investigation we identified multiple factors that may have contributed to this increased risk, including patient specific factors, the chemotherapy patients received, and factors related to the product. Although we believe there are protocol modifications and process improvements that could enable us to proceed with JCAR015 in clinical testing in adult r/r ALL, we would first need to establish preliminary safety and dose in a Phase I trial. As a result of the timing delay that would entail and our belief that we have other product candidates in our pipeline that are likely to provide improved efficacy and tolerability, we have made a strategic decision to cease Juno development of JCAR015 and to redirect associated resources to the development of a defined cell product candidate in the adult r/r ALL setting.
|
JCAR014 is an example of the potential of other product candidates in adult r/r ALL. In investigator-reported data presented at the 52nd Annual Meeting of the American Society for Clinical Oncology in June 2016 (the "ASCO 2016") in adult patients with r/r ALL that were evaluable for efficacy as of the data cutoff date of May 18, 2016, 34 out of 34 patients, or 100%, have achieved a complete remission ("CR") and 32 out of 34 patients, or 94%, achieved a complete molecular remission ("CRm") as measured by flow cytometry, a more stringent measure of a response defined by the absence of minimal residual disease ("MRD"). Additionally, 13 out of 20 patients, or 65%, had a CRm as measured by the highly sensitive technique of IGH deep sequencing. In the cohort that received flu/cy lymphodepletion, 22 out of 22 efficacy-evaluable patients, or 100%, achieved a CR and CRm as measured by flow cytometry, and median disease free survival and overall survival have not yet been reached with patients from this cohort followed for up to 18 months. Severe cytokine release syndrome ("sCRS") was observed in 14/36 (39%) patients and Grade 3 or higher neurotoxicity was observed in 14/36 (39%) patients. Although more follow-up is needed, data to date suggest that JCAR014 plus a flu/cy lymphodepletion regimen has improved durability of response.
In pediatric and young adult r/r ALL, JCAR017, in investigator-reported interim data presented at ASH 2016 from the Phase I portion of a Phase I/II trial, achieved a 93% CR rate and 93% CRm rate by flow cytometry, in 43 patients as of
a data cutoff date of July 19, 2016. We intend to articulate details around our best-in-class strategy in pediatric r/r ALL later in 2017.
At ASH 2016, we reported interim data from a Phase I trial exploring JCAR018, our CD22-directed CAR product candidate, in pediatric and young adult patients with r/r ALL. In this dose escalation trial, we have seen early signs of activity, with seven out of eight r/r ALL patients, or 88%, achieving a CRm at dose level 2 (1x10
6
cells/kg) as measured by flow cytometry as of a data cutoff date of October 4, 2016. Three of seven patients, or 43%, who achieved a CRm at dose level 2 were in ongoing remission ranging from three to 12 months
.
This trial continues to enroll patients. Combining a CD19-directed therapy and a CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse, particularly in patients with ALL. As a result, we are currently investigating preclinical constructs to better understand the optimal way to target these two targets in the same product.
We also expect to commence a Phase I trial of a CD19/4-1BBL "armored" CAR in the first half of 2017 in one or more B cell malignancies. The IND has cleared for, and we plan to enroll patients in 2017 in, a Phase I trial in certain adult B cell malignancies for a CD19 CAR product candidate incorporating a fully human binding domain.
In addition to the Phase I trial combining JCAR014 with durvalumab in patients with r/r NHL and the planned JCAR017 and durvalumab combination trial in r/r NHL, we are exploring other combination approaches. For example, in early 2017 we plan to begin Phase I testing of JCAR014 in combination with with ibrutinib, which is a small molecule Bruton's tyrosine kinase inhibitor currently approved for use in the treatment of r/r CLL, in patients with r/r CLL. We also are planning a trial with vipadenant, a small molecule A2a receptor ("A2aR") antagonist we acquired an exclusive license to in 2016 that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers.
Our CD19 product candidates, JCAR017, JCAR014, JCAR015, and our CD19 product candidate incorporating a fully human binding domain, differ in multiple respects, including the types of T cells used, sites of engagement, activation signal within the cells, manufacturing process, and origin of binding domain. We believe clinical experience with multiple CD19 CARs in patients with B cell malignancies gives us the opportunity to learn about the product characteristics that lead to the best patient outcomes. We intend to apply these learnings as rapidly as we can to improve our future product candidates.
Our goal is to bring best-in-class therapies to market across a range of B cell malignancies, focusing on improving efficacy, safety, and patient experience.
Product Candidates in Multiple Myeloma
Another key area of focus for us is the treatment of multiple myeloma. Multiple myeloma is the second most common hematologic malignancy, making up approximately 2% of all cancers. Despite many recent therapeutic advances in the treatment of this disease, multiple myeloma is still largely fatal and an area of high unmet medical need, with greater than 12,500 deaths estimated to have occurred in 2016.
We have begun a Phase I trial in r/r multiple myeloma at Memorial Sloan Kettering Cancer Center ("MSK") of a CAR product candidate that targets B-cell maturation antigen ("BCMA") and incorporates a fully human binding domain and a 4-1BB costimulatory domain. We also plan to commence another Phase I trial in r/r multiple myeloma at Fred Hutchinson Cancer Research Center ("FHCRC") later in 2017 using a CAR product candidate that targets BCMA using a different fully human binding domain than the one to be used at MSK. We intend to use these trials to better understand binding domain safety and obtain other translational insights to help us to accelerate our own clinical program in multiple myeloma. If the results of these trials are sufficiently encouraging, we intend to begin a clinical trial in the first half of 2018 under a Juno IND with a product candidate using one of these two binding domains and manufactured using Juno's controlled manufacturing process.
In addition to this fully human BCMA binding domain, we have licensed rights to binding domains against two other multiple myeloma targets that we may also advance to the clinic.
Additional Product Candidates
We are conducting Phase I trials for four additional product candidates using our CAR technology, directed against L1CAM, Lewis Y, MUC-16, and ROR-1. We are also conducting two Phase I/II clinical trials for a fifth product candidate, using our TCR technology, directed against WT-1. L1CAM, Lewis Y, MUC-16, ROR-1, and WT-1 are proteins that are overexpressed or aberrantly expressed on certain cancer cells. These trials explore the use of our engineered T cell technologies in cancer patients beyond the blood cancer setting, including patients with common solid tumors. Our MUC-16 directed product candidate is an "armored" CAR that secretes the cytokine interleukin 12 ("IL-12"), a stimulatory signal which we believe may help overcome the inhibitory effects that the tumor microenvironment can have on T cell activity. We expect to have
preliminary data from some of these product candidates over the next six to 18 months. We are also planning a trial in 2017, subject to completion of certain preclinical studies, using a CAR product candidate targeting a cytokine receptor, interleukin 13 receptor alpha 2 ("IL13rα2"), for the treatment of glioblastoma, an aggressive form of brain cancer.
Another active area of research for Juno is the possibility of treating cancers that are caused by viruses, such as the human papillomavirus ("HPV"), a cause of certain cervical cancers and head and neck malignancies. We are planning a trial to begin as early as 2018 with a TCR product candidate targeting the HPV e6/e7 oncoproteins, which are proteins that are expressed in many HPV-associated cancers.
The following tables summarize our product candidate pipeline and our active and planned clinical trials:
Research Strategy
We believe there are a number of areas for ongoing research that may significantly impact our long-term success with CARs and TCRs, including:
|
|
•
|
Cell Selection and Composition.
We believe that a defined cell composition has the potential to improve the consistency, potency, cell persistence, and tolerability of CAR and TCR based treatments. Achieving greater product composition consistency through defined cell composition may also facilitate regulatory approval. We are exploring defined cell composition with several of our product candidates, including JCAR017, which includes a defined ratio of T cells known as CD8+ and CD4+ T cells and uses a manufacturing process designed to influence the T cells toward a consistent phenotype and metabolic state. We are continuing to focus on improving our understanding of the different types of T cells in an effort to identify the subsets of T cells that optimize efficacy and safety. We intend to leverage our experience with these product candidates as we advance our pipeline. Our acquisition of Stage Cell Therapeutics GmbH ("Stage") in 2015 gives us access to potential best-in-class cell selection technologies.
|
|
|
•
|
Cell Persistence.
We believe the persistence of our engineered T cells, meaning the duration of time CARs or TCRs have anti-tumor activity in the body, has a meaningful impact on clinical outcomes. We are continuing to invest in technologies to optimize the cell persistence of our genetically-engineered T cells, including technologies related to the manufacturing process, cell composition, cell signaling, single chain variable fragments ("scFvs") that are non-immunogenic and fully human, and modulation of a patient’s immune system. We are building internal capabilities through hiring, acquisitions such as X-Body and AbVitro, and collaborations with companies such as Editas and Fate Therapeutics.
|
|
|
•
|
Target Protein Selection.
We are using bioinformatics,
in vitro
analyses, animal data, and clinical experience to identify additional target tumor proteins. Our CAR and TCR technologies enable us to explore target proteins located inside cells ("intracellular proteins") and proteins located on the cell surface ("extracellular proteins"), giving us the potential to treat a wide array of cancers. We are also investing in technologies that have the potential to accelerate our generation of TCRs and CARs to new targets. For instance, our acquisition of AbVitro in early 2016 gave us access to a leading next-generation single cell sequencing platform that allows for the identification of full-length, natively paired antibodies and T cell receptors across millions of single cells simultaneously from patient tumor or blood samples.
|
|
|
•
|
Cell Signaling.
Researchers have used CAR T cells for more than two decades in the treatment of cancer. A key insight over the past decade was the addition of a costimulatory domain to the genetically engineered CAR construct. The costimulatory domain amplifies intracellular signaling after the binding domain interacts with a target protein, magnifying the activation of the T cell. We are advancing two next-generation CAR technologies, which we refer to as bispecific CARs and "armored" CARs. Bispecific CARs incorporate a second binding domain on the CAR T cell designed to either amplify or inhibit signaling, a feature that may increase the CAR T cells’ ability to distinguish between cancer cells and normal cells. "Armored" CARs deliver cytokines or other stimulatory signals to modify the tumor microenvironment as well as the CAR T cell. We believe these technologies may be important for the treatment of solid tumors.
|
|
|
•
|
Combinations.
In an attempt to evade the cytotoxic, or cell killing, effects of the immune system, many cancers develop an immunosuppressive tumor microenvironment, which may negatively impact the potency or viability of our engineered T cells in patients. We are exploring various strategies that can positively impact the interaction of our engineered T cells and the tumor microenvironment, with goal of improving the efficacy and tolerability of our product candidates. For instance, certain combinations may help our engineered T cells that persist in a patient's body to remain active over time to increase the durability of the clinical response. We are exploring both approved therapies and drugs that are in development. An example of the output of this research is our ongoing trial combining durvalumab and JCAR014.
|
Our Strategy
Our current focus is to create best-in-class cancer therapies using human T cells. We believe that genetically-engineered T cells have the potential to meaningfully improve survival and quality of life for cancer patients. Key elements of our strategy include:
Expedite clinical development, regulatory approval, and commercialization of our CD19 product candidates.
We began a Phase I trial in adult r/r NHL in 2015 with JCAR017, with a potential to move to a registration trial in adult r/r DLBCL with JCAR017 in 2017. We are also planning to file an IND in 2017 in support of a planned Phase I/II trial with JCAR017, or a product candidate similar to JCAR017, in r/r CLL. We believe data from these trials, if positive, may lead to U.S. regulatory approval for the treatment of adult r/r DLBCL as early as 2018, with U.S. regulatory approval in r/r CLL as early as the end of 2019. If approved in r/r NHL, we plan to commercialize this CD19 product candidate in the U.S. using our own commercial organization, to consist of marketing, commercial analytics, and payer/access capabilities and a specialty sales force. We also plan to leverage these commercial capabilities across other indications, such as CLL, ALL, and multiple myeloma, if approved. We expect that data from our U.S. registration trials for our CD19 product candidates will also serve as part of our European Union ("EU") regulatory package. In 2016, Celgene opted in to our CD19 program and therefore is responsible for leading clinical and commercial development of our CD19 product candidates outside of North America and China. Celgene has begun dialogues with EU regulators and we expect Celgene will initiate its first clinical study with one of our product candidates in the EU as early as 2017. In certain types of r/r NHL, we have obtained breakthrough therapy designation for JCAR017 in the United States and access to the PRIority MEdicines ("PRIME") scheme for JCAR017 in the EU, regulatory designations aimed at streamlining the development of promising new therapies.
Develop process development and manufacturing capabilities to be a competitive advantage
. We are investing significant resources to optimize process development and manufacturing. We believe these efforts will lead to better product characterization, a more efficient production cycle, and greater flexibility in implementing manufacturing enhancements. In turn, these improvements may lead to a lower cost of manufacturing, streamlined regulatory reviews, greater convenience for patients and physicians, and better patient outcomes. Additionally, this investment in characterizing and controlling our process has the potential to allow us to better exploit future biologic insights into what cell types improve patient outcomes. We have used contract manufacturing organizations ("CMOs") to provide speed, flexibility and limit upfront capital investment, and successfully brought a CMO on-line to manufacture some of the JCAR015 product used in the ROCKET trial. We have also established a Juno owned and operated manufacturing facility in Bothell, Washington, which manufactured some of the JCAR015 product used in the ROCKET trial and continues to manufacture the JCAR017 product used in the Phase I trial of
JCAR017 in r/r NHL. We expect this manufacturing facility to continue to supply our Juno-sponsored clinical trials and commercial launch for JCAR017. In addition, in 2015 we acquired Stage, a company with potential best-in-class cell selection and cell activation technologies as well as automation technologies. We are working to integrate these technologies into our manufacturing platform. Our overall goal in process development and manufacturing is to maximize patient benefit and carefully manage our cost structure.
Invest in our platform to maximize the beneficial outcomes for cancer patients.
Because our CAR and TCR technologies are designed to target both proteins on the cell surface and inside the cell, we believe we have the potential to treat a wide array of cancers, including solid tumors. We believe there are multiple ways to continue to improve efficacy and tolerability of each of these technologies. We are conducting Phase I trials for six product candidates targeting cancer-associated proteins other than CD19. We plan to begin Phase I testing of our first CD19-directed "armored" CAR in one or more B cell malignancies within the next several months. As data emerge from these studies, we may advance one or more of these product candidates beyond proof of concept trials. We, together with our collaborators, intend to advance multiple additional product candidates into clinical testing over the next five years, with an increasing focus on addressing solid tumors, which cause the vast majority of cancer-related deaths in the developed world. Additionally, we believe that there may be multiple opportunities to improve the efficacy or safety of our product candidates by manipulating the genome, RNA, cell signaling pathways within a cell, or cell surface proteins. To that end, we have made substantial internal investments in these capabilities and entered into collaborations with companies such as Editas, Fate Therapeutics, and Celgene. We expect to continue to build our internal capabilities and to look to access best-in-class technologies outside the company with the goal of making better products for patients.
Leverage our relationships with our founding institutions, scientific founders and other scientific advisors.
Our world-renowned scientific founders and founding institutions, have a history of seminal discoveries and significant experience in oncology, immunology, and cell therapy. We intend to be a science-driven company in all our strategic decision-making and to continue to use our scientific founders’ insights, discoveries, and know-how as we develop our pipeline and technologies.
Background on the Immune System and T Cells
The immune system recognizes danger signals and responds to threats at a cellular level. It is often described as having two arms. The first arm is known as the innate immune system, which recognizes non-specific signals of infection or abnormalities as a first line of defense. The innate immune system is the initial response to an infection, and the response is the same every time regardless of prior exposure to the infectious agent. The second arm is known as the adaptive immune system, which is composed of highly specific, targeted cells and provides long-term recognition and protection from infectious agents and abnormal processes such as cancer. The adaptive immune response is further subdivided into humoral, or antibody-based, and cellular, which includes T cell-based immune responses.
The most significant components of the cellular aspect of the adaptive immune response are T cells, so called because they generally mature in the thymus. T cells are involved in both sensing and killing infected or abnormal cells, as well as coordinating the activation of other cells in an immune response. These cells can be classified into two major subsets, CD4+ T cells and CD8+ T cells, based on cell surface expression of CD4 or CD8 glycoprotein. Both subsets of T cells have specific functions in mounting an immune response capable of clearing an infection or eliminating cancerous cells. CD4+ T cells, or helper T cells, are generally involved in coordinating the immune response by enhancing the activation, expansion, migration, and effector functions of other types of immune cells. CD8+ T cells, or cytotoxic T cells, can directly attack and kill cells they recognize as infected or otherwise abnormal, and are aided by CD4+ T cells. Both types of T cells are activated when their T cell receptor recognizes and binds to a specific protein structure expressed on the surface of another cell. This protein structure is composed of the major histocompatibility complex ("MHC") and a small protein fragment, or peptide, derived from either proteins inside the cell or on the cell surface. Circulating CD4+ and CD8+ T cells survey the body differentiating between MHC/peptide structures containing "foreign" peptides and those containing "self" peptides. A foreign peptide may signal the presence of an immune threat, such as an infection or cancer, causing the T cell to activate, recruit other immune cells, and eliminate the targeted cell.
Although the immune system is designed to identify foreign or abnormal proteins expressed on tumor cells, this process is often defective in cancer patients. The defective process sometimes occurs when the cancer cells closely resemble healthy cells and go unnoticed or if tumors lose their protein expression. Additionally, cancer cells employ a number of mechanisms to escape immune detection to suppress the effect of the immune response. Some tumors also encourage the production of regulatory T cells that block cytotoxic T cells that would normally attack the cancer.
Our CAR and TCR Technologies
Our CAR and TCR technologies alter T cells
ex vivo
, or outside the body, so that the T cells can recognize specific proteins on the surface or inside cancer cells or other diseased cells in order to kill those diseased cells. As depicted below, with both our
CAR and TCR technologies, we (1) harvest a patient’s white blood cells in a process called leukapheresis, and while
ex vivo
we (2) select and activate certain T cells of interest. (3) Gene sequences for the CAR or TCR construct are transferred into the T cell DNA using a viral vector, such as a lentivirus or a gamma retrovirus. The number of cells is (4) expanded until it reaches the desired dose. These genetically engineered cells are (5) infused back into the patient.
When the engineered T cell engages the target protein on the cancer cell, it triggers further multiplication of the cells in the body and activation of a cytotoxic, or cell-killing, response against the cancer cell. These T cells have an "auto-regulatory" capability that stimulates their multiplication in the presence of the target protein and a reduction in the number of such cells as the target protein declines.
In most of our trials, including our trials with JCAR017, JCAR014, and JCAR015, after a patient goes through leukapheresis, the patient is administered chemotherapeutic agents before infusion of the engineered T cells
in order to provide an environment for the engineered T cells to thrive. We refer to this process as conditioning chemotherapy or lymphodepletion. It is an active area of research to determine the optimal lymphodepletion regimen to use in conjunction with engineered T cell therapy, in terms of dose, duration, and type or combinations of chemotherapeutic agents, such as cyclophosphamide or fludarabine.
The genetically-engineered CARs and TCRs are designed to help a patient’s immune system overcome survival mechanisms employed by cancer cells. CAR technology directs T cells to recognize cancer cells based on expression of specific cell surface proteins, whereas high-affinity TCR technology provides the T cells with a specific T cell receptor that recognizes protein fragments derived from either intracellular or extracellular proteins. The differences in these two technologies may enable us to develop immunotherapies targeting a broad array of cancer-associated proteins, including those expressed by solid organ cancers.
For both the CAR and TCR technologies, we believe that the T cell subsets used in treatment may have a significant impact on cell persistence, efficacy, and/or tolerability. We are investing significant resources in understanding the optimal cells and cell conditions for treatment. Animal data have shown that using a defined composition of CD8+ cells and CD4+ cells can improve the frequency, robustness, and duration of an anti-tumor response. Animal data have also shown that certain CD8+ T cells, when introduced, are more likely to persist as part of the T cell memory pool with the capability of self-renewal, which may lead to a longer duration of the therapeutic effect in patients.
We believe our focus on optimizing certain cell characteristics and cellular conditions increases our probability of generating best-in-class therapeutics. Moreover, we believe that the enhanced product characterization that results from a defined cell population may provide greater consistency across patients and give us an improved process development and a potential advantage with clinicians, patients, and regulators.
In some patients, it may be important to control the proliferation and survival of the engineered T cells after they are infused. Our scientific founders have developed technology that inserts a gene into the cell that leads to expression of an inactive truncated EGF receptor ("EGFRt"). Commercially available antibodies, such as cetuximab, can bind to EGFRt and initiate a process that leads to rapid killing, or ablation, of the engineered T cells. This killing effect with cetuximab has been observed in animal studies, but not yet in human studies. Several of our product candidates, including JCAR017 and JCAR014, incorporate this technology. In some of our manufacturing processes, we also use EGFRt as means of identifying the T cells that have been genetically modified to include the CAR construct.
Differences between CARs and TCRs
There are three main differences between CARs and TCRs:
|
|
•
|
Site of Protein Recognition.
CARs recognize proteins expressed on the cell’s surface, whereas TCRs recognize peptide fragments from proteins expressed either inside the cell or on the cell’s surface. TCRs are capable of targeting a broader range of proteins and may be able to more selectively target cancer cells or target a broader array of tumor types.
|
|
|
•
|
MHC Restriction.
TCRs recognize proteins that are presented to the immune system as a peptide bound to an MHC, and are therefore restricted to a certain MHC type. MHC types vary across the human population. It is estimated that approximately 80% of the U.S. population has one of the four most common MHC types. Due to this variability, multiple different TCR product candidates will be needed to address any given target protein for a broad population. In contrast, CARs are capable of recognizing the target protein regardless of MHC type. Additionally, most of the TCR product candidates developed in the field to date have been designed to recognize peptides in the context of Class I MHC, which activates CD8+ cells and not CD4+ cells. The implications of the preferential CD8+ activation are not clear, but given the importance of CD8+ and CD4+ cells in a typical immune response, activation of a CD4+ cellular response is likely important in generating maximum efficacy.
|
|
|
•
|
Maturity of the Technology
.
The life sciences industry has been developing antibodies for several decades and we believe scientific advances made with this technology can be leveraged to rapidly and predictably generate scFvs to incorporate into a CAR construct and enable it to target a specific protein. Industrial production of TCRs is relatively new, and we are investing in improving our understanding of important variables such as the optimal binding efficiency and structure.
|
CARs
There are several key components to our CAR technology, each of which may have a significant impact on its utility in cancer immunotherapy:
|
|
•
|
Targeting Element.
Our CAR construct typically uses an scFv, also referred to as a binding domain, to recognize a protein of interest. The scFv is derived from the portion of an antibody that specifically recognizes a target protein, and when it is expressed on the surface of a CAR T cell and subsequently binds to a target protein on a cancer cell, it is able to maintain the CAR T cell in proximity to the cancer cell and trigger the activation of the T cell. For example, our most clinically-advanced CAR T cell programs use an scFv from a mouse-derived antibody to target a cell surface protein called CD19. Through our 2015 acquisition of X-Body, we have access to a library of fully human scFvs and our AbVitro acquisition enables us to identify naturally occurring antibodies. We plan to use both of these technologies in the development of future product candidates.
|
|
|
•
|
Spacer and Transmembrane Domain.
The spacer connects the extracellular scFv targeting element to the transmembrane domain, which transverses the cell membrane and connects to the intracellular signaling domain. Data from our scientific founders suggest that the spacer may need to be varied to optimize the potency of the CAR T cell toward the cancer cell due to factors such as the size of the target protein, the region of the target protein where the scFv binds, and the size and affinity of the scFv. Through our collaborations, we have access to a library of spacer constructs.
|
|
|
•
|
Costimulatory Domains
. Upon recognition and binding of the scFv of the CAR T cell to the cancer cell, there is a conformational change that leads to an activation signal to the CAR T cell through CD3-zeta, an intracellular signaling protein. Our current CAR constructs also include either a 4-1BB or CD28 costimulatory signaling domain to mimic a "second signal" that amplifies the activation of the CAR T cells, leading to a more robust signal to the T cell to multiply and kill the cancer cell. While head-to-head clinical comparisons have not been conducted, in some disease settings there is some preclinical and early clinical evidence that suggests that 4-1BB has some advantages over CD28 as a costimulatory domain, including increased persistence and a metabolic profile supporting gradual expansion, as opposed to rapid expansion. Our early clinical data with CD19-directed CAR T cells support this view. We incorporate the 4-1BB costimulatory domain in JCAR017, JCAR014, JCAR018, JCAR023, JCAR024, our CD19 product candidate with a fully human binding domain, and our BCMA-directed product candidate. Additionally, we are exploring the use of a "third signal" in improving the efficacy of our CAR T technology. In the first half of 2017, we intend to begin human testing of an "armored CAR" that includes both a CD28 co-stimulatory domain and another signal through 4-1BB ligand.
|
Next-Generation CAR Technology
We are investing significant resources and are developing deep expertise on how each element of the CAR construct affects the potency and durability of the T cell response that ensues, as we believe these will be the key determinants for the long-term ability to create novel CAR T cell products with improved patient benefit.
As we build on the specificity of our technologies and our understanding of mechanisms of immune evasion used by cancer cells, we are advancing two next-generation CAR technologies, "armored" CARs and bispecific CARs, that incorporate mechanisms to either dampen or amplify T cell activation signals present on the cancer cells or in the tumor microenvironment. Our "armored" CAR technology can incorporate the production or expression of locally acting signaling proteins to amplify the immune response within the tumor microenvironment with the goal of minimizing systemic side effects. An example of such a signaling protein is IL-12, which can stimulate T cell activation and recruitment. We believe "armored" CAR technology will be especially useful in solid tumor indications, in which microenvironment and potent immunosuppressive mechanisms have the potential to make the establishment of a robust anti-tumor response more challenging.
Our bispecific CAR technology includes a second binding domain on the CAR T cell designed to either amplify or inhibit signaling, a feature that may increase our CAR T cells’ ability to distinguish between cancer cells and normal cells. For example, a CAR T cell can be engineered such that it would be triggered in the presence of one target protein, but if a second protein is present it would be inhibited. Alternatively, it could also be engineered such that two target proteins would be required for maximal activation. These approaches may increase the specificity of the CAR for tumor relative to normal tissue.
We are also exploring a number of technologies that modulate T cell biology and their biologic properties in patients. For example, we have partnered with Editas, a leader in applying genome editing such as CRISPR/Cas9 and Talon technologies to create human therapeutics, and Fate Therapeutics, a leader in using pharmacologic modulators such as small molecules to alter the properties of cells while they are
ex vivo
. With Editas, we are exploring the biologic implication on our engineered T cell technologies of knocking-out or altering the function of a number of human genes. With Fate Therapeutics, we are exploring the potential for these modulators to alter intracellular signaling pathways, with the potential to alter the subtype of T cell or the state of the T cell. The goal of these modifications is to improve efficacy and safety of our products.
TCRs
Much like our CAR technology, our high-affinity TCR technology is designed to activate a potent immune response against cancer through the introduction of engineered T cells. The gene sequence we introduce with our TCR technology is designed to enable the engineered cell to assemble a TCR that recognizes a specific MHC/peptide structure. Modified T cells expressing a TCR construct have the potential advantage of recognizing peptides from cancer-associated proteins expressed either on the surface of or inside the tumor cell, which may allow us to target a broad range of tumors. Beyond the fact that TCRs can recognize peptides derived from intracellular proteins, another advantage of TCRs is that they are fully human and therefore may be less likely to elicit an immune response against the infused TCR cells.
The engagement of a TCR is restricted to a certain MHC type. Due to the variability of MHC types across the human population, different TCRs will be required for various segments of the population. Our TCR constructs are selected by
screening healthy donors for naturally-occurring high-affinity TCRs against a MHC/ peptide combination of interest. Depending on the binding affinity of the selected TCR construct, it is either used directly or modified by mutating a specific region, the hypervariable domain, of the TCR binding pocket to create a higher affinity construct. Based on the limited number of patients who have received any TCR treatment to date, these TCR cells appear to behave like endogenous T cells after re-infusion back into the patient. They undergo a process similar to an endogenous T cell of cell expansion and cytotoxic activation upon recognition of their defined cancer-associated proteins.
Important areas of investment for us going forward will be industrializing the creation and manufacturing of TCRs, improving screening processes to better ensure that TCR constructs do not cross-react with normally expressed or other proteins, and finding costimulatory signals to enhance the potency of the genetically engineered cells.
Our primary method of identifying novel TCRs is utilizing our next-generation, high throughput, single cell sequencing technology, which allows us to interrogate millions of cells per experiment. An important application for this technology is to find high affinity, naturally occurring, matched chain TCRs from the normal human immune repertoire, which we believe have a lower risk of unexpected off-target binding than TCRs that have manipulated or mutagenized during development. This technology significantly improves the speed at which we find these TCRs, allowing us to optimize binding affinity and develop TCRs for a larger percentage of the population.
Product Pipeline
Product Candidates in B Cell Malignancies
Our product candidates that are the furthest advanced in the clinic are designed to treat B cell malignancies, with a particular focus on r/r NHL, r/r CLL, and r/r ALL.
B Cell Non-Hodgkin Lymphomas
NHL is the most common cancer of the lymphatic system. NHL is not a single disease, but rather a group of several closely related cancers. Although the various types of NHL have some things in common, they differ in their appearance under the microscope, their molecular features, their growth patterns, their impact on the body, and treatment. Over 72,000 cases of NHL are diagnosed annually in the United States, and 85% derive from B cell lineages, which express CD19. B cell NHLs are a large group of cancers that are typically divided into aggressive (fast-growing) and indolent (slow-growing) types.
Aggressive NHL also represents a collection of lymphoma subtypes. The most common histologic type of aggressive lymphoma is DLBCL, which is also the most common subtype of all NHLs, and represents approximately 40% of new cases annually. Unlike indolent lymphomas, which have a median survival time as long as 20 years, DLBCL, if left untreated, may have survival measured in weeks or months. Patients often present with a rapidly enlarging mass in a lymphatic region. Extranodal involvement or associated constitutional symptoms are uncommon, although the presence of these symptoms indicates a more aggressive phenotype. The typical approach to treatment of r/r DLBCL involves induction chemotherapy to get a patient into remission, followed by an autologous hematopoietic stem cell transplant (“HSCT”). Autologous HSCT is a treatment that involves the collection of a patient's own hematopoietic stem cells once the patient is in remission, followed by further chemotherapy and/or radiation to deplete the patient's immune system and existing hematopoietic stem cells, then the infusion of the previously collected hematopoietic stem cells back into the patient. However, not all r/r DLBCL patients are able to undergo autologous HSCT due to failure to respond adequately to the induction chemotherapy, risk of complication, or
other reasons. We estimate that only approximately 17% of first salvage patients, or patients who relapsed or were refractory after one round of prior treatment, undergo autologous HSCT. For patients who are unable or otherwise do not receive autologous HSCT, the prognosis is grim. In a study conducted by GSK, HOVON (Hemato-Oncologie voor Volwassenen Nederland), and other groups, in patients with r/r DLBCL who relapsed or were refractory after one round of prior treatment, patients that did not undergo autologous HSCT in the second-line setting and were treated solely with chemotherapy had a two year overall survival rate of 22–27%, compared to a two year overall survival rate of 68–76% for patients that underwent autologous HSCT. In a separate study conducted by the
Lymphoma Academic Research Organization in
patients with r/r DLBCL who relapsed or were refractory after two rounds of prior treatment and who had not received prior HSCT, the patients that were unable to or otherwise did not then undergo HSCT in the third-line setting and were treated solely with chemotherapy had a median overall survival of 3.3 months and a one year overall survival rate of 16%, as compared to a median overall survival of 11.5 months and a one year overall survival rate of 43% for those who then underwent autologous HSCT.
The indolent lymphomas represent a wide group of tumors that often have a long natural history characterized by frequent relapses; together, the indolent lymphomas account for approximately 36% of NHL incidence in the United States. Although these malignancies are treated routinely with a combination of chemotherapy and antibodies, there is no standard of care for relapsed indolent NHL. The typical treatment approaches include multiple rounds of induction chemotherapy or more aggressive salvage therapies, including autologous HSCT. Unfortunately, these treatments are generally not curative. Patients with recurrent or progressive indolent lymphoma may be candidates for allogeneic HSCT, involving the infusion of a matched donor's hematopoietic stem cells instead of the patient's own cells, which can provide long-term disease free survival to some.
Chronic Lymphocytic Leukemia
CLL is the most common type of leukemia, and it occurs most frequently in older individuals, with diagnoses in persons under 30 years of age occurring only rarely. Each year, approximately 20,000 patients are diagnosed with CLL in the United States. Nearly all CLL develops from B cells that express CD19. Approximately 75–80% of individuals with CLL have standard risk disease at diagnosis, and for them the level of disease burden determines both prognosis and the need for immediate treatment or "watchful waiting" before the initiation of any therapy. Over time, CLL develops poor risk features, including expression of CD38, ZAP70, unmutated immunoglobulin heavy chain sequences, or cytogenetic abnormalities or gene mutations. Approximately 20–25% of CLL patients can initially present with poor risk disease. Median progression-free survival in these high risk groups is often under 12 to 18 months after frontline therapy, and less than 12 months in relapsed/refractory disease.
The goal of therapy in CLL for individuals with both treatment naïve and relapsed/refractory disease is a clinical complete response. Strong correlations have been demonstrated between depth of response, specifically to levels in the bone marrow below detectable MRD by flow cytometry, and survival. An array of therapies have been evaluated and approved for use in treatment naive and relapsed/refractory CLL, including combination chemotherapy, chemoimmunotherapy, ibrutinib, idelalisib, alemtuzumab, and ofatumumab, and several others continue in development. However, the long-term benefit for these agents has generally been tempered by the low likelihood of complete responses, challenging toxicities, and limited duration of disease responses. For instance, patients treated with ibrutinib whose disease progresses early after treatment have poor clinical outcomes with a median survival of approximately three months. Individuals with CLL are generally not considered candidates for allogeneic or autologous HSCT due in part to the median age of 71 years at diagnosis. Therefore, significant opportunity exists for novel therapies to address this unmet need with agents that are tolerated in this patient population.
B Cell Acute Lymphoblastic Leukemia
ALL is an uncontrolled proliferation of lymphoblasts, which are immature white blood cells. The lymphoblasts, which are produced in the bone marrow, cause damage and death by inhibiting the production of normal cells. Approximately 6,000 patients are diagnosed with ALL in the United States each year, and although just under half of the new diagnoses are in adult patients, the vast majority of the approximately 1,400 deaths per year occur in adults. There are two main types of ALL, B cell ALL and T cell ALL. Approximately 80% of cases of ALL are B cell ALL, which we aim to address with our CD19 product candidates.
Treatment outcomes for ALL patients can be distinguished between CR and CRm rates. CR occurs when there is no clinical evidence of the disease based on less than 5% blast cells in the marrow, blood cell counts within normal limits, and no signs or symptoms of the disease. CRm occurs when a patient has all of the above outcomes and there is no evidence of ALL cells in the marrow when using sensitive tests such as polymerase chain reaction ("PCR") and/or flow cytometry. CR rates are the typical regulatory standard, but recent evidence suggests that achieving a CRm is a better predictor of long-term survival.
Current standard-of-care treatment for both adults and children involves multi-drug chemotherapeutic regimens, and in some cases HSCT. In adults with ALL, approximately 80% of patients will demonstrate a complete remission with their initial course of chemotherapy. However, approximately 60% of these patients who achieve a complete remission with their initial course of chemotherapy will relapse. Most patients that relapse after the first course of chemotherapy will die in well under a year, and
patients that have failed at least two salvage therapies have a median survival that is typically around three months. Allogeneic HSCT offers the potential for disease eradication in some individuals, however, the option is available only to approximately a third of patients due to the lack of compatible stem cell source, general health, or the high risk of complications. Even in patients who undergo allogeneic HSCT, approximately 20-30% of patients die of treatment-related complications and the median disease-free survival is less than six months.
|
|
|
ALL Efficacy with Current Standard of Care Therapy
|
ALL Treatment Course
|
CR Rate
(Complete Remission)
|
1st Induction
|
80-90%
|
1st Salvage Chemotherapy
|
31-44%
|
>1st Salvage Chemotherapy
|
20-23%
|
>2nd Salvage Chemotherapy
|
5-8%
|
Antibody-based platforms, including bispecific T cell enhancers ("BiTEs") and antibody-drug conjugates ("ADCs") have also been explored in this disease setting. The FDA granted accelerated approval in late 2014 to blinatumomab, a CD19 BiTE given by continuous infusion due to its short serum half-life, for treatment of individuals with r/r Philadelphia-chromosome negative ALL. Despite a CR rate of 42% and a CRm rate of 31%, which represent a meaningful improvement versus historical standards, the median duration of response was just under six months. Another novel agent, inotuzumab ozogamicin ("inotuzumab"), a CD22 monoclonal ADC conjugated to calicheamicin, has been studied in adults with r/r ALL. The reported results from a Phase III randomized trial of inotuzumab plus induction chemotherapy, as compared against induction chemotherapy on its own, demonstrated a CR rate of 81% but a median duration of response of 4.6 months and median overall survival of 7.7 months. Although these novel agents have improved CR rates, such outcomes are not uniform with later relapses, higher burden disease, or in all age groups. Thus, significant unmet need remains. Of note, the majority of inotuzumab treated patients were in first relapse, while the blinatumomab data and data for JCAR014 and JCAR015 are primarily in patients after a second or greater relapse.
CD19 Overview
Our lead candidate, JCAR017 uses CAR T cell technology to target CD19. Other of our CD19-directed product candidates include JCAR014, JCAR015, and a product candidate with a fully human binding domain that is entering Phase I testing this year. These product candidates differ in several respects as outlined below. We believe our access to and clinical experience with multiple CD19 CARs in patients with B cell malignancies gives us the opportunity to bring best-in-class therapies to market across a range of different blood cancers. We have treated over 350 patients with anti-CD19 CAR T cells.
|
|
|
|
|
|
CD19-Directed Clinical Product Candidate Overview
|
|
JCAR017
|
JCAR015
|
JCAR014
|
Human CD19
|
Binding Domain
|
FMC63
|
SJ25C1
|
FMC63
|
Other
|
Indications
|
Adult aggressive NHL
Pediatric ALL
|
Adult ALL
|
NHL, Adult ALL, CLL
|
NHL, Adult ALL, CLL
|
Costimulatory Domain
|
4-1BB
|
CD28
|
4-1BB
|
4-1BB
|
Cell Population
|
CD4+ & CD8+
in a defined ratio
|
CD4+ & CD8+ upfront selection
|
CD4+ & CD8+ in a defined ratio
|
CD4+ & CD8+
in a defined ratio
|
Manufacturing
|
Key steps automated and functionally closed + process designed to deliver more naive and quiescent cells
|
Key steps automated and functionally closed
|
Open and manual process steps
|
Open and manual process steps
|
Ablation Technology
|
EGFRt
|
None
|
EGFRt
|
EGFRt
|
Viral Vector
|
Lentiviral
|
Gamma Retroviral
|
Lentiviral
|
Lentiviral
|
Origin of Binding Domain
|
Mouse
|
Mouse
|
Mouse
|
Human
|
We believe CD19 presents an attractive immunotherapeutic target for our technology for a number of reasons:
|
|
•
|
CD19 is expressed by most B cell malignancies including NHL, ALL, and CLL. Within these CD19 positive malignancies, it is generally expressed on all of a patient’s cancer cells.
|
|
|
•
|
CD19 is expressed on all stages of B lineage cells, and it is present in the vast majority of precursor B cell ALL cases.
|
|
|
•
|
CD19 is not known to be expressed on any healthy tissue other than B cells. Although treatment with a CD19-directed therapy has the potential to deplete B cells, experience with Rituxan has shown that humans can live with B cell
|
depletion for a prolonged period. Further, CD19 is not expressed on hematopoietic stem cells, and therefore B cells should return when the CAR T cell is no longer present.
JCAR017
Overview
. JCAR017 is the backbone of our CD19 program. It differs from JCAR015 in several important respects: it uses the 4-1BB costimulatory domain, a different scFv binding domain, a defined cell composition made up of a 1:1 ratio of CD4+ T cells and CD8+ T cells, and a manufacturing process designed to influence the phenotypic and metabolic state of the T cells toward more naive and quiescent cells, which we believe improves patient outcomes. The defined cell composition is attained by using separate CD4+ and CD8+ selection and processing and then controlling for the number of each cell subtype in the final product. The process provides a consistent dose of CD4+ and CD8+ cells and decreases the variability of other phenotypic and metabolic conditions of the T cell. JCAR017 was originally developed at Seattle Children’s Research Institute ("SCRI").
JCAR017 is currently in development for adults with r/r aggressive NHL and pediatric patients with r/r ALL. A Phase I r/r NHL trial began in 2015 and is enrolling adults with r/r aggressive NHL to explore this product candidate’s efficacy in this setting and to explore multiple-dose schedules. We intend to begin a registration trial with JCAR017 in r/r DLBCL in 2017. The Phase I/II pediatric r/r ALL trial with JCAR017 also explored multiple doses in its Phase I portion and advanced to the Phase II dose-expansion portion of the trial in 2016. We plan to file an IND in 2017 in support of a planned Phase I/II trial using JCAR017, or a product candidate similar to JCAR017, for the treatment of r/r CLL. We believe that if the results of the planned trial are successful, they may support U.S. regulatory approval in r/r CLL as early as the end of 2019. We expect to initiate clinical trials with JCAR017, or a similar drug product designed specifically for the target patient population, in other B cell malignancies over the next 12 to 24 months.
The FDA has granted breakthrough therapy designation to JCAR017 for the treatment of patients with r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma ("PMBCL"), or follicular lymphoma grade 3B. The FDA has also granted orphan drug designation for JCAR017 in DLBCL, CLL, and ALL. In addition, the European Medicines Agency ("EMA") Committee for Medicinal Products for Human Use ("CHMP") and Committee for Advanced Therapies ("CAT") have granted JCAR017 access to the Priority Medicines ("PRIME") scheme for r/r DLBCL.
Clinical Experience
. We began a multicenter Phase I trial in 2015 of JCAR017 in adults with r/r aggressive NHL under a Juno-sponsored Investigational New Drug ("IND") application. We refer to this trial as the TRANSCEND trial. The primary endpoints of the dose-escalation trial are to evaluate preliminary toxicity, safety, and cell expansion and cell persistence of JCAR017. The secondary endpoints of the trial include assessing efficacy, durability of responses, progression-free survival, and overall survival. All patients on the trial receive lymphodepletion with flu/cy, and there is no prophylactic use of safety medications called for by the protocol. The trial is also exploring a one dose versus two dose dosing schedule.
We presented interim data from the TRANSCEND trial at ASH 2016. As of a data cutoff date of November 23, 2016, results were as follows:
|
|
|
|
Summary of Clinical Data
JCAR017 Phase I - r/r DLBCL
|
Dose Level & Dose Schedule
|
Dose Level 1
(5*10
7
cells)
Single Dose
(1)
|
Dose Level 2
(1*10
8
cells)
Single Dose
(2)
|
Number of Patients
|
19-22
|
2-3
|
Overall Response Rate: Complete Responses + Partial Responses
|
16/20 (80%)
|
2/2 (100%)
|
Complete Response
|
12/20 (60%)
|
2/2 (100%)
|
Complete Response Ongoing at Three Months
|
8/19 (42%)
|
Not yet evaluable
|
sCRS
(3)
|
0/22 (0%)
|
0/3 (0%)
|
Severe Neurotoxicity
(4)
|
3/22 (14%)
|
0/3 (0%)
|
(1) Efficacy data at dose level 1 includes 19 patients with r/r DLBCL and one patient with follicular lymphoma grade 3B, which is biologically similar to DLBCL. One of these DLBCL patients was not yet evaluable at three months. Safety data for dose level 1 also includes two patients with mantle cell lymphoma.
(2) One patient at dose level 2 was evaluable for safety but not yet evaluable for efficacy.
(3) For this trial, sCRS is defined based on Lee et al. 2014 criteria, according with which sCRS is generally identified by certain side effects, including hypotension, or low blood pressure, requiring treatment with a high dose of a single vasopressor or with multiple vasopressors, or respiratory distress, or breathing difficulties, requiring significant supplemental oxygen and in some cases mechanical ventilation and medical management in the intensive care unit.
(4) CTCAE Grade 3 and above neurotoxicity. Characteristic symptoms of neurotoxicity include encephalopathy, headache, seizure, tremor, confusion, and aphasia.
|
Other treatment-emergent adverse events, whether or not treatment related, occurring in at least 25% of these patients included fatigue, CRS of any grade, and decreased appetite.
As of the data cutoff date, three other r/r DLBCL patients had been evaluated for efficacy after receiving dose level 1 with a two dose dosing schedule. In these patients, there were two partial responses, no sCRS, and one patient with severe neurotoxicity. In the two patients with mantle cell lymphoma, both treated at dose level 1 in a single dose, one patient had a partial response.
The TRANSCEND trial continues, enrolling more patients at dose level 1 and dose level 2 using a single dose. As of the date of this report, we do not intend to develop the two dose dosing schedule further.
The TRANSCEND trial is enrolling patients that range in ECOG performance status grades 0 to 2. The ECOG performance status is a scale used to measure how a disease affects daily living abilities of a patient. Grade 0 represents that a patient is fully active and able to carry on all pre-disease performance without restriction. Grade 1 represents that a patient is restricted in physically strenuous activity but ambulatory and able to carry out work of a light or sedentary nature, such as light house work or office work. Grade 2 represents that a patient is ambulatory and capable of all selfcare but unable to carry out any work activities, and is up and about more than 50% of waking hours. We believe that approximately 25–50% of patients with r/r DLBCL have an ECOG performance status of grade 2.
Juno intends to initiate a pivotal trial with JCAR017 in the U.S. in patients with r/r DLBCL in 2017, with the potential to support accelerated U.S. regulatory approval as early as 2018.
Data from the TRANSCEND trial has also revealed that in three of four patients that relapsed, CAR T cells persisted in the patient's body. This suggests the potential of combination therapy to improve long-term outcomes by helping the CAR T cells to remain active and to overcome the immunosuppressive effects of the tumor microenvironment. Indeed, in one case a patient that had relapsed later had a spontaneous re-expansion of T cells following a biopsy procedure, which resulted in a second complete response for the patient. We intend to explore the combination of JCAR017 with various drugs, such as durvalumab, whose mechanisms are designed to overcome the immunosuppressive effects of the tumor microenvironment.
JCAR017 is also being evaluated at SCRI in a Phase I/II clinical trial in pediatric r/r ALL, under an SCRI IND. The trial was initiated in January 2014. The Phase I/II trial is designed to evaluate four dose levels: 5x10
5
T cells/kg, 1x10
6
T cells/kg, 5x10
6
T cells/kg, and 1x10
7
T cells/kg. The primary endpoints of the trial are to evaluate the preliminary toxicity, safety, and efficacy of JCAR017, and the feasibility of manufacturing and releasing JCAR017, in children and young adults with CD19-positive pediatric leukemia. The secondary endpoints of the trial include assessing persistence of the modified T cells and potentially assessing the efficacy of cetuximab to eliminate the modified T cells. Patients enrolled in this trial initially received cyclophosphamide lymphodepletion prior to receiving their CAR T cell dose, and maximum tolerated dose was determined to be 5x10
6
T cells/kg. More recently, a much lower cell dose of 5x10
5
T cells/kg has been tested with low-intensity flu/cy lymphodepletion, and preliminary results with this regimen have demonstrated an improved risk/benefit profile.
The following figure summarizes investigator-reported data presented at ASH 2016 from the Phase I portion of the Phase I/II trial of JCAR017 in pediatric patients with r/r ALL:
|
|
|
|
Summary of Clinical Data from Phase I Portion
JCAR017 - Pediatric r/r ALL
|
|
All patients
|
Flu/cy cohort
|
Number of Patients
|
43
|
14
|
CR
|
40/43 (93%)
|
14/14 (100%)
|
CRm
(1)
|
40/43 (93%)
|
14/14 (100%)
|
sCRS
(2)
|
10/43 (23%)
|
4/14 (29%)
|
Severe Neurotoxicity
|
10/43 (23%)
|
4/14 (29%)
|
(1) Measured by flow cytometry
(2) For this trial, sCRS is defined clinically by certain side effects, including hypotension, or low blood pressure, requiring vasopressor support, and respiratory distress, or breathing difficulties, requiring ventilatory support, where such side effects are life-threatening (CTCAE Grade 4+).
CRS is generally believed to result from the release of inflammatory proteins in the body as the CAR T cells rapidly multiply in the presence of the target tumor proteins.
Source: SCRI ASH 2016 presentation
|
Other treatment-emergent adverse events, whether or not treatment related, occurring in at least 25% of these 43 patients included CRS, hypocalcemia, anemia, febrile neutropenia, neutrophil count decreased, platelet count decreased, hypertension, hypomagnesemia, hypotension, white blood cell count decreased, sinus tachycardia, hypophosphatemia, vomiting,
disseminated intravascular coagulation, hypokalemia, blood creatinine increased, diarrhea, hyponatremia, fatigue, alanine aminotransferase increased, headache, hypoalbuminemia, encephalopathy, weight increased, lymphocyte count decreased, weight decreased, nausea, urine output decreased, cough, aspartate aminotransferase increased, blood immunoglobulin G decreased, device related infection, and constipation.
As presented at ASH 2016, the estimated 12-month event-free survival across all patients in the pediatric r/r ALL trial is 50.8% (95% [confidence interval 36.9, 69.9]) and 12-month overall survival is 69.5% (95% [confidence interval 55.8, 86.5]).
SCRI has independently proceeded to the trial's Phase II portion, for which Juno is providing only minimal support. SCRI has used a manufacturing process for patients treated to date in the trial’s Phase II portion that is different than the process SCRI used in the Phase I portion of the trial and the process we use in the TRANSCEND trial. The difference in manufacturing process may contribute to meaningful product differences that could affect patient outcomes. We do not expect the data from the Phase II portion of the SCRI trial (nor the data from the Phase I portion of that trial) to be included in the efficacy and safety dataset that would serve as the primary basis for regulatory approval of JCAR017, although we expect such data would be included as background in our regulatory submissions pertaining to JCAR017.
JCAR014
Overview
. JCAR014 also targets CD19. JCAR014, like JCAR017, uses the 4-1BB costimulatory domain and is composed of CD8+ T cells and CD4+ T cells in a defined ratio. A different manufacturing process from JCAR017 leads to different phenotypic and metabolic profiles for these T cells. At this time, we do not intend to develop JCAR014 commercially, but we do believe that its clinical development provides insights that we can apply across our CD19 portfolio and to our CAR T cell technology more broadly. JCAR014 was originally developed at FHCRC.
Clinical Experience
. JCAR014 is being evaluated at FHCRC in a Phase I/II trial as a treatment for adults with any of several B cell malignancies, including ALL, NHL, and CLL, in patients relapsed or refractory to standard therapies, under a FHCRC IND. The trial was initiated in May 2013. The Phase I/II trial is designed to evaluate three dose levels: 2x10
5
cells/kg, 2x10
6
cells/kg, and 2x10
7
cells/kg. Dose level 3 (2x10
7
cells/kg) has been discontinued as it exceeded the maximum tolerated dose as defined by the study. The primary endpoint of the trial is to evaluate the feasibility and preliminary safety of using JCAR014 to treat CD19-positive advanced B cell malignancies. The secondary endpoints of the trial include assessing the duration of persistence of the modified T cells, determining whether the modified T cells traffic in the bone marrow and function
in vivo
, determining if the modified T cells have antitumor activity in patients with measurable tumor burden prior to T cell transfer, and determining if the treatment is associated with tumor lysis syndrome. We plan to amend the protocol for this trial to explore the combination of JCAR014 with ibrutinib in r/r CLL patients starting in early 2017.
Patients enrolled in this trial initially received cyclophosphamide lymphodepletion prior to receiving their CAR T cell dose. This trial has systematically evaluated alternative lymphodepletion regimens and established a flu/cy lymphodepletion regimen that supports significantly improved cell expansion, cell persistence, and complete response rates. The combination of this regimen and the JCAR014 defined cell product also demonstrated relatively low frequency of severe CRS and neurotoxicity at lower dosing levels for all diseases. A key finding of the early phase of the trial was that patients with greater cell expansion and longer cell persistence generally derived better clinical benefit.
In CLL, in investigator-reported interim data presented at ASH 2016 as of a data cutoff date of December 4, 2016, 24 patients had been treated on the study, 21 of whom received flu/cy lymphodepletion. Out of 17 efficacy-evaluable patients with r/r CLL in the bone marrow at the start of the trial that were treated with flu/cy lymphodepletion followed by the two lowest doses of JCAR014, 15 out of 17 patients, or 88%, had a complete marrow response by flow cytometry. The complete marrow response by flow cytometry was similar in patients documented to be ibrutinib-refractory at 86% (12 out of 14 patients). Fourteen of the complete bone marrow response patients had a response assessment by the more sensitive method of IgH deep sequencing, with seven out of 14 patients, or 50%, having no detectable disease. As illustrated by the following diagram, as of the data cutoff date, all seven of these patients were alive and progression free with follow-up ranging from 2 to 24 months.
|
|
Progression-Free Survival & Overall Survival
in JCAR014 r/r CLL Patients Assessed with IgH Deep Sequencing
|
Source: FHCRC ASH 2016 Presentation.
In patients with CLL that is PET-avid, an indicator of rapidly growing forms of CLL, at the start of treatment and treated with flu/cy and the two lowest doses of JCAR014, eight of 11 patients, or 73%, had a partial remission ("PR") or CR at four weeks, with seven out of 11 patients, or 64%, having a CR. In patients evaluated for efficacy at four weeks using International Workshop on Chronic Lymphocytic Leukemia ("IWCLL") criteria and treated with flu/cy and the two lowest doses of JCAR014, 14 of 19 patients, or 74% had a PR or CR, with 4 of 19, or 21%, being a CR. The response data were similar in patients documented to be ibrutinib-refractory, with 11 of 16 patients, or 69%, experiencing a PR or CR, with 4 of 16, or 25% being a CR. All patients with either a PR or a CR remain alive, with follow-up ranging from three to 26 months. In contrast to the data using IgH deep sequencing, there is no obvious early difference in time to progression between a CR and a PR by IWCLL data.
Two of 24 r/r CLL patients treated with JCAR014, or 8%, developed sCRS and six of 24 patients, or 25%, developed severe neurotoxicity. For this trial, sCRS is defined based on Lee et al. 2014 criteria, according with which sCRS is generally identified by certain side effects, including hypotension, or low blood pressure, requiring treatment with a high dose of a single vasopressor or with multiple vasopressors, or respiratory distress, or breathing difficulties, requiring significant supplemental oxygen and in some cases mechanical ventilation and medical management in the intensive care unit. There was one treatment-related death in the trial in a r/r CLL patient, who received flu/cy lymphodepletion, with both CTCAE Grade 5 sCRS and cerebral edema. Other treatment-emergent adverse events of Grade 3 and above, whether or not treatment related, occurring in at least 10% of these patients included febrile neutropenia, anemia, platelet count decreased, white blood cell count decreased, lymphocyte count decreased, hypoxia, neutrophil count decreased, hypotension, hypophosphatemia, CRS, encephalopathy, hypocalcemia, hyponatremia, pyrexia, activated partial thromboplastin time prolonged, hypertension, hyperglycemia, aspartate aminotransferase increased, dyspnea, blood bilirubin increased, pulmonary edema, and lung infection. FHCRC only collects adverse event data of Grade 3 and above for this trial.
Encouraged by this data in r/r CLL, we plan to file an IND in 2017 in support of a planned Phase I/II trial using JCAR017, or a product candidate similar to JCAR017, for the treatment of r/r CLL. We believe that if the results of the planned trial are successful, they may support U.S. regulatory approval in r/r CLL as early as the end of 2019.
In NHL, in investigator-reported interim data presented at ASCO 2016 as of a data cutoff date of May 18, 2016, 16 of 20 r/r NHL patients, or 80%, had an overall response and 10 of 20 patients, or 50%, had a complete response, when treated at JCAR014 dose level 2 (2x10
6
cells/kg) after receiving flu/cy lymphodepletion. In patients who had a complete response, 70% remained in complete response in follow up that ranged from 3 to 11 months as of the data cutoff date. sCRS and severe neurotoxicity were each observed in 2 of 20 patients, or 10%. Other treatment-emergent adverse events of Grade 3 and above, whether or not treatment related, occurring in at least 10% of these patients included neutrophil count decreased, white blood cell count decreased, febrile neutropenia, anemia, platelet count decreased, lymphocyte count decreased, hypotension, hypophosphatemia, CRS, hypoxia, encephalopathy, and hyponatremia. Notably, 16 of 20 patients, or 80%, treated with flu/cy lymphodepletion followed by JCAR014 dose level 2 were treated in the outpatient setting, and 6 of 20, or 30%, did not require hospitalization during the first 30 days of treatment.
Across r/r NHL patients at all dose levels and lymphodepletion regimens tested on the trial as of the data cutoff date of May 18, 2016, 22% of 41 patients with r/r NHL experienced sCRS and 20% experienced severe neurotoxicity. There were two patient deaths in r/r NHL patients treated with JCAR014, both at dose level 3, that we believe were either directly or indirectly related to sCRS or severe neurotoxicity.
In ALL, in investigator-reported interim data presented at ASCO 2016 as of a data cutoff date of May 18, 2016, 34 out of 34 efficacy-evaluable patients, or 100%, achieved a CR and 32 out of 34 patients, or 94%, achieved a CRm as measured by flow cytometry. Additionally, 13 out of 20 patients, or 65%, had a CRm as measured by the more sensitive technique of IgH deep sequencing. In the cohort that received flu/cy lymphodepletion, 22 out of 22 efficacy-evaluable patients, or 100%, achieved a CR and CRm, and median disease-free survival and overall survival have not yet been reached with patients followed for up to 18 months. sCRS was observed in 14 of 36 patients, or 39%, patients and severe neurotoxicity was observed in 14 of 36 patients, or 39%. There have been three patient deaths in r/r ALL patients treated with JCAR014, one at dose level 3, and two at dose level 2, that we believe were either directly or indirectly related to sCRS or severe neurotoxicity, including one case of cerebral edema. As a result of these deaths, only dose level 1 (2x10
5
cells/kg) is being used in r/r ALL on the trial. Other treatment-emergent adverse events of CTCAE Grade 3 and above, whether or not treatment related, occurring in at least 10% of the r/r ALL patients included neutrophil count decreased, febrile neutropenia, white blood cell count decreased, platelet count decreased, anemia, hypotension, CRS, hypophosphatemia, sinus tachycardia, encephalopathy, activated partial thromboplastin time prolonged, lymphocyte count decreased, hypoxia, hyponatremia, pyrexia, hypocalcemia, hypertension, hypokalemia and aspartate aminotransferase increased.
In 2017, we plan to test JCAR014 in combination with other agents, including an ongoing Phase Ib trial with the MedImmune checkpoint inhibitor durvalumab in which we are enrolling adult r/r NHL patients and Phase I testing with ibrutinib in r/r CLL patients. We believe that these and other combination trials will provide key insights on the next set of development trials in lymphoma and CLL. These trials may also potentially inform strategies for solid organ tumor settings and next generation CAR constructs.
JCAR015
JCAR015 is a CD19-directed product candidate that uses a CD28 costimulatory domain and a CD4+ and CD8+ selection step to select out T cells from peripheral blood mononuclear cells. JCAR015 was originally developed at MSK and had demonstrated clinically meaningful complete remission rates in adult patients with r/r ALL in a Phase I trial conducted at MSK under an MSK IND.
In the second half of 2015, we began the ROCKET trial, a Phase II, multicenter trial with JCAR015 in adult r/r ALL under a Juno IND that we believed could have served the basis for regulatory approval in the United States. Initially, the trial enrolled 14 patients who received cyclophosphamide lymphodepletion followed by JCAR015, like the majority of patients in the Phase I trial conducted at MSK. From the outset of the ROCKET trial, we had planned to change to flu/cy lymphodepletion because of better outcomes observed in other adult r/r ALL trials from the use of that lymphodepletion regimen with CAR T cells, and this switch was made in May 2016. However, in early July 2016, the FDA placed the trial on clinical hold after we observed a greater-than-expected incidence of severe neurotoxicity, including two patients who died in late June 2016 from cerebral edema, following the switch to flu/cy lymphodepletion on the trial. There had been one earlier death in the trial in May 2016 from cerebral edema in a patient treated with JCAR015 after receiving flu/cy lymphodepletion, but a review identified confounding factors specific to the event, and the FDA, our data safety monitoring board, and Juno each determined that it was appropriate to continue the trial without changes to the treatment protocol with respect to cell dose or lymphodepletion regimen. Following the June 2016 deaths and the FDA hold, we amended the trial protocol to continue the trial without fludarabine, returning to the original cyclophosphamide-only lymphodepletion regimen. The FDA removed the clinical hold on July 12, 2016 and we recommenced treating new patients in the trial in early August 2016. However, in November 2016, there were two additional deaths on the trial from cerebral edema and the trial was again placed on clinical hold.
The trial has remained on hold since November 2016, while we conducted our investigation into the toxicity. Through the investigation we identified multiple factors that may have contributed to this increased risk, including patient specific factors, the conditioning chemotherapy patients received, and factors related to the product.
Although we believe there are protocol modifications and process improvements that could enable us to proceed with JCAR015 in clinical testing in adult r/r ALL, we would first need to establish preliminary safety and dose in a Phase I trial. As a result of the timing delay that would entail and our belief that we have other product candidates in our pipeline that are likely to provide improved efficacy and tolerability, we have made a strategic decision to cease Juno development of JCAR015 and to redirect associated resources to the development of a defined cell product candidate in the adult r/r ALL setting.
CD22-directed Product Candidate: JCAR018
We also have another product candidate in clinical trials, JCAR018, that also designed for the treatment of B cell malignancies, but uses technology to target a different cell surface protein on B cells, CD22. Like CD19, CD22 is widely expressed on B lymphocytes. It is expressed by most B cell malignancies, including NHL, ALL, and CLL, although its expression is not as common as CD19 in some of these diseases. Within these CD22 positive malignancies, it is generally expressed on all of a patient’s cancer cells. Additionally, treatment with CD19-directed therapies has led to the emergence in some patients of CD19-
negative cancer cells. To date, these patients’ cancer cells have retained CD22 expression, potentially making a CD22-directed CAR T cell product candidate an important potential treatment for these patients, alone or in combination with CD19-directed therapy. Similar to CD19, CD22 is not known to be expressed on any healthy tissue other than B cells. It is also not expressed on hematopoietic stem cells, and therefore B cells should return when the CAR T cell is no longer present.
JCAR018 is the CD22-directed CAR product candidate with respect to which we have licensed technology from Opus Bio. JCAR018 has a fully human binding domain and a 4-1BB costimulatory domain. This product candidate was originally developed at the NCI.
JCAR018 is being tested in a Phase I trial at the NCI in pediatric and young adult patients that have CD22-positive r/r ALL or r/r NHL, under an NCI IND. The trial is open to patients who have either CD19-negative or CD19-positive disease and who have or have not received previous CAR T cell treatment.
Based on investigator-reported data presented at ASH 2016 as of a data cutoff date of October 4, 2016, in r/r ALL patients who received dose level 2 (1x10
6
cells/kg) of JCAR018 and flu/cy lymphodepletion, seven of eight, or 88%, achieved a CRm as measured by flow cytometry. Three of seven r/r ALL patients, or 43%, who achieved a CRm at dose level 2 are in ongoing remission ranging three to 12 months.
The product candidate had generally manageable adverse events in the 16 r/r ALL patients and one r/r NHL patient treated.
T
he primary adverse event was CTCAE Grade 1 to 2 CRS, with no severe or irreversible neurotoxicity. There was one death due to sepsis in a patient after resolution of CRS. Other treatment-emergent adverse events, whether or not treatment related, occurring in at least 25% of patients included hypoalbuminemia, anemia, aspartate aminotransferase increased, hypocalcemia, lymphocyte count decreased, neutrophil count decreased, fever, hypokalemia, hyponatremia, platelet count decreased, white blood cell decreased, activated partial thromboplastin time prolonged, alanine aminotransferase increased, febrile neutropenia, hypophosphatemia, alkaline phosphatase increased, hypotension, diarrhea, headache, nausea, pain, sinus tachycardia, anorexia, edema limbs, hypomagnesemia, vomiting, fatigue, abdominal pain, creatinine phosphokinase increased, chills, blood bilirubin increased, hypercalcemia, hypertension, and hypertriglyceridemia. All of the treated r/r ALL patients had been previously treated with anti-CD19 CAR T cell therapy and had previously undergone at least one allogeneic stem cell transplant.
This trial will continue during 2017 and we plan to present additional data on this trial in 2017.
Combining CD19-directed therapy and CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse. We are currently testing preclinical constructs to better understand the optimal way to target both CD22 and CD19 in the same product, with the aim of increasing the rate of durable remissions.
B Cell Malignancies Strategy and Development Plans
With respect to r/r NHL, we initiated our multi-center Phase I trial for JCAR017 in adults in 2015 and announced promising interim data from the trial at ASH2016. If data from this trial continue to show favorable clinical responses and encouraging tolerability, we intend to begin a registration trial in aggressive r/r NHL in 2017 to support U.S. regulatory approval as early as 2018.
With respect to r/r CLL, we are planning to file an IND in 2017 in support of a planned Phase I/II trial using JCAR017, or a product candidate similar to JCAR017, for the treatment of r/r CLL. We believe that if the results of the planned trial are successful, they may support U.S. regulatory approval in r/r CLL as early as the end of 2019.
With respect to pediatric and adult r/r ALL, we intend to outline the specifics of our strategy later in 2017.
Not every patient achieves a complete remission or CR, and of those that do, many patients have seen their cancer relapse. Several key hypotheses have emerged for improving patient long-term outcomes. In particular, we believe that improving the predictability of early cell expansion, improving CAR T cell persistence, overcoming the immunosuppressive effects of the tumor microenvironment, and addressing cancer cells losing expression of the epitope to which the CAR T binds are important areas to explore for potential clinical benefit. We expect several generations of product improvements for CD19 over the coming years, as we work to optimize patient outcomes for patients with lymphoma or leukemia.
Improved Predictability of Cell Expansion
We are planning Phase I trials in one or more B cell malignancies for "armored" CAR product candidates that target CD19. These product candidates are designed to explore the potential for synergistic effects of a CD19-directed CAR T cell and the production or expression of locally acting signaling proteins by the CAR T cell, such as 4-1BBL. In preclinical models, these "armored" CARs have greater cell expansion than our other CAR T product candidates. We expect to commence a Phase I trial through our collaborator MSK of a CD19/4-1BBL "armored" CAR in the first half of 2017.
Improving CAR T Cell Persistence
The IND has cleared for, and we plan to enroll patients in 2017 in, a Phase I clinical trial at FHCRC of our CD19-directed CAR product candidate with a fully human binding domain, in advanced B cell malignancies, including r/r NHL. We believe that the use of a human binding domain may lead to decreased risk of an immune response by a patient’s own immune system against the CAR T cell and increased persistence of the CAR T cells in the body. Our clinical experience to date suggests that increased CAR T cell persistence can potentially increase the duration of clinical response.
Overcoming the Tumor Microenvironment
We have begun a Phase Ib trial, under a FHCRC IND, in r/r NHL patients using the novel combination of JCAR014 with MedImmune’s PD-L1 checkpoint inhibitor durvalumab. We also intend to commence a multi-center, global trial in collaboration with Celgene in 2017 exploring JCAR017 and multiple immunomodulatory drugs, including durvalumab, in patients with r/r NHL. Beyond NHL, we are planning to test the combination of JCAR014 and ibrutinib in r/r CLL, with a cohort expected to begin enrollment at FHCRC in early 2017. We also are planning a trial with vipadenant, a small molecule A2aR antagonist we acquired an exclusive license to in 2016 that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. We believe that these and other combination trials will provide key insights on the next set of development trials in leukemia, lymphoma, and solid tumor settings, and also potentially inform next generation CAR constructs.
Overcoming CD19 Epitope Loss
As noted, we have an ongoing development program targeting CD22. Combining CD19-directed therapy and CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse. We are currently testing preclinical constructs to better understand the optimal way to target both CD22 and CD19 in the same CAR T product, with the aim of increasing the rate of durable remissions.
EU Development
As described in more detail under the caption "Licenses and Third-Party Collaborations" below, Celgene has opted in to our CD19 program and thereby has obtained an exclusive license to our CD19 product candidates for development and commercialization outside of North America and China. Celgene now is responsible for development and commercialization of our CD19 product candidates in its territories and is actively planning one or more trials of our CD19 product candidates in the EU. We expect Celgene will enroll its first patients in clinical studies with our product candidates in the EU as early as 2017.
Product Candidates in Multiple Myeloma
Another key area of focus for us is the treatment of multiple myeloma, which is a cancer of the plasma cells. Plasma cells are B cells that have matured to specialize in the production of antibodies. As plasma cells are primarily found in the bone marrow, cancerous plasma cells usually generate tumors in bone, and infrequently appear elsewhere. Multiple myeloma is a condition in which these plasma cells become malignant, with a single clone growing at an uncontrolled pace. These myeloma cells secrete large quantities of the same antibody, and patient symptoms can develop from the myeloma cells crowding out other plasma and bone marrow cells, leading to increased risk of infection, risk of bone destruction, and kidney disease. Multiple myeloma is the second most common hematologic malignancy making up approximately 2% of all cancers. Despite many recent advances in therapy, this form of cancer is still largely fatal and an area of high unmet medical need, with greater than 12,500 deaths estimated to have occurred in 2016.
Multiple myeloma shares some common attributes with B cell malignancies that make it an attractive target for CAR T cell therapy:
|
|
•
|
There are certain cell surface proteins that appear on many multiple myeloma cancer cells with consistency.
|
|
|
•
|
There are identifiable proteins whose expression is limited to the B cell lineage, decreasing the likelihood of off-target toxicity.
|
|
|
•
|
Multiple targets have been identified for potential use in CAR T therapy.
|
We have an internal research effort in generating binders and CAR T constructs for potential development for the treatment of multiple myeloma. Additionally, in August 2016 we entered into a license agreement with MSK and Eureka Therapeutics, Inc. pursuant to which we obtained an exclusive license pertaining to fully human binding domains targeting BCMA. We also licensed binding domains against two additional undisclosed multiple myeloma targets, in part to enable us to accelerate development in the event BCMA antigen loss becomes a significant issue for patients.
We have begun a Phase I trial at MSK in r/r multiple myeloma of a CAR product candidate that incorporates a fully human binding domain targeting BCMA and a 4-1BB costimulatory domain, under an MSK IND. Recent data from other groups have highlighted the potential of BCMA CAR T cells as a potential therapy for patients with multiple myeloma. As a target, BCMA has similar characteristics as CD19 has in the context of B cell malignancies. BCMA is expressed on all plasma cells, including cancerous plasma cells, but not other human tissues, and humans can live with plasma cell depletion for a prolonged period. Further, BCMA is not expressed on hematopoietic stem cells or undifferentiated B cells, and therefore plasma cells should return when the CAR T cells are no longer present.
One potential challenge with BCMA as a target is that in a patient with multiple myeloma there is often a significant amounts of soluble BCMA in the blood that could "divert" some of the CAR T cells away from the membrane-bound BCMA in the cancerous plasma cells. Among the other binding domains we have licensed includes a fully human binding domain that is designed to bind to membrane-bound BCMA, but not soluble BCMA. We plan to commence a Phase I trial at FHCRC in r/r multiple myeloma later in 2017 with a CAR product candidate that incorporates this binding domain.
We intend to use the MSK and FHCRC trials to better understand binding domain safety and obtain other translational insights to help us to accelerate our own clinical program in multiple myeloma. If the results from the trials are sufficiently encouraging, we intend to begin a clinical trial in the first half of 2018 under a Juno IND with a product candidate that incorporates one of these two binding domains and is manufactured using Juno's controlled manufacturing process.
Additional Product Candidates
We are exploring the potential of our CAR and TCR technologies against targets that have the potential to treat cancers beyond B cell malignancies and multiple myeloma—in particular, difficult-to-treat solid organ tumors such as certain breast, lung, and pancreatic cancers. We and our collaborators are working on a number of product candidates in early clinical or late-stage preclinical development that target different cancer proteins associated with solid organ tumors. We have five such candidates in clinical testing against five different targets, with additional product candidates in the preclinical pipeline.
Glycoprotein Targets: L1CAM (CD171) and Lewis Y
We have two CAR product candidates in the clinic that target glycoproteins, which are proteins that have carbohydrates attached to them, on the cell surface. The first of the targets is L1CAM, also known as CD171, a cell-surface adhesion molecule that plays an important role in the development of a normal nervous system. It is overexpressed in neuroblastoma, and there is increasing evidence of aberrant expression in a variety of solid organ tumors, including glioblastoma and lung, pancreatic, and ovarian cancers. The second of the targets is Lewis Y, which has an aberrant glycosylation when Lewis Y is expressed in multiple types of cancer, such as lung, leukemia, breast, and ovarian cancers.
JCAR023 is our L1CAM directed CAR T cell product candidate, which was originally developed at SCRI. It has a defined cell composition. Preliminary data from a non-human primate study has shown no evidence of reactivity of JCAR023 to normal tissues at cell doses 10-100 fold higher than the anticipated target dose in humans. SCRI is conducting a Phase I trial of JCAR023 in in patients with refractory or recurrent pediatric neuroblastoma, under a SCRI IND.
Our Lewis Y-directed CAR T cell product candidate was originally developed by the Peter MacCallum Cancer Centre. The Lewis Y-directed product candidate is currently being tested in lung cancer patients in a Phase I trial in Australia at the Peter MacCallum Cancer Centre.
JCAR020: MUC-16 / IL-12
MUC-16 is a protein overexpressed in the majority of ovarian cancers, but not on the surface of normal ovary cells. CA-125 is a protein found in the blood of ovarian cancer patients that results from the cleavage of MUC-16. CA-125 levels in the blood are a common test for ovarian cancer progression because they correlate with cancer progression. Our MUC-16/IL-12 product candidate, JCAR020, which was originally developed at MSK, has a binding domain that recognizes an extracellular domain of MUC-16 that remains following cleavage of CA-125.
JCAR020 is our first development candidate that uses our "armored CAR" technology. IL-12 is a cytokine that can help overcome the inhibitory effects that the tumor micro-environment can have on T cell activity. Systemic delivery of IL-12 has been limited to date by severe side effects, which have included severe hematological toxicity, severe hepatic dysfunction, and immune reactive events such as colitis, some of which resulted in deaths and trial stoppage. However, we believe local delivery to the tumor may provide efficacy while avoiding these side effects. JCAR020 secretes IL-12. Because CAR T cells aggregate at the target protein, IL-12 delivery is likely to concentrate in areas with significant MUC-16 protein expression, in this case, MUC-16 expressing cancers. We believe the armored CAR utilizing IL-12 has the potential to enhance T cell potency and persistence. MSK is conducting a Phase I trial of JCAR020 in ovarian cancer, under an MSK IND. The Phase I trial for
JCAR020 opened for enrollment in late 2015, and the trial will continue to enroll patients at ascending doses in 2017. In addition to assessing safety and preliminary efficacy, the trial is designed to provide potential biomarker and translational insights.
JCAR024: ROR-1
ROR-1 is a protein expressed in the formation of embryos, but in normal adult cells its surface expression is predominantly found at low levels on adipocytes, or fat cells, and briefly on precursors to B cells, or pre-B cells, during normal B cell maturation. ROR-1 is overexpressed on a wide variety of cancers including a subset of non-small cell lung cancer, triple negative breast cancer, pancreatic cancer, and prostate cancer. It is highly expressed on B cell chronic lymphocytic leukemia and mantle cell lymphoma.
JCAR024 is our ROR-1-directed CAR T cell product candidate, which was originally developed at FHCRC. It has a defined cell composition. Preliminary data in non-human primates has shown no evidence of acute clinically relevant side effects at cell doses exceeding the anticipated target dose in humans. We began a Phase I trial in early 2016 of JCAR024 in patients with ROR-1 expressing cancers, under a FHCRC-sponsored IND. We are also developing a next generation ROR-1-directed CAR T cell product candidate.
JTCR016: WT-1
Our lead high-affinity TCR T cell product candidate, JTCR016, targets WT-1, an intracellular protein that is overexpressed in a number of cancers, including adult myeloid leukemia ("AML") and non-small cell lung, breast, pancreatic, ovarian, and colorectal cancers. This product candidate was originally developed at FHCRC.
The first trial to test WT-1 was a Phase I/II trial that began in 2002, under a FHCRC IND, for the treatment of patients who have relapsed or are at a high risk of relapse after having received an allogeneic HSCT for AML, myelodysplasic syndrome, and chronic myeloid leukemia. In preliminary investigator-reported clinical data presented at ASH 2016 from the Phase I dose-escalation portion of the trial, 12 patients who had relapsed and 12 patients with no measurable disease but at high risk of relapse of AML had been treated as of the data cutoff date of November 1, 2016. In these patients, JTCR016 was relatively well-tolerated with prolonged persistence of the engineered T cells and no relapses as of the data cutoff date in the 12 patients at high risk of relapse. In the portion of the trial in which the 12 relapsed patients were treated, there was some early evidence of a direct anti-leukemic effect of JTCR016. Across all patients treated on the trial, treatment-emergent adverse events of Grade 3 and above, whether or not treatment related, occurring in at least 10% of patients included platelet count decreased, lymphocyte count decreased, anemia, neutrophil count decreased, white blood cell count decreased, hyponatremia, and hypotension. FHCRC only collects adverse event data of Grade 3 and above for this trial. There were no observed events of sCRS or severe neurotoxicity in any patients treated with JTCR016 in the trial. We expect additional data to be presented from this trial in 2017.
In 2015, FHCRC began a second Phase I/II trial of JTCR016, in patients with advanced NSCLC or mesothelioma, under a FHCRC IND. In early clinical data presented at the American Association for Cancer Research Annual Meeting 2016 ("AACR 2016") in April 2016 from the Phase I portion of the trial, out of three patients treated as of the data cutoff date of April 1, 2016, one mesothelioma patient had an ongoing partial response and one mesothelioma patient had stable disease after receiving JTCR016. JTCR016 was generally well-tolerated in these three patients, with no evidence of sCRS or severe neurotoxicity. This trial continues to enroll patients and we expect enrollment of additional patients in 2017.
We are planning a third Phase I/II trial of JTCR016 at FHCRC, in patients with newly diagnosed or relapsed high risk AML, under a FHCRC IND. We expect this trial to begin enrolling patients in 2017.
HPV e6/e7 Oncoproteins
Another active area of research for Juno is the possibility of treating cancers that are caused by viruses, such as HPV. We are planning a Phase I trial to begin as early as 2018 under a Juno IND with a TCR product candidate targeting the HPV e6/e7 oncoproteins, which are proteins that are expressed in many HPV-associated cancers, including certain cervical cancers and head and neck malignancies.
IL13rα2
We are developing a CAR product candidate that targets a cytokine receptor, IL13rα2, which is overexpressed on glioblastoma. The New England Journal of Medicine recently published a case study showing a patient who received a non-Juno CAR product candidate directed toward IL13rα2. This case study offers a proof of concept that CAR T cell therapy directed toward IL13rα2 may be efficacious in the treatment of glioblastoma.
We are planning to initiate a Phase I trial in glioblastoma in 2017, subject to completion of certain preclinical studies, using a CAR product candidate directed at IL13rα2.
Process Development and Manufacturing
We are devoting significant resources to process development and manufacturing in order to optimize the safety and efficacy of our product candidates, as well as to reduce our per unit manufacturing costs. The manufacture of our product candidates involves complex processes, including the separation of the appropriate T cells from blood product collected from the patient, the activation of the T cells, the insertion of the gene sequence for the CAR or TCR construct into the cell’s DNA, and the growth in the number of these modified T cells to the desired dose level. We have established a semi-automated, closed platform for this process, and we are investing further resources in improving and further automating the process so as to reduce the cost of manufacturing.
We continue to leverage our relationships with our academic partner institutions for manufacturing for some of our Phase I/II clinical trials. Doing so has significantly accelerated our ability to advance clinical trials, gain insights into the multiple manufacturing processes, and establish an infrastructure for future Phase I and II trials.
Our manufacturing strategy is designed to meet the demand needs of clinical supply and commercial launch, while also pursuing the goal of carefully managing our cost structure, maximizing optionality, and driving long-term cost of goods as low as possible. We have established a Juno owned and operated manufacturing facility in Bothell, Washington, that is manufacturing JCAR017 for the TRANSCEND trial and also manufactured much of the JCAR015 used in the ROCKET trial. We also used a CMO to manufacture JCAR015 during the ROCKET trial to increase the speed at which we could bring cGMP capacity on-line to support our JCAR015 clinical program, and we could use CMOs for drug product manufacturing again in the future if needs require. We believe that operating our own manufacturing facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, will enable the more rapid implementation of process changes, and will allow for better long-term margins. We believe this approach will position us to support multicenter clinical trials and commercialization.
Our manufacturing strategy is currently structured to support our U.S. development plans. Although we believe the general manufacturing strategy developed for the United States will be applicable in other geographies, specific strategies for other geographies will be developed as part of our clinical and commercial plans for such other geographies. As such, we are currently working with Celgene on developing a strategy for those geographies, such as the EU, where Celgene will be leading the development and commercialization of our CD19 product candidates, and we are working with JW Therapeutics on developing a strategy for manufacturing in China.
Commercialization Plan
We currently have limited sales, marketing or commercial product distribution capabilities and as a company we have no experience in commercializing products. We are in the process of building our U.S. commercial infrastructure and intend to build our own global commercialization capabilities over time as well as to leverage Celgene’s global capabilities in certain geographies for CD19 product candidates and any other programs that Celgene opts into.
According to Decision Resources Group’s projections, the combined global market for ALL, DLBCL, and CLL combined is expected to be approximately $20 billion by 2025. In the United States alone, there are approximately 6,000 patients diagnosed with ALL, 72,000 patients diagnosed with NHL and another 20,000 diagnosed with CLL each year. If any of our CD19 product candidates are approved, we expect to commercialize those products in the United States with an experienced sales, marketing, payer access and distribution organization including a national specialty hematology sales force.
Outside the United States, we have not yet defined our regulatory and commercial strategy. Under our license agreement with Celgene for the CD19 program, Celgene leads development and commercialization activities outside of North America and China. We expect to further outline our global plan for further development and commercialization of our CD19 product candidates in partnership with Celgene in 2017. With respect to product candidates arising out of other programs that Celgene opts in to, we would expect to leverage Celgene’s global development and commercial capabilities in those territories where Celgene receives development and commercialization rights. With respect to product candidates arising from programs for which Celgene chooses not to exercise its option, we would expect to build global commercial capacity internally or identify strategic partners for ongoing global commercialization of such product candidates, which may include biopharmaceutical partners, distributors, and contract sales and marketing organizations. We plan to further evaluate these alternatives as we approach approval for one of our product candidates.
As additional product candidates advance through our pipeline, our commercial plans will evolve as we consider elements such as the market potential, the unmet clinical need, the competitive landscape, development costs, etc., in order to efficiently and successfully commercialize our assets.
Intellectual Property
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, and product candidates that are important to the development and implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation, and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of immunotherapy. We additionally rely on data exclusivity, market exclusivity, and patent term extensions when available, and plan to seek and rely on regulatory protection afforded through orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.
We have developed and in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to the development and commercialization of immunotherapy product candidates, including related manufacturing processes and technology. Many of these in-licensed patents and patent applications claim the inventions of investigators at MSK, FHCRC, SCRI, NIH, City of Hope, and St. Jude, as described in more detail below under the caption "Licenses and Third-Party Collaborations." As of December 31, 2016, our owned and licensed patent portfolio consists of approximately 31 licensed U.S. issued patents, approximately 37 licensed U.S. pending patent applications, approximately 41 owned U.S. issued patents, and approximately 48 owned U.S. pending patent applications covering certain of our proprietary technology, inventions, and improvements and our most advanced product candidates, as well as approximately five owned patents issued in jurisdictions outside the United States, approximately 81 licensed patents issued in jurisdictions outside of the United States, approximately 268 licensed patent applications pending in jurisdictions outside of the United States (including 12 licensed pending Patent Cooperation Treaty applications), and approximately 128 owned patent applications pending in jurisdictions outside of the United States (including 24 owned pending Patent Cooperation Treaty applications) that, in many cases, are counterparts to the foregoing U.S. patents and patent applications. For example, these patents and patent applications include claims directed to:
|
|
•
|
proprietary CARs, T cell receptors and antibodies;
|
|
|
•
|
proprietary CAR constructs, including those with customized spacer domains for improved tumor recognition;
|
|
|
•
|
engineered transgenes for T cell selection, identification, and in vivo ablation;
|
|
|
•
|
proprietary gene transfer vectors;
|
|
|
•
|
reversible reagents for cell selection, expansion and engineering;
|
|
|
•
|
systems, assays, and processes for generating, evaluating, and manufacturing cells and compositions for adoptive immunotherapy;
|
|
|
•
|
adoptive immunotherapy using defined T cell compositions;
|
|
|
•
|
multispecific cellular therapy approaches, including bispecific CARs, cells and compositions;
|
|
|
•
|
formulations, dosages, and treatment methods for adoptive immunotherapy, including those for predicting risk of and reducing toxicity associated with adoptive immunotherapy;
|
|
|
•
|
approaches for improving exposure to therapeutic cell product and promoting resistance to factors of tumor microenvironments;
|
|
|
•
|
diagnostic and prognostic methods and compositions;
|
|
|
•
|
libraries and high throughput methods for the discovery of antigen-binding molecules and targets; and
|
|
|
•
|
compositions, combinations, and treatment methods related to the modulation of adenosine and/or adenosine receptors.
|
As for the immunotherapy products and processes we develop and commercialize, in the normal course of business, we intend to pursue, when possible, composition, method of use, dosing and formulation patent protection. We may also pursue patent protection with respect to manufacturing and drug development processes and technology.
Individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications filed in the United States are effective for 20 years from the earliest effective filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. 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 patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. Our patents issued as of December 31, 2016, will expire on dates ranging from 2019 to 2033. If patents are issued on our patent applications pending as of December 31, 2016, the resulting patents are projected to expire on dates ranging from 2021 to 2037. However, 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.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the scope of claims allowable in patents in the field of immunotherapy has emerged in the United States. The patent situation outside of the United States is even more uncertain. Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property. In particular, our ability to stop third parties from making, using, selling, offering to sell, or importing products that infringe our intellectual property will depend in part on our success in obtaining and enforcing patent claims that cover our technology, inventions, and improvements. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our products and the methods used to manufacture those products. Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our products. The area of patent and other intellectual property rights in biotechnology is an evolving one with many risks and uncertainties, and third parties may have blocking patents that could be used to prevent us from commercializing our patented product candidates and practicing our proprietary technology. Our issued patents and those that may issue in the future may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing related products or limit the length of the term of patent protection that we may have for our product candidates. For example, in 2015, Kite Pharma, Inc. ("Kite") filed a petition with the USPTO for inter partes review of U.S. Patent No. 7,446,190, a patent that we have exclusively licensed from MSK. Although the USPTO upheld all the claims of this patent in December 2016, Kite has appealed this decision. If Kite is successful in its appeal, one or more of the patent's claims could be narrowed or invalidated. In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
Patent disputes are sometimes interwoven into other business disputes. For example, we were a party in a lawsuit captioned
Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital
, Civil Action No. 2:13-cv-01502-SD (E.D. Penn.), which concerned both a contractual dispute between St. Jude Children’s Research Hospital ("St. Jude") and the Trustees of the University of Pennsylvania ("Penn"), and a dispute about U.S. Patent No. 8,399,645 (the "’645 Patent"), which St. Jude has exclusively licensed to us. This lawsuit settled in April 2015.
As of December 31, 2016, our registered trademark portfolio currently contains 55 registered trademarks and pending trademark applications, consisting of four trademark registrations and three pending trademark applications in the United States, and 17 registered trademarks and 31 pending trademark applications in the following countries through both national filings and under the Madrid Protocol: Australia, Canada, China, the European Union (including Germany), Hong Kong, India, Japan, Korea, Singapore, and Switzerland. We may also rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into confidentiality agreements with those who have access to our confidential information, including our employees,
contractors, consultants, collaborators, and advisors. We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations, and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or may be independently discovered by competitors. To the extent that our employees, contractors, consultants, collaborators, and advisors 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. For this and more comprehensive risks related to our proprietary technology, inventions, improvements and products, please see the section captioned "Risks Related to Intellectual Property" in Part I—Item 1A—"Risk Factors" of this report.
Licenses and Third-Party Collaborations
Celgene Corporation
Collaboration Agreement
In June 2015, we entered into a master research and collaboration agreement (the "Celgene Collaboration Agreement") with Celgene pursuant to which Juno and Celgene will research, develop and commercialize novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. The Celgene Collaboration Agreement became effective on July 31, 2015 and was amended and restated in August 2015 to clarify certain procedural aspects relating to a party’s exercise of an option for a given program, and to provide additional detail regarding a party’s entry into the applicable development and commercialization agreement thereafter. Pursuant to the collaboration, each of Celgene and Juno will conduct independent programs to research, develop, and commercialize such product candidates (including, in the case of Juno, our CD19 and CD22 programs). As detailed below, each party has certain options to obtain either an exclusive license to develop and commercialize specified product candidates arising from specified types of programs conducted by the other party within the scope of the collaboration, or the right to participate in the co-development and co-commercialization of specified product candidates arising from such programs. BCMA-directed product candidates are excluded from the collaboration.
The parties may exercise their options with respect to specified product candidates arising under programs within the scope of the collaboration until July 31, 2025, which is the tenth anniversary of the effective date of the Celgene Collaboration Agreement (the "Research Collaboration Term"), subject to a tail period applicable to certain programs, for which options have not yet been exercised as of the expiration of the Research Collaboration Term. For therapeutic product candidates that are directed to the target of a program for which an option is exercised, but for which the party exercising its option has not elected to obtain rights upon option exercise, each party is obligated during the remainder of the Research Collaboration Term to continue to offer the other party the right to exercise an additional option to obtain rights to develop and commercialize such other product candidates in such program until commencement of a pivotal clinical trial, upon terms set forth in the Celgene Collaboration Agreement. If a party does not exercise its option with respect to a program that is subject to the other party’s exclusive right to exercise an option prior to the expiration of all applicable option exercise periods for such product candidates in such program, the option with respect to such product candidates and such program will expire and the party required to offer such product candidates and program to the other party is free to develop and commercialize such product candidates independently.
Pursuant to the Celgene Collaboration Agreement, each party is solely responsible for research and development activities conducted under its programs prior to the other party’s exercise of an option. Following a party’s exercise of its option for a program, the parties will enter into an agreed form of license agreement or co-development and co-commercialization agreement for such program, as applicable, which agreement will set forth the allocation of rights and responsibilities as between the parties for development and commercialization activities for product candidates arising out of such program in the Celgene Territory and the Juno Territory, as applicable (as each is defined below).
Options under Celgene Collaboration Agreement
First, we granted Celgene options to obtain an exclusive license with respect to Juno’s internally conducted programs, to develop and commercialize specified types of immuno-oncology and immunology therapeutics that are selected by Celgene at the time it exercises such options and are directed to the molecular targets that are the subject of the relevant Juno programs. Juno will retain the right to develop and commercialize product candidates arising from such programs in the United States, Canada and Mexico, and for cellular therapy product candidates, China (such countries, the "Juno Territory" and all other countries, the "Celgene Territory"). Celgene may exercise the foregoing options on a program-by-program basis at various time points through completion of certain clinical trials with respect to product candidates in each program. Upon Celgene’s exercise
of such option for specified product candidates for a program, the parties are obligated to enter into either a license agreement or a co-development and co-commercialization agreement as specified below.
If Celgene exercises an option with respect to our internally developed programs within the scope of the collaboration, such as our CD19 and CD22 programs, Juno and Celgene will enter into an agreed form of a license agreement pursuant to which Celgene receives an exclusive, royalty-bearing license to develop and commercialize, at Celgene’s cost, specified therapeutic product candidates directed to the targets of such Juno programs in the Celgene Territory, and Juno retains all rights to develop further and commercialize, at Juno’s cost, such therapeutic product candidates in the Juno Territory, subject to Celgene’s right to exercise an option for a specified number of such programs, excluding the CD19 program and the CD22 program, to co-promote such product candidates in the Juno Territory (in which case the parties would execute a co-development and co-commercialization agreement as specified below). Under all such license agreements, Juno has the right to participate in specified commercialization activities arising from such programs in certain major European markets.
For internally developed Juno programs for which Celgene exercises one of its specified number of rights to co-develop and co-commercialize product candidates arising in such program, as described above, the parties shall enter into an agreed form of co-development and co-commercialization agreement, pursuant to which Celgene shall have the right to co-develop and co-commercialize such product candidates, with the parties each entitled to bear and receive an equal share of the profits and losses arising out of such programs following the exercise of such co-promote right. In general, under such agreements, Juno will be the lead party for development and commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization activities for such product candidates in the Celgene Territory. Under such agreements, Celgene has the right to elect to participate in up to a specified percentage of specified commercialization activities for such product candidates in the Juno Territory, and Juno has the right to elect to participate in up to a specified percentage of specified commercialization activities for such product candidates in certain major European markets.
If Juno exercises its option with respect to specified product candidates arising in internally developed Celgene programs within the scope of the collaboration, the parties are obligated to enter into a co-development and co-commercialization agreement pursuant to which Juno bears thirty percent (30%) and Celgene bears seventy percent (70%) of global profits and losses. Under such co-development and co-commercialization agreements, Celgene is the lead party for all development and commercialization activities for such product candidates worldwide, subject to Juno’s right to participate in up to a specified percentage of specified commercialization activities in North America under certain circumstances and in certain major European countries.
Furthermore, each party will have the exclusive right to exercise options to co-develop and co-commercialize product candidates arising out of programs for which the other party in-licenses or acquires rights that are within the scope of their collaboration, where such rights are available to be granted, with the parties each bearing an equal share of the profits and losses arising out of such programs following the exercise of such option. In general, for such programs where the rights are in-licensed or acquired by Juno and for which Celgene exercises its options, Juno will be the lead party for development and commercialization of product candidates arising from such programs in the Juno Territory, subject to Celgene’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization of product candidates arising in such programs in the Celgene Territory, subject to Juno’s right to elect to participate in certain commercialization activities for such product candidates in certain major European markets. Conversely, for such programs where the rights are in-licensed or acquired by Celgene and for which Juno exercises its options, Celgene will be the lead party for development and commercialization activities for product candidates arising from such programs on a worldwide basis, subject to Juno’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory and in certain major European markets. The party exercising an option for these in-licensed or acquired programs is required to pay to the other party an upfront payment equal to one half of the costs incurred by other party in connection with the acquisition of rights to such programs
.
In addition to an upfront cash payment of approximately $150.2 million under the Celgene Collaboration Agreement made by Celgene upon its effectiveness, Celgene is required to pay to Juno an additional upfront fee if Celgene exercises its option for each of the CD19 Program and the CD22 Program, totaling, if the options are exercised for both programs during the initial opt-in window, $100.0 million. In April 2016, Celgene paid us $50.0 million upon its exercise of its option for the CD19 Program. Upon a party’s exercise of the option for any other program (other than certain in-licensed or acquired programs where a party exercises its option at the time such program is acquired), the party exercising the option is required to pay to the other party an upfront payment at the time of exercise of its option, calculated as a multiple of the costs incurred by the other party in relation to the development activities for such program prior to the exercise of the option, with such multiple based on the point in development of such product at which such party exercises such option. For programs for which the parties have entered into a license agreement, Juno will also receive royalties from Celgene, for product candidates arising from the CD19 and CD22 programs, at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory, and for
product candidates arising from other Juno programs that are subject to a license agreement, tiered royalties on net sales of such product candidates in the Celgene Territory, at percentages ranging from the high single digits to the mid-teens, calculated based on the stage of development at which Celgene exercises its option for such program.
In addition to each party’s rights with respect to development and commercialization of product candidates arising from programs in the collaboration as set forth above, the parties have agreed to enter into a manufacturing and supply agreement that will govern the terms of manufacture and supply of cellular therapy product candidates and other product candidates included within collaboration programs following the exercise of an option for each such program. Under this agreement, Juno would manufacture and supply cellular therapy product candidates for the Juno Territory, and provide certain support for the manufacture and supply of cellular therapy product candidates for the Celgene Territory. Celgene would be responsible for the supply of other types of product candidates for which options are exercised.
The Celgene Collaboration Agreement will terminate upon the later of the last-to-expire of all option exercise periods, or, if an option is exercised by a party for one or more programs in the collaboration, upon the termination or expiration of the last-to-exist license agreement or co-development and co-commercialization agreement, as applicable, for any such program. The Celgene Collaboration Agreement may be terminated by either party for the insolvency of, or for an uncured material breach of the Celgene Collaboration Agreement by, the other party. Celgene may terminate the Celgene Collaboration Agreement in its entirety for any reason by providing Juno with prior written notice if there are no active development and commercialization agreements in place. Juno may terminate the Celgene Collaboration Agreement if Juno exercises its termination rights under the Voting and Standstill Agreement (as defined below) between the Parties for Celgene’s breach of certain covenants therein, or if either party terminates the Celgene Share Purchase Agreement (as defined below) other than as a result of a failure by Juno to meet specified closing conditions under such agreement. Either party also has the right to terminate the Celgene Collaboration Agreement on a program-by-program basis if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under the Celgene Collaboration Agreement.
On a program-by-program basis and prior to the exercise of an option, either party may terminate the Celgene Collaboration Agreement either in its entirety or with respect to one or more programs on prior written notice to the other party in the case of an uncured material breach by the other party that frustrates the fundamental purpose of the Celgene Collaboration Agreement,. On a program-by-program basis following the exercise of an option for a program, either Party may also terminate any license agreement, or co-development and co-commercialization agreement for such program upon prior notice for an uncured material breach by the other party with respect to such program that frustrates the fundamental purpose of such agreement. Either party may terminate a license agreement or co-development and co-commercialization agreement upon the bankruptcy or insolvency of the other party. Either party also has the right to terminate the license agreement or the co-development and co-commercialization agreement if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under such agreement.
CD19 License Agreement
In April 2016, Celgene exercised its opt-in right to develop and commercialize product candidates from our CD19 program in the Celgene Territory. As a result, we entered into a license agreement with Celgene (the "Celgene CD19 License") pursuant to which Celgene received an exclusive, royalty-bearing license to develop and commercialize therapeutic CAR product candidates from our CD19 program in the Celgene Territory. Juno retains all rights to develop further and commercialize such product candidates in the Juno Territory. Juno and Celgene will generally share worldwide research and development costs, while Juno will be responsible for commercialization costs in the Juno Territory and Celgene will be responsible for commercialization costs in the Celgene Territory. Juno has the right to participate in specified commercialization activities for licensed products arising from the CD19 program in certain major European markets. Celgene has the right to participate in specified commercialization activities in North America for licensed products for certain indications under the CD19 program. We received a
$50.0 million
option exercise fee from Celgene upon the exercise of Celgene’s option for the CD19 program. We will also receive royalties from Celgene for CAR product candidates arising from the CD19 program at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory.
The term of the Celgene CD19 License will expire on the last to expire royalty payment obligation of Celgene under that agreement. Such royalty payment obligation will expire, on a licensed product-by-licensed product and a country-by-country basis, after sales of such licensed product decline to specified levels following the latest of (i) the expiration of the last to expire Juno patent licensed to Celgene covering such licensed product in such country, (ii) the expiration of regulatory exclusivity for such licensed product in such country, and (iii) a specified anniversary of the first commercial sale of such licensed product in such country.
Celgene may terminate the Celgene CD19 License in its entirety upon prior written notice. Celgene also has the right to terminate the Celgene CD19 License, on a product candidate-by-product candidate basis, immediately upon written notice to Juno upon the occurrence of certain safety events. Either Juno or Celgene may terminate the Celgene CD19 License upon prior written notice for an uncured material breach by the other party that frustrates the fundamental purpose of the Celgene CD19 License. Either Juno or Celgene may terminate the Celgene CD19 License upon the bankruptcy or insolvency of the other party, or if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under the Celgene CD19 License. Juno may also terminate the Celgene CD19 License immediately for certain breaches by Celgene of the voting and standstill agreement between Celgene and Juno.
Equity Placement
In June 2015, we also entered into a share purchase agreement (the "Celgene Share Purchase Agreement") with Celgene. Pursuant to the Celgene Share Purchase Agreement, we agreed to sell 9,137,672 shares of our common stock to Celgene at an aggregate cash price of approximately $849.8 million, or $93.00 per share of common stock, at an initial closing. The initial closing occurred on August 4, 2015.
First Period Top-Up Rights
Starting in 2016 and until June 29, 2020, Celgene has the annual right, following the filing of each Annual Report on Form 10-K filed by Juno (including this report), to purchase additional shares from Juno at a market average price, allowing it to "top up" to an ownership interest equal to 10% of the then-outstanding shares (after giving effect to such purchase), subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise).
In March 2016, Celgene exercised its annual top-up right to purchase
1,137,593
shares at a price of
$41.32
per share, for an aggregate cash purchase price of
$47.0 million
. As Celgene in March 2016 did not exercise the top-up right in full to reach
10%
ownership that would have been permitted by the top-up right, the top-up right that will be triggered by the filing of this Annual Report on Form 10-K for the fiscal year ending
December 31, 2016
will only permit Celgene to top-up its ownership stake of the Company’s common stock to
9.76%
. Based on the number of shares of common stock outstanding as of February 22, 2017 as set forth on the cover of this report, we estimate that Celgene will have the right to acquire approximately
75,000
shares of our common stock if it exercises the "top up" right triggered by the filing of this report.
First Acquisition Right
During the period beginning on June 29, 2019 and ending on June 28, 2020, subject to Celgene opting in to a certain number of Juno programs under the Celgene Collaboration Agreement, Celgene will have the right (the "First Acquisition Right") to purchase up to 19.99% of the then-outstanding shares of Juno’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market (currently The NASDAQ Global Select Market) on the date of exercise (the "FAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.
Second Period Top-Up Rights
After the closing of the purchase of shares upon the exercise of the First Acquisition Right until the SAR Termination Date (as defined below), in the event that Celgene has been diluted after exercising the First Acquisition Right, Juno may elect annually, upon the filing of each Annual Report on Form 10-K filed by Juno, to offer Celgene the right to purchase additional shares from Juno at 105% of market average price, allowing Celgene to "top up" to an ownership interest (after giving effect to such purchase) equal to the percentage ownership of shares that Celgene obtained upon exercise of the First Acquisition Right, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any year in which it is offered such right by Juno, then the percentage of ownership targeted for a top-up stock purchase for the next year it is offered such top-up right will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). The "SAR Termination Date" is the later of (a) June 29, 2025, and (b) the earlier of (x) the date that is 6 months following the date that the conditions to the exercise of the Second Acquisition Right (as defined herein) are satisfied and (y) December 29, 2025.
Second Acquisition Right
During the period beginning on June 29, 2024 and ending on the SAR Termination Date, subject to each of Celgene and Juno opting into a certain number of programs under the Celgene Collaboration Agreement, and provided that Celgene exercised the First Acquisition Right so as to obtain a percentage ownership of 17% of Juno, Celgene will have the right (the "Second Acquisition Right") to purchase up to 30% of the then-outstanding shares of Juno’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market on the date of exercise (the "SAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph.
Final Top-Up Rights
Following the closing of the purchase of shares upon the exercise of the Second Acquisition Right and until the Celgene Collaboration Agreement expires or is terminated, Celgene would have the annual right, in the event that Celgene has been diluted after exercising the Second Acquisition Right, following the filing of each Annual Report on Form 10-K filed by Juno, to purchase additional shares from Juno at a price equal to 105% of market average price, allowing it to "top up" to the percentage ownership it had attained upon exercising the Second Acquisition Right, less 250 basis points, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise).
These rights and the other described top-up rights, as well as the First Acquisition Right and Second Acquisition Right, may be limited or eliminated in certain circumstances when and if Celgene disposes of any of its shares.
Conditions to Closing; Termination; Stockholder Approval
Closings of top-up rights, the First Acquisition Right, and the Second Acquisition Right, are subject to customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We have the ability to terminate Celgene’s future purchase rights under the Celgene Share Purchase Agreement in the event that Celgene breaches certain of its obligations under the Voting and Standstill Agreement (described below), Celgene undergoes a change in control, or the Celgene Collaboration Agreement terminates or expires.
Voting and Standstill Agreement
In connection with the Celgene Share Purchase Agreement, we entered into a voting and standstill agreement (the "Voting and Standstill Agreement") with Celgene in June 2015. Pursuant to the Voting and Standstill Agreement, until the later of the fifth anniversary of the date of the Voting and Standstill Agreement and the expiration or earlier termination of the Celgene Collaboration Agreement, Celgene will be bound by certain "standstill" provisions which generally will prevent it from purchasing outstanding shares of Juno common stock or common stock equivalents, making a tender offer or encouraging or supporting a third party tender offer, calling a meeting of Juno’s stockholders, nominating a director whose nomination has not been approved by Juno’s board of directors (the "Board"), soliciting proxies in opposition to the recommendation of the Board, depositing shares of common stock in a voting trust, assisting a third party in taking such actions, entering into discussions with a third party as to such actions, or requesting or proposing in writing to the Board or any member thereof that Juno amend or waive any of these limitations. Celgene has also agreed not to dispose of any shares of common stock beneficially owned by it during certain specified lock-up periods, other than under certain exceptions. Following the expiration of such lock-up periods, Celgene may sell shares subject to certain manner of sale and volume limitations, as well as restrictions on sales to persons defined as "competitors." Celgene has agreed generally to vote its shares in accordance with the recommendations of the majority of Juno’s Board.
We have agreed to give Celgene certain Board designation rights until at least June 29, 2020, and thereafter for as long as Celgene and its affiliates beneficially own at least 7.5% of the voting power of Juno’s outstanding shares. Dr. Thomas O. Daniel is Celgene’s current designee on the Board. Juno has agreed to nominate Dr. Daniel for election and reelection as a director on the Board, provided in each case that Dr. Daniel is reasonably acceptable to the nominating and governance committee of the Board. Celgene may designate another nominee to replace Dr. Daniel upon Dr. Daniel’s departure from the Board or as a replacement nominee for election at a meeting of stockholders at which such position is up for election. Except for the first such subsequent designee, any such subsequent designee may not be an employee or officer of Celgene, must be independent under NASDAQ rules, and must be reasonably acceptable to the nominating and governance committee of the Board. The first subsequent designee may be an "officer" of Celgene Corporation for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, within the meaning of Rule 16a-1(f) thereunder, provided that such designee is reasonably acceptable to the nominating and governance committee of the Board.
The rights and restrictions applicable to Celgene under the Voting and Standstill Agreement are subject to termination upon the occurrence of certain events, including certain events involving a change of control, or potential change of control, of Juno.
Registration Rights Agreement
In connection with the Celgene Share Purchase Agreement, we also entered into a registration rights agreement (the "Celgene Registration Rights Agreement") with Celgene in June 2015. Pursuant to the Celgene Registration Rights Agreement, if and as Celgene is permitted to sell shares under the Voting and Standstill Agreement, Juno has agreed to, upon the written request of Celgene, prepare and file with the Securities and Exchange Commission a registration statement on Form S-3 for purposes of registering the resale of the shares specified in Celgene’s written request or, if Juno is not at such time eligible for the use of Form S-3, use its commercially reasonable efforts to prepare and file a registration statement on a Form S-1 or alternative form that permits the resale of the shares. Juno has also agreed, among other things, to indemnify Celgene under the registration statement from certain liabilities and to pay all fees and expenses (excluding any legal fees of the selling holder(s) above $10,000 per registration statement, and any underwriting discounts and selling commissions) incident to the Juno’s obligations under the Celgene Registration Rights Agreement.
Fred Hutchinson Cancer Research Center License and Collaboration Agreement
In October 2013, we entered into a license agreement with FHCRC that grants us an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain technology, to research, develop, manufacture, improve, and commercialize products and processes covered by such patent rights or incorporating such technology for all therapeutic uses for the treatment of human cancer. This agreement was amended and restated in November 2014, and further amended in October 2015 and March 2016 to add additional patent assets and associated payment obligations to the agreement. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including target specific constructs and customized spacer regions, TCR constructs, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2016, we have rights to four pending U.S. patent applications, two pending Patent Cooperation Treaty applications, one issued patent in a jurisdiction outside the United States, and a number of other patent applications in jurisdictions outside the United States. We paid to FHCRC an upfront payment of $250,000 upon entering into this agreement. We are required to pay to FHCRC an annual maintenance fee of $50,000 for the first four years of the agreement’s term and thereafter minimum annual royalties of $100,000 per year, with such payments reduced by the amount of running royalties paid to FHCRC in the applicable prior year. With respect to technology licensed under the license agreement that is applicable to JCAR014 and JCAR017, we may be obligated to pay to FHCRC up to a maximum of $6.75 million per licensed product upon our achievement of certain specified clinical and regulatory milestones. In addition, the license agreement provides that we are required to pay to FHCRC low single-digit royalties based on annual net sales of the licensed products by us and by our sublicensees. We are also required to pay to FHCRC a portion of the payments that we receive from sublicensees of the rights licensed to us by FHCRC, on a tiered basis, up to a cap. In addition, we have agreed to use a set amount of these sublicensee payments to support the research and development of licensed products, and if, by the fifth anniversary of the license agreement, we have received at least such amount in sublicensee payments but have spent less than such amount on such research and development activities, we must pay to FHCRC the difference between such set amount and the actual amounts we have spent on such activities.
The license agreement will expire on the later of the expiration of the last to expire of the licensed patents rights covering a licensed product, on a country-by-country basis, or 15 years following the regulatory approval of the first licensed product. We may terminate the agreement at will upon 90 days’ notice, in its entirety, on a country-by-country basis, or with respect to any aspect of any licensed patent. FHCRC has the right to terminate the agreement upon 90 days’ notice in the event of our uncured breach, but upon 45 days’ notice if such breach is of a payment or reporting obligation, and upon written notice if we are more than three days late with any payment obligation on any two occasions within a 12-month period. FHCRC may also terminate the agreement upon 30 days’ written notice if we challenge, or notify FHCRC that we intend to challenge, the validity or enforceability of any of the licensed patent rights, and the agreement will terminate automatically in the event of our bankruptcy or insolvency. Upon termination, but not expiration, of the agreement, we are required, upon FHCRC’s request, to timely enter into good faith negotiations with FHCRC’s future licensees for the purpose of granting licensing rights to our modifications to or improvements upon the licensed patents or technologies.
Also in October 2013, we entered into a collaboration agreement with FHCRC relating to the research and development of cellular immunotherapy products. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain a royalty-bearing license to intellectual property owned by FHCRC that is developed in connection with the work conducted under the collaboration agreement, such license to be exclusive with respect to patents and patent applications and non- exclusive with respect to any other intellectual property. In addition, FHCRC granted us an exclusive, perpetual, royalty-free, sublicensable license to any such intellectual property that constitutes an
improvement to any process used to manufacture any human cellular and tissue-based collaboration study product, for the development and/or commercialization of cellular immunotherapy products.
The term of the collaboration agreement shall continue for six years from the effective date, unless earlier terminated. Either party may terminate the collaboration agreement, in its entirety or with respect to a particular collaboration project, upon 30 days’ prior written notice in the case of the other party’s uncured material breach. Either we or FHCRC may also terminate upon written notice in the event of the other party’s bankruptcy or insolvency.
In connection with the collaboration agreement in October 2013, we entered into a letter agreement with FHCRC pursuant to which we issued to FHCRC 3,274,998 shares of our common stock and also agreed to make success payments to FHCRC, payable in cash or publicly-traded equity at our discretion. In December 2015, we amended this letter agreement to make certain clarifying amendments thereto. These success payments are based on increases in the per share fair market value of our common stock during the term of the success payment agreement, which is a period of time that begins on the date of our collaboration agreement with FHCRC and ends on the later of: (1) the eighth anniversary of that date and (2) the earlier of (a) the eleventh anniversary of that date and (b) the third anniversary of the first date on which the FDA issues formal written approval for us to market a pharmaceutical or biologic product developed at least in part by our company. Success payments are owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014 (the date our common stock first became publicly traded upon our initial public offering); (2) the date on which we sell, lease, transfer, or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4), but only upon a request by FHCRC made within 20 calendar days after receiving written notice from us of such event; and (6) the last day of the term of the success payment agreement. Any success payment will generally be made within 90 days after the applicable valuation measurement date, except that (1) in the case of an initial public offering, the payment was required on December 21, 2015, which was the first business day following the first anniversary of the date our common stock first became publicly traded upon our initial public offering, and (2) in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of an initial public offering, the value of our common stock for determining whether a success payment was owed was determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2015, which was the first anniversary of the date our common stock first became publicly traded following our initial public offering. In the case of a valuation measurement date triggered by each second anniversary of our stock first becoming publicly traded, the value of our common stock for determining whether a success payment is owed will be determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding such anniversary date, so long as our common stock is publicly tradable during such 90 calendar day period. On all other valuation measurement dates (if any), the value will be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or, in all other cases, by a baseball arbitration process. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $20.00 per share to $160.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $20.00 per share to $375.0 million at $160.00 per share, payable if such threshold is reached. Any previous success payments made to FHCRC are credited against the success payment owed as of any valuation measurement date, so that FHCRC does not receive multiple success payments in connection with the same threshold. The success payments paid to FHCRC will not exceed, in aggregate, $375.0 million, which would be owed only when the value of the common stock reaches $160.00 per share. In June 2014, we entered into an agreement with FHCRC to provide that certain indirect costs related to the collaboration projects conducted by FHCRC are creditable against any success payments, and we amended this agreement in December 2015. If we elect to make a success payment in shares of our common stock, the number of shares to be issued is computed by dividing the dollar amount of the success payment by the volume weighted average trading price of a share of our common stock on the trading day preceding the date on which the success payment is made.
In December 2015, success payments to FHCRC were triggered in the aggregate amount of $75.0 million, less indirect cost offsets of $3.3 million. We elected to make the payment in shares of our common stock, and thereby issued 1,601,085 shares of our common stock to FHCRC in December 2015.
Memorial Sloan Kettering License and Research Agreement
In November 2013, we entered into a license agreement with MSK that grants us a worldwide, sublicensable license to certain patent rights and intellectual property rights related to certain know-how to develop, make, and commercialize licensed
products and to perform services for all therapeutic and diagnostic uses, which license is exclusive with respect to such patent rights and tangible materials within such know-how, and nonexclusive with respect to such know-how and related intellectual property rights. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including bispecific and armored CARs, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2016, we have rights to three issued U.S. patents, five pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. Upon entering the agreement, we paid MSK an upfront payment of $6.9 million, and we are required to pay to MSK annual minimum royalties of $100,000 commencing on the fifth anniversary of the license agreement, with such payments creditable against royalties. The license agreement requires us to pay to MSK mid-to-high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by us and our affiliates and sublicensees, which royalty will be reduced in the case of licensed products or services that are not covered by a valid patent in the country in which such products or services are manufactured or commercialized. In addition, if the first product we commercialize contains a chimeric antigen receptor T cell that is not a licensed product under the terms of the agreement, we are required to pay to MSK a below-single-digit royalty on net sales of such product for ten years after the first commercial sale of such product. We may also be obligated to pay to MSK up to a maximum of $6.75 million in clinical and regulatory milestone payments for each licensed product, which includes JCAR015. In addition, we are required to pay to MSK a percentage of certain payments that we receive from sublicensees of the rights licensed to us by MSK, which percentage will be based upon the date we receive such payments, the commitments we make for the development of licensed products under the agreement, or the achievement of certain clinical milestones.
The license agreement will expire, on a country-by-country and licensed-product-by-licensed-product and/or licensed-service-by-licensed-service basis, until the later of the expiration of the last to expire of the patents and patent applications covering such licensed product or service, the expiration of any market exclusivity period granted by a regulatory authority for such licensed product or service in such country, ten years from the first commercial sale of such licensed product or service in such country, or ten years from the first commercial sale of such licensed product or service in such country, where such product or service was never covered by a valid patent or patent application in such country. Upon the expiration of the agreement in any country for a particular licensed product, we will retain a nonexclusive, royalty-free license in such country to the licensed know-how useful to manufacture or commercialize such product. MSK may terminate the license agreement upon 90 days’ notice in the event of our uncured material breach, or upon 30 days’ notice if such breach is of a payment obligation. MSK may also terminate the agreement upon written notice in the event of our bankruptcy or insolvency or our conviction of a felony relating to the licensed products, or if we challenge the validity or enforceability of any licensed patent right. In addition, we have the right to terminate the agreement in its entirety at will upon 30 days’ notice to MSK, but if we have commenced the commercialization of licensed products we can only terminate at will if we cease all development and commercialization of licensed products.
Also in November 2013, we entered into a master sponsored research agreement, which we refer to as the MSRA, with MSK focused on research and development relating to chimeric antigen receptor T cell technology. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to intellectual property owned by MSK developed in connection with the work conducted under the MSRA, and an exclusive option to obtain an exclusive, worldwide, sublicensable license to MSK’s interest in any improvements to the intellectual property licensed by us to MSK for conducting a research project. If the exclusive license agreement with MSK described above is still in effect, any such intellectual property licensed by us pursuant to our exercise of either such option shall be included within the rights licensed to us under the exclusive license agreement, although we may agree to additional diligence and other obligations. The term of the MSRA shall continue until the activities set forth in each statement of work entered into under the MSRA are completed. The MSRA may be terminated by either party upon 90 days’ notice in the event of the other party’s uncured material breach. MSK may terminate the MSRA upon 30 days’ notice in the event of our uncured failure to make a payment.
Also in November 2013, we entered into a master clinical study agreement, which we refer to as the MCSA, for clinical studies to be conducted at MSK on our behalf. Each such clinical study will be conducted in accordance with a written plan and budget and protocol approved by the parties. We have an exclusive option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to intellectual property owned by MSK developed in connection with the work conducted under the MCSA, and an exclusive option to obtain an exclusive, worldwide, sublicensable license to MSK’s interest in any improvements to the intellectual property licensed by us to MSK to conduct any clinical study under the MCSA. If the exclusive license agreement with MSK described above is still in effect, any such intellectual property licensed by us pursuant to our exercise of either such option shall be automatically included within the rights licensed to us under the exclusive license agreement. The MCSA has a term of five years and may be terminated by either party upon 30 days’ notice in the event of the other party’s uncured material breach, or upon written notice in the event of the other party’s bankruptcy or insolvency.
In connection with these arrangements, in November 2013 we entered into a letter agreement with MSK pursuant to which we issued to MSK 500,000 shares of our common stock and agreed to make success payments to MSK, payable in cash or
publicly-traded equity at our discretion. In December 2015, we amended this letter agreement to make certain clarifying amendments thereto. These success payments are based on increases in the per share fair market value of our common stock during the term of the success payment agreement, which is a period of time that begins on the date of our research agreement with MSK and ends on the later of (1) the eighth anniversary of that date and (2) the earlier of (a) the 11th anniversary of that date and (b) the third anniversary of the first date on which the FDA issues formal written approval for us to market a pharmaceutical or biologic product developed at least in part by our company. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014 (the date our common stock first became publicly traded upon our initial public offering); (2) the date on which we sell, lease, transfer, or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4); and (6) the last day of the term of the success payment agreement. Any success payment will generally be made within 90 days after the applicable valuation measurement date, except that (1) in the case of an initial public offering, the payment will be made on March 19, 2016, which the date that is 90 days after the first anniversary of the date our common stock first became publicly traded upon our initial public offering, and (2) in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of an initial public offering, the value of our common stock for determining whether a success payment was owed was determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2015, which was the first anniversary of the date our common stock first became publicly traded following our initial public offering. In the case of a valuation measurement date triggered by each second anniversary of our stock first becoming publicly traded, the value of our common stock for determining whether a success payment is owed will be determined by the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding such anniversary date, so long as our common stock is publicly tradable during such 90 calendar day period. On all other valuation measurement dates (if any), the value will be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or, in all other cases, by a baseball arbitration process. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $40.00 per share to $120.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $40.00 per share to $150.0 million at $120.00 per share, payable if such threshold is reached. Any previous success payments made to MSK are credited against the success payment owed as of any valuation measurement date, so that MSK does not receive multiple success payments in connection with the same threshold. The success payments paid to MSK will not exceed, in aggregate, $150.0 million, which would be owed only when the value of the common stock reaches $120.00 per share. In October 2015, we entered into an agreement with MSK to provide that certain indirect costs related to certain clinical studies and research projects are creditable against any success payments, and we amended this agreement in December 2015. If we elect to make a success payment in shares of our common stock, the number of shares to be issued is computed by dividing the dollar amount of the success payment by the volume weighted average trading price of a share of our common stock on the trading day preceding the date on which the success payment is made.
In December 2015, a success payment to MSK was triggered in the amount of $10.0 million, which we elected to pay, less indirect cost offsets of $1.0 million, in the form of 240,381 shares of our common stock in March 2016. In April 2016, we agreed to repurchase the 240,381 shares of common stock issued to MSK at a repurchase price of $41.90 per share.
Seattle Children’s Research Institute License and Collaboration Agreement
In February 2014, we entered into a license agreement with SCRI that grants to us an exclusive, worldwide, royalty-bearing sublicensable license to certain patent rights to develop, make, and commercialize licensed products and to perform licensed services for all therapeutic, prophylactic, and diagnostic uses. The patents and patent applications covered by this agreement are directed, in part, to regulated transgene expression and CAR constructs, including bispecific CARs and customized spacer regions, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2016, we have rights to one issued U.S. patent, six pending U.S. patent applications, and a number of other pending patent applications in jurisdictions outside the United States. Under the terms of the agreement, we paid SCRI an upfront payment of $200,000 and are required to pay to SCRI annual license maintenance fees, creditable against royalties and milestone payments due to SCH, of $50,000 per year for the first five years and $200,000 per year thereafter. Pursuant to the license agreement, we are obligated to pay to SCRI low single-digit royalties based on annual net sales of licensed products and licensed services by us and our affiliates and sublicensees. Based on the progress we make in the advancement of licensed products, including JCAR014 and JCAR017, we may be required to make clinical and regulatory milestone payments totaling up to $13.3 million in the aggregate per licensed product and up to $3.0 million in commercial milestone payments. In addition, we are required to pay to SCRI a percentage of
the payments that we receive from sublicensees of certain rights licensed to us by SCRI, up to an aggregate of $15.0 million, which percentage will be based upon the date we receive such payments and the achievement of certain clinical and regulatory milestones. The term of the license agreement will continue until the expiration or abandonment of all licensed patents and patent applications. We have the right to terminate the agreement at will upon 60 days’ written notice to SCRI. SCRI may terminate the agreement upon 90 days’ notice in the event of our uncured material breach, or upon 30 days’ notice if such breach is of a payment obligation. SCRI may terminate the agreement immediately if we challenge the enforceability, validity, or scope of any licensed patent right or assist a third party to do so. The agreement will terminate immediately in the event of our bankruptcy or insolvency.
Also in February 2014, we entered into a sponsored research agreement with SCRI. The research is conducted under project orders containing plans and budgets approved by the parties. We have an exclusive option to obtain an exclusive license to certain improvements, inventions, and other intellectual property rights owned by SCRI developed in connection with the work conducted under the sponsored research agreement. In some circumstances, we may be required to pay an option exercise fee to SCRI of up to $100,000 per improvement. When improvements provide substantial new functionality or commercial benefit and can be practiced without a license to any of the patents already licensed under the license agreement, we may agree to additional royalties, development milestones, and diligence obligations. The initial term of the sponsored research agreement was five years, and has since been extended through April 2020. SCRI may terminate the agreement for any reason upon 180 days’ notice, or immediately if the principal investigator is unable to continue performing the research and there is no successor acceptable to both parties. Either party may terminate the agreement upon 30 days’ notice in the event of the other party’s uncured material breach.
City of Hope License Agreement
In November 2009, ZetaRx LLC ("ZetaRx") entered into a license agreement with City of Hope ("COH") pursuant to which ZetaRx was granted an exclusive, worldwide, royalty-bearing license under certain patent rights to manufacture and commercialize products involving genetically engineered white blood cells for the treatment or prevention of disease in humans. The agreement was amended in May 2016 to update the patent exhibits to the agreement. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including bispecific CARs and T cell ablation technologies, and their use for immunotherapy. Pursuant to this license agreement, as of December 31, 2016, we have rights to 12 issued U.S. patents, three pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. The license is sublicensable with consent, and our sublicensees cannot grant further sublicenses. This license agreement was assumed by us in connection with our acquisition of certain of ZetaRx’s assets in October 2013. Under the terms of the license agreement, we are required to pay COH an annual license maintenance fee of $25,000, which payment is creditable against any other royalties due for the applicable year. In addition, the license agreement requires us to pay COH low single-digit royalties on annual net sales by us and our sublicensees. In addition, we are required to pay COH a fixed percentage of certain payments we receive from sublicensees of the technology licensed to us by COH.
The license agreement shall expire, on a country-by-country basis, upon the expiration of the last to expire of the patent rights licensed to us in such country. The agreement may be terminated by either party upon 30 days’ prior written notice in the event of the other party’s uncured material breach. In addition, COH may terminate the agreement immediately upon written notice in the event of bankruptcy or insolvency of our company, or if we do not reach certain clinical milestones by certain dates.
St. Jude Children’s Research Hospital Agreement; Sublicense to Penn and Novartis
In December 2013, we entered into an agreement with St. Jude (the "St. Jude License Agreement") pursuant to which we (1) obtained control over, and are obliged to pursue and defend, St. Jude’s causes of action in a pending litigation in the Eastern District of Pennsylvania,
Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital
, Civil Action No. 2:13-cv-01502-SD (the "Penn litigation"), in which we and St. Jude were each adverse to Penn and Novartis, and (2) acquired an exclusive, worldwide, royalty-bearing license under certain patent rights owned by St. Jude, including the ’645 Patent, to develop, make, and commercialize licensed products and services for all therapeutic, diagnostic, preventative, and palliative uses. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs capable of signaling both a primary and a co-stimulatory pathway. Pursuant to the St. Jude License Agreement, as of December 31, 2016, we have rights to one issued U.S. patent and three pending U.S. patent applications. The Penn litigation concerned both the ’645 Patent and a contractual dispute between St. Jude and Penn. We also obtained settlement authority in the Penn litigation, subject to certain conditions.
Upon entering into this the St. Jude License Agreement, we made an initial payment to St. Jude of $25.0 million. In addition, the agreement requires us to pay St. Jude low single-digit royalties on net sales of licensed products and services. We are also obligated to pay a $100,000 minimum annual royalty for the first two years of the agreement, and a $500,000 minimum royalty thereafter through the term of the agreement. In addition, we are required to make milestone payments of up to an aggregate of
$62.5 million upon the achievement of specified clinical, regulatory, and commercialization milestones for licensed products, which includes JCAR014 and JCAR017. In addition, we are required to pay St. Jude a percentage of certain payments we receive from sublicensees of the rights licensed to us by St. Jude or in settlement of litigation with respect to such rights. We were also required to pay a percentage of St. Jude’s reasonable legal fees incurred in connection with the Penn litigation.
The term of the St. Jude License Agreement will expire, on a country-by-country basis, upon the expiration of the last to expire of the licensed patents and patent applications in such country. The agreement may be terminated by either party in the event of the other party’s bankruptcy or insolvency, or upon advance written notice in the event of the other party’s uncured breach. We may terminate the agreement at will, in its entirety or with respect to any particular licensed patent or patent application, upon advance written notice to St. Jude.
In April 2015, St. Jude and we agreed to settle the litigation with Penn and Novartis. In connection with such settlement, we entered into a sublicense agreement (the "Penn/Novartis Sublicense Agreement") with Penn and an affiliate of Novartis pursuant to which Juno granted to Novartis a non-exclusive, royalty-bearing sublicense under certain patent rights, including the ‘645 Patent, to develop, make and commercialize licensed products and licensed services for all therapeutic, diagnostic, preventative and palliative uses. This sublicense is not sublicensable without our prior written consent, although Novartis may authorize third parties to act on its behalf with respect to the manufacture, development or commercialization of Novartis’ licensed products and licensed services. Pursuant to the Penn/Novartis Sublicense Agreement, Novartis paid Juno $12.3 million upon the effectiveness of such agreement, which amount was first applied to cover certain predetermined litigation expenses incurred by St. Jude, with the remainder divided between Juno and St. Jude at a fixed ratio. In addition, Novartis is also required to pay mid-single digit royalties on the U.S. net sales of products and services related to the disputed contract and patent claims (the "Novartis Royalty Payments"), a low double digit percentage of the royalties Novartis pays to Penn for global net sales of those products (the "Penn Royalty Payments"), and milestone payments upon the achievement of specified clinical, regulatory and commercialization milestones for licensed products (the "Novartis Milestone Payments"). If Juno achieves any of the milestones prior to Novartis, the related Novartis Milestone Payment will be reduced by 50%. In addition, if Juno achieves any milestone after Novartis, Juno will reimburse Novartis 50% of any Novartis Milestone Payment previously paid by Novartis to Juno in respect of such milestone. These milestones largely overlap with the milestones for which Juno may owe a payment to St. Jude under the St. Jude License Agreement and the Novartis Milestone Payments would in effect serve to partially offset Juno’s obligations to St. Jude with respect to such milestones.
The term of the Penn/Novartis Sublicense Agreement will expire when there are no remaining payment obligations due under the agreement. The Penn/Novartis Sublicense Agreement may be terminated by either party in the event of the other party’s bankruptcy or insolvency or upon the occurrence of certain specified breaches, or upon advance written notice in the event of the other party’s uncured material breach. Novartis may terminate the Penn/Novartis Sublicense Agreement at will upon advance written notice to Juno.
In connection with the settlement, Juno also amended the St. Jude License Agreement to provide the terms by which the Penn/Novartis Sublicense Agreement would be treated under the St. Jude License Agreement. The net effect of the Penn/Novartis Sublicense Agreement and amendment to the St. Jude License Agreement is that (1) Juno will pass through a percentage of the Novartis Royalty Payments to St. Jude, and (2) Juno will pass through a portion of the Penn Royalty Payments and Novartis Milestone Payments to St. Jude.
In 2016, Novartis paid us an aggregate of
$14.3 million
upon the achievement of two clinical milestones by Novartis,
$12.5 million
of which we were required to pass on to St. Jude. In the event we separately achieve the same clinical milestones in the future, we will be required to reimburse Novartis $7.1 million.
License Agreements with Fred Hutchinson Cancer Research Center assumed from ZetaRx
We assumed two license agreements with FHCRC in connection with our acquisition of certain of ZetaRx’s assets in October 2013. ZetaRx entered into these license agreements with FHCRC in 2009 (the "2009 FHCRC Agreement") and 2012 (the "2012 FHCRC Agreement"). These agreements were amended and restated in November 2014, and the 2012 FHCRC Agreement was further amended in October 2015 to add additional patent assets to the scope of the license. Under each of these license agreements, we received an exclusive, worldwide, sublicensable license under patent and technology rights to make, manufacture, use, and commercialize products (and, under the 2009 FHCRC Agreement only, services) for all fields of use. The patents and patent applications covered by these agreements are directed, in part, to defined T cell compositions and their use for immunotherapy. Pursuant to these license agreements, as of December 31, 2016, we have rights to one issued U.S. patent, three pending U.S. patent applications, one issued patent in a jurisdiction outside the United States, two pending Patent Cooperation Treaty applications, and a number of other patent applications in jurisdictions outside the United States. Pursuant to each of the agreements, we are required to pay FHCRC a low single-digit running royalty based on annual net sales of licensed products (and, under the 2009 FHCRC Agreement only, licensed services) by us and by our affiliates and sublicensees.
In addition, under each agreement, we are required to pay to FHCRC a minimum annual royalty of $5,000 until we receive FDA approval of a licensed product, and a minimum annual royalty of $20,000 thereafter for the remainder of the applicable agreement term, which payments will be creditable against any running royalties due to FHCRC under the respective license agreements. Under the 2012 FHCRC Agreement, we are required to pay to FHCRC up to an aggregate of $1.4 million upon our achievement of certain clinical and regulatory milestones relating to the licensed products, which includes JCAR014 and JCAR017. In addition, under each of the license agreements, we are required to pay FHCRC a fixed percentage of certain payments that we receive from sublicensees of the rights licensed to us by FHCRC, up to a cap.
Unless earlier terminated, each of these license agreements will expire upon the expiration of the last to expire of the patent rights licensed to us under the respective agreements. Each agreement may be terminated by FHCRC upon 90 days’ written notice if we fail to provide satisfactory written evidence that we have submitted an IND application to the FDA, by June 2015 in the case of the 2009 FHCRC Agreement, and by January 2017 in the case of the 2012 FHCRC Agreement. We have the right to terminate each of the agreements at will, in part or in their entirety, upon 60 days’ written notice to FHCRC. Each of the license agreements may also be terminated by FHCRC in the event of our bankruptcy or insolvency, upon 90 days’ written notice in the event of our uncured material breach, and upon 30 days’ written notice in the event of our uncured breach of a payment or reporting obligation. Upon termination, but not expiration, of either of these license agreements, we must grant to FHCRC a royalty-bearing, non-exclusive, non-sublicensable license with respect to any improvements we make based on the patents or technology licensed to us under the respective agreements.
Royalty and Milestone Obligations for JCAR017
Under our existing license agreements, our overall royalty burden for net sales of JCAR017 in the United States is less than 10%. As of the date of this report, based on our planned manufacturing process for JCAR017, the aggregate maximum amount of future milestone payments we could be required to make under our existing license and collaboration agreements is $97.1 million for JCAR017. Certain milestones would be paid in euros, which have been estimated in U.S. dollars for the foregoing figures based on the exchange rate as of December 31, 2016.
Opus Bio License Agreement
In December 2014, we entered into a license agreement with Opus Bio pursuant to which we were granted an exclusive, worldwide, sublicensable license under certain patent rights and data to research, develop, make, have made, use, have used, sell, have sold, offer to sell, import and otherwise exploit products that incorporate or use engineered T cells directed against CD22 and that are covered by such patent rights or use or incorporate such data. Certain of the licensed patent rights are in-licensed by Opus Bio from the National Institutes of Health ("NIH"). The patents and patent applications covered by this agreement are directed, in part, to various human monoclonal antibodies specific for CD22 and their use in immunotherapy. Pursuant to this license agreement, as of December 31, 2016, we have rights to five issued U.S. patents, three pending U.S. patent applications, and a number of other patents and patent applications in jurisdictions outside the United States. The licensed data was generated under an agreement between Opus Bio and the National Cancer Institute ("NCI") and Opus Bio’s rights to the licensed data are not exclusive. Our rights to such data are therefore exclusive only as between us and Opus, and non-exclusive as between us and third parties, who may license such data from the NCI. Our license from Opus Bio is limited to the field of treating B cell malignancies that express CD22 on their cell surface using CARs containing certain specified antibody binding fragments. Under the agreement, we will be required to use commercially reasonable efforts to research, develop, and commercialize licensed products. Such development must be in accordance with the timelines provided in the license agreement for achievement of certain clinical, regulatory, and commercial benchmarks, and with the development plans set forth in Opus Bio’s agreements with the NIH. In November 2015, the license agreement was amended to adjust certain of these timelines.
Upon the effectiveness of this license in December 2014, we made an upfront payment to Opus Bio of $20.0 million in cash and issued to Opus Bio 1,602,564 shares of our common stock. Upon our achievement of certain clinical, regulatory, and commercial milestones set forth in the license agreement, we will be obligated to pay Opus Bio additional consideration. The consideration due upon achievement of the first three clinical milestones would consist of additional shares of our common stock in an amount equal to the dollar value specified for the applicable milestone, divided by the greater of $10.92 and the arithmetic average of the daily volume-weighted average price of our common stock on The NASDAQ Global Select Market over the 30 trading days preceding the achievement of the milestone, up to a maximum of 4,807,692 shares in the aggregate (this minimum per share value and maximum number of shares subject, in each case, to adjustment for any stock dividend, stock split, combination of shares, or other similar events). Two of these milestones were achieved in the first quarter of 2016, for which we issued a total of 603,364 shares of our common stock as payment. After giving effect to the achievement of these milestones, as of December 31, 2016, one milestone required to be paid in equity in the amount of $25.0 million remains to be achieved, along with up to $215.0 million in milestones payable in cash. The license agreement further provides that we are required to pay to Opus Bio tiered royalties based on annual net sales of licensed products by us and by our sublicensees, at
rates ranging from the low-single to mid-single digits. We will also be required to make certain pass-through payments owed by Opus Bio to NIH under its NIH license agreements, including certain patent costs, development and commercial milestones of up to $2.8 million in the aggregate, and low single-digit royalties based on annual net sales.
Our obligations to pay royalties to Opus Bio will expire, on a country-by-country and licensed-product- by-licensed-product basis, upon the later of the expiration of the last-to-expire patent covering such product in such country and the expiration of the period of data protection or market exclusivity or similar protection granted by the regulatory authority in such country for such product. The license agreement will expire on the expiration of our payment obligations to Opus Bio and to the NIH. We may terminate the agreement at will upon 30 days’ prior written notice. Opus Bio has the right to terminate the agreement immediately in the event of our material breach, including our failure to meet certain regulatory, clinical, and commercial deadlines, that remains uncured after a period of notice from Opus Bio, and immediately upon notice in the event of our bankruptcy or insolvency. If we terminate for convenience, or if Opus Bio terminates due to our material breach, then we will be subject to obligations allowing Opus Bio to continue to develop licensed products, including transfer of certain materials and products, transfer of ownership of certain regulatory documents and any approved trademarks or brand names, the assignment of third-party agreements solely related to the licensed products and necessary for the research, development, or commercialization of the licensed products, our continued manufacture of the licensed products, and the grant of certain non-exclusive licenses under certain technology controlled by us. If we terminate the license agreement for convenience and Opus elects to continue to develop the licensed products, then we have the option to resume our rights under the license agreement in exchange for additional payment obligations to Opus.
Other Licenses and Third-Party Collaboration Agreements
We have entered into a number of other license agreements and collaboration agreements with third parties, including additional license agreements with MSK, FHCRC, and SCRI, in connection with our preclinical and clinical research and development activities. These include, among others:
|
|
•
|
A collaboration and license agreement with Fate Therapeutics to identify and utilize small molecules to modulate our genetically-engineered T cell product candidates to improve their therapeutic potential for cancer patients.
|
|
|
•
|
A collaboration and license agreement with Editas to pursue research programs utilizing Editas’ genome editing technologies with Juno’s CAR and TCR technologies.
|
|
|
•
|
A clinical study collaboration agreement with MedImmune to conduct combination clinical trials in immuno-oncology with one of our investigational CD19-directed CAR product candidates and MedImmune’s investigational PD-L1 immune checkpoint inhibitor, durvalumab.
|
|
|
•
|
We and WuXi AppTec have formed a company, JW Therapeutics (Shanghai) Co., Ltd, to leverage Juno’s CAR and TCR technologies and WuXi AppTec’s research and development and manufacturing platform and local expertise to develop novel cell-based immunotherapies for patients in China with hematologic and solid organ cancers.
|
|
|
•
|
A license agreement with MSK and Eureka Therapeutics, Inc. pursuant to which we obtained an exclusive license pertaining to a fully-human binding domain targeting BCMA, as well as binding domains against two additional undisclosed multiple myeloma targets to be used for the potential development and commercialization of CAR cell therapies for patients with multiple myeloma.
|
Acquisitions
During 2015 and 2016, we completed four business acquisitions to augment our research and development capabilities, to obtain access to a compound that could potentially be used in combination trials, and to improve our supply chain and long-term cost of goods.
Stage Cell Therapeutics
In May 2015, we acquired Stage, a company focused on developing technology platforms, including novel reagents and automation technologies, that enable the development and production of cell therapeutics. The acquisition of Stage is intended to provide us access to transformative cell selection and activation capabilities, next generation manufacturing automation technologies, enhanced control of our supply chain, and lower expected long-term cost of goods.
As consideration for the Stage acquisition, we paid €52.5 million in cash and issued an aggregate of 486,279 shares of common stock to the selling shareholders. We also agreed to pay additional amounts of up to an aggregate of €135.0 million in cash based on the achievement of certain technical, clinical, regulatory, and commercial milestones related to novel reagents (€40.0
million), advanced automation technology (€65.0 million), and Stage’s existing clinical pipeline (€30.0 million). As of December 31, 2016, we have triggered and paid
€6.0 million
in such milestone payments.
X-Body
In June 2015, we acquired X-Body, a company focused on the discovery of human monoclonal antibodies and discovery of TCR binding domains. The X-Body acquisition is intended to augment our capabilities to create best-in-class engineered T cells against a broad array of cancer targets.
As consideration for the X-Body acquisition, we paid $21.3 million in cash and issued an aggregate of 366,434 shares of common stock to the former X-Body stockholders. We also agreed to pay additional amounts in cash upon the realization of specified milestones substantially as follows, with respect to products generated using the X-Body technology: $5.0 million per target upon the achievement, during a specified period, of a certain regulatory milestone for products that utilize a certain type of binding mechanism; up to $30.0 million upon the achievement, during a specified period, of regulatory and clinical milestones for the first product using another type of binding mechanism (any product using such type of binding mechanism, a "Type X Product"); $5.0 million per product upon the achievement, during a specified period, of a certain regulatory milestone for a certain number of subsequent Type X Products; $50.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain specified binding properties (a "Type Y Product"); and $20.0 million upon the achievement, during a specified period, of a clinical milestone related to the first product with certain other specified binding properties. If a Type X Product or a Type Y Product is commercialized, we can choose either to make a commercialization milestone payment for such a product or to pay a low single-digit royalty on net sales of such a product.
AbVitro
In January 2016, we acquired AbVitro, a company with a leading next-generation single cell sequencing platform. The AbVitro acquisition is intended to augment our capabilities to create best-in-class engineered T cells against a broad array of cancer targets. We will initially use this technology in our translation research assays, to find and generate fully-human TCRs and antibodies, and to find novel targets.
As consideration for the AbVitro acquisition, we paid $74.7 million in cash and issued 1,289,188 shares of our common stock. There are no milestone payment obligations under the terms of the AbVitro acquisition.
We and Celgene have agreed in principle to enter into an agreement to license Celgene a subset of the acquired AbVitro technology and to grant Celgene options to certain related potential product rights emanating from the acquired technology.
RedoxTherapies
In July 2016, we acquired RedoxTherapies. The acquisition provides us with an exclusive license to vipadenant, a small molecule A2a receptor antagonist that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. As consideration for the acquisition, we paid $10.0 million in cash and agreed to deliver additional consideration upon achievement of specified clinical, regulatory, and commercial milestones.
Competition
The biotechnology and pharmaceutical industries, including the gene therapy field, are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. We face substantial competition from many different sources, including large biopharmaceutical companies, midsize/smaller public and privately-held biotechnology firms, academic research institutions, governmental agencies, and public and private research institutions.
In addition to the current standard of care treatments for patients, a large number of commercial and academic clinical trials are being pursued by variety of parties in the field of immunotherapy. Early positive clinical results from these trials have fueled continued interest in the field of immunotherapy. In the CAR and TCR space, our competitors include, but are not limited to, Novartis / Penn, Kite / Amgen / NCI, Cellectis / Pfizer / Servier, Johnson & Johnson / Transposagen Biopharmaceuticals, bluebird bio, Bellicum, Celyad, Cell Design Labs, NantKwest, Intrexon / ZIOPHARM / MD Anderson Cancer Center, Unum Therapeutics, Adaptimmune / GlaxoSmithKline, ImmunoCellular Therapeutics, Adicet Bio, and Autolus. We also face competition from non-cell based treatments offered by companies such as Amgen, Pfizer, Abbvie, AstraZeneca, Bristol-Myers, Incyte, Merck, Roche, Regeneron, Corvus, MacroGenics, and Johnson & Johnson. For instance, the FDA approved Amgen’s blinatumomab for the treatment of r/r ALL in 2014, and that product has achieved a complete remission rate of approximately 40% in clinical trials. We also anticipate Pfizer’s inotuzumab may be approved for the treatment of r/r ALL as early as 2017, which has shown a CR rate of approximately 80% in clinical trials. Many of our larger current or potential competitors, either alone or with their collaboration partners, have greater financial resources and deeper expertise in manufacturing, preclinical
testing, clinical trial execution, regulatory matters and commercializing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being concentrated among a smaller number of very capable 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 experienced scientific and management personnel, patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs’ success.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that alone or in combination have better efficacy, less toxicity, more convenience, or are less expensive than the products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we do, which may also include broader labels, which could result in our competitors establishing a strong market position before we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, and convenience, along with our ability to simply operationalize the use of our products.
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 biologics 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 the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.
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 current Good Laboratory Practices ("GLP") regulation;
|
|
|
•
|
submission to the FDA of an IND which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;
|
|
|
•
|
approval by an independent Institutional Review Board ("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 investigations to assess compliance with Good Clinical Practices ("GCP"); and
|
|
|
•
|
FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.
|
The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all. Prior to beginning the first clinical trial with a product candidate, 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 studies. 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 IND submission process, sponsors of certain clinical studies of cells containing recombinant or synthetic nucleic acid molecules, including human gene transfer studies, must comply with the National Institutes of Health’s ("NIH") Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules ("NIH Guidelines"). The NIH Guidelines set forth the principles and requirements for NIH and institutional oversight of research with recombinant or synthetic nucleic acid molecules, including the standards for investigators and institutions to follow to ensure the safe handling and containment of such molecules. In April 2016, modifications to the NIH Guidelines went into effect, pursuant to which only a subset of human gene transfer protocols are subject to review by the NIH Recombinant DNA Advisory Committee ("RAC"), a federal advisory committee that provides recommendations regarding research involving recombinant or synthetic nucleic acid molecules. Specifically, under the modified NIH Guidelines, RAC review of the protocol will be required only in exceptional cases where (1) an oversight body such as an Institutional Biosafety Committee ("IBC"), which provides local review and oversight of research utilizing recombinant or synthetic nucleic acid molecules, or an IRB determines that the protocol would significantly benefit from RAC review, and (2) the protocol (a) uses a new vector, genetic material, or delivery methodology that represents a first-in-human experience and thus presents an unknown risk, and/or (b) relies on preclinical safety data that were obtained using a new preclinical model system of unknown and unconfirmed value, and/or (c) involves a proposed vector, gene construct, or method of delivery associated with possible toxicities that are not widely known and that may render it difficult for oversight bodies to evaluate the protocol rigorously. The RAC review proceedings are public, and reports are posted publicly to the website for the NIH’s Office of Biotechnology Activities. Although compliance with the NIH Guidelines is mandatory for research 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. Independent of RAC review, the NIH Guidelines also require all human gene transfer protocols subject to the NIH Guidelines to be registered with NIH, with limited exemptions. A study subject to the NIH Guidelines may not begin until the IBC approves the protocol, and the IBC cannot approve the protocol until confirmation from the NIH that such registration is complete. In the event that RAC review is warranted, the protocol registration process cannot be completed until RAC review has taken place.
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, including our Phase II trial for JCAR015, 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.
|
|
•
|
Phase I—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 II—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 II clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase III clinical trials.
|
|
|
•
|
Phase III—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.
|
|
•
|
Phase IV—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 IV studies may be made a condition to approval of the BLA.
|
Phase I, Phase II and Phase III testing may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support FDA approval or licensure of the product. 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 requirements. 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, or for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA Submission and Review by the FDA
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent 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 annual product and establishment user fees. These fees are typically increased annually. A waiver of user fees may be obtained under certain limited circumstances.
Once a BLA has been submitted, the FDA’s goal is to review the application within ten months after it accepts the application for filing, or, if the application relates to an unmet medical need in a serious or life-threatening indication, six months after the FDA accepts the application for filing. 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 convene an advisory committee to provide clinical insight on application review questions. 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 requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical 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. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter 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 Complete Response Letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete Response Letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy ("REMS") to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or
elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may 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. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs. For example, in December 2016, the 21st Century Cures Act was signed into law. The Act is intended, among other things, to modernize the regulation of drugs and biologics and to spur innovation.
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 drugs and 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. 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 relevant criteria are met. 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. Priority review is granted when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious disease or condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.
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 Food and Drug Administration Safety and Innovation Act ("FDASIA"), which was enacted and signed into law in 2012, established the new breakthrough therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Sponsors may request the FDA to designate a breakthrough therapy at the time of or any time after the submission of an IND, but ideally before an end-of-phase II meeting with FDA. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with FDA on the proposed schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review. We plan to seek designation as a breakthrough therapy for some or all of our CD19 product candidates, as qualification permits. We have obtained breakthrough therapy designation for JCAR017 for the treatment of patients with r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma (PMBCL), or follicular lymphoma grade 3B.
Fast Track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.
Orphan Drugs
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 FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does
not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.
A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if the second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We plan to seek orphan drug designation for some or all of our CD19 product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. We have obtained orphan drug designation for JCAR017 in DLBCL, CLL, and ALL.
Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals 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 user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. 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. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may, among other things, halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the BLA.
We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates, and expect to rely in the future on third parties for the production of commercial quantities. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.
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 holds on post-approval 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; or
|
|
|
•
|
injunctions or the imposition of civil or criminal penalties.
|
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
Biosimilars and Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "Affordable Care Act"), signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. To date, only a handful of biosimilars have been licensed under the BPCIA, although numerous biosimilars have been approved in Europe. 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 the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their 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, recent 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 and Compliance Requirements
Our sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human Services and state and local governments. Our promotional and scientific/educational programs must comply with the federal Anti-Kickback Statute, the Foreign Corrupt Practices Act, the False Claims Act, the Veterans Health Care Act, physician payment transparency laws, privacy laws, security laws, and additional state laws similar to the foregoing.
The federal Anti-Kickback Statute prohibits, among other things, the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. The government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. 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 False Claims Act. Many states have similar laws that apply to their state health care programs as well as private payors.
The False Claims Act ("FCA"), imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the FCA can result in significant monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multibillion dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in which they conduct their business. The federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") also created federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.
In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Affordable Care Act, among other things, imposed new reporting requirements on drug manufacturers for payments or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1.0 million per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers must submit reports by the 90th day of each calendar year. Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH"), and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA's privacy and security standards directly applicable to "business associates," defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and
criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.
Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.
Coverage and Reimbursement
Sales of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party payors include government health administrative authorities, managed care providers, private health insurers, integrated delivery networks, and other organizations. Although we currently believe that third-party payors will provide coverage and reimbursement for our product candidates, if approved, these third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of our products. The product candidates that we develop may not be considered cost-effective. It is time consuming and expensive for us to seek coverage and reimbursement from third-party payors. Moreover, a payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
By way of example, the Affordable Care Act signed into law in 2010 was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the Affordable Care Act of importance to our potential drug candidates are:
|
|
•
|
an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;
|
|
|
•
|
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;
|
|
|
•
|
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;
|
|
|
•
|
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
|
|
|
•
|
extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
|
|
|
•
|
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
|
|
|
•
|
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and
|
|
|
•
|
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
|
We expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. Since taking office, President Trump has continued to support the repeal of all or portions of the Affordable Care Act. In January 2017, the House and Senate passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the Affordable Care Act and permits such legislation to pass with a majority vote in the Senate. President Trump has also recently issued an Executive Order in which he stated that it is his administration’s policy to seek the prompt repeal of the Affordable Care Act and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequent legislative amendments, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently, there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the 21
st
Century Cures Act changes the reimbursement methodology for infusion drugs and biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.
We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
In the EU, member states require both regulatory clearances by the national competent authority and a favorable ethics committee opinion prior to the commencement of a clinical trial.
Under the EU regulatory systems, authorization to market a product in the member states of the European Union proceeds under one of four procedures: a centralized authorization procedure, a mutual recognition procedure, a decentralized procedure, or a national procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all
EU member states plus Norway, Iceland, and Liechtenstein. It is compulsory for medicines that contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions; viral disease; for advanced therapy medicinal products; for products officially designated orphan medicines and; for medicines produced by certain biotechnological processes (i.e., recombinant DNA technology, controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes including transformed mammalian cells, and hybridoma and monoclonal antibody methods). Because our products are produced by one of those biotechnological processes, we would be subject to the centralized process.
Under the centralized authorization procedure, the EMA's Committee for Human Medicinal Products ("CHMP") serves as the scientific committee that renders opinions about the safety, efficacy and quality of medicinal products for human use on behalf of the EMA. The CHMP is composed of experts nominated by each member state's national authority for medicinal products, one of whom is appointed to act as Rapporteur for the co-ordination of the evaluation with the possible assistance of another member of the Committee acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle. The CHMP has 210 days to adopt an opinion as to whether a marketing authorization should be granted. The process usually takes longer in case additional information is requested, which triggers clock-stops in the procedural timelines. The process is complex and involves extensive consultation with the regulatory authorities of member states and a number of experts. Once the procedure is completed, a European Public Assessment Report ("EPAR") is produced. If the opinion is negative, information is given as to the grounds on which this conclusion was reached. After the adoption of the CHMP opinion, a decision on the marketing authorization application must be adopted by the European Commission, after consulting the EU Member States, which in total can take more than 60 days.
For our CD19 product candidates, Celgene is responsible for development and commercialization activities outside of North America and China, and therefore will lead regulatory dialogues and processes in those geographies, including the EU.
Employees
As of
December 31, 2016
, we had
553
employees globally. None of our employees are represented by a labor union or covered under a collective bargaining agreement. We consider our employee relations to be good.
Research and Development
Our research and development costs were
$264.3 million
,
$205.2 million
, and
$204.5 million
for the
years ended December 31, 2016, 2015, and 2014
, respectively. See Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report for additional detail regarding our research and development activities.
Geographic Information
Revenues generated outside of the United States and long-lived assets located outside of the United States were not material for the
years ended December 31, 2016 and 2015
, respectively.
Financial Information about Segments
We operate in one business segment. See Note 2 to our audited consolidated financial statements included in this report. For financial information regarding our business, see Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report and our audited consolidated financial statements and related notes included elsewhere in this report.
Corporate Information
Juno was incorporated in Delaware on August 5, 2013. Our principal executive offices are located at 307 Westlake Avenue North, Suite 300, Seattle, Washington 98109. Our telephone number is (206) 582-1600. Our website address is www.junotherapeutics.com. Information contained on the website is not incorporated by reference into this report, and should not be considered to be part of this report.
We use Juno Therapeutics
®
, the Juno Therapeutics logo, and other marks as trademarks in the United States and other countries. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the
®
or
TM
symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
Available Information
We file electronically with the Securities and Exchange Commission ("SEC") our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We make available on our website at www.junotherapeutics.com, free of charge, copies of these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The public may read or copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only.
The following section includes the most significant factors that may adversely affect our business and operations. You should carefully consider the risks and uncertainties described below and all information contained in this report, including our consolidated financial statements and the related notes and Part II—Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Our Business and Industry
We are a clinical-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
We are a clinical-stage biopharmaceutical company that was formed in August 2013. We have no cell-therapy products approved for commercial sale and as of
December 31, 2016
had not generated any revenue from such products. We are focused on developing products that use human cells as therapeutic entities and, although there have been significant advances in cell-based immunotherapy, our T cell technologies are new and largely unproven. Our limited operating history, particularly in light of the rapidly evolving cancer immunotherapy field, may make it difficult to evaluate our current business and predict our future performance. Our short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer.
We have incurred net losses in each period since our inception and anticipate that we will continue to incur net losses in the future.
We are not profitable and have incurred losses in each period since our inception. For the
years ended December 31, 2016, 2015, and 2014
, we reported a net loss of
$245.6 million
,
$239.4 million
, and
$243.4 million
, respectively. As of
December 31, 2016
, we had an accumulated deficit of
$831.2 million
, which includes
$51.1 million
related to non-cash deemed dividends,
$174.4 million
in upfront fees to acquire technology, of which
$100.5 million
was paid in cash and
$73.9 million
was paid through the issuance of common stock, non-cash expense of
$104.0 million
associated with the change in the estimated fair value and elapsed service period for our potential and actual success payment liability to FHCRC and MSK, expense of $23.2 million associated with non-cash milestones, non-cash gain of
$9.6 million
associated with the change in the estimated value of our contingent consideration liabilities, and
$10.7 million
of expense associated with our convertible preferred stock options. We expect these losses to increase as we continue to incur significant research and development and other expenses related to our ongoing operations, seek regulatory approvals for our product candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our product candidates and to enhance our operational, financial and information management systems.
A critical aspect of our strategy is to invest significantly in our technology platform to improve the efficacy and safety of our product candidates. Even if we succeed in commercializing one or more of these product candidates, we will continue to incur losses for the foreseeable future relating to our substantial research and development expenditures to develop our technologies. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Further, the net losses we incur 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 losses for the foreseeable future. We expect these losses and our cash utilization to increase in the near term as we continue to conduct clinical trials, file additional IND filings for additional product candidates, and conduct research and development of our other product candidates.
We are collaborating with Celgene pursuant to the Celgene Collaboration Agreement, under which we and Celgene will research, develop, and commercialize novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. Contingent upon the payment of certain upfront payments, Celgene may exercise options to acquire exclusive licenses in territories outside North America and China to certain therapeutics we develop and each party may exercise certain options to co-develop and co-commercialize product candidates developed, or acquired or in-licensed, by the other party. If Celgene does not exercise its options, or if Celgene exercises an
option for a program (such as our CD19 program) but later the license agreement with Celgene for such program is terminated, we will be responsible for the full costs of funding further worldwide development of the relevant product candidates, which would cause our expenses to increase, unless we choose not to pursue further development of such product candidates or we enter into another collaboration for such product candidates, which may not be possible within an acceptable timeframe or on suitable terms. Similarly, our expenses would increase if we exercise an option to co-develop and co-commercialize any product candidate developed, or in-licensed or acquired, by Celgene.
We have never generated any revenue from sales of cell-therapy products and our ability to generate revenue from cell-therapy product sales and become profitable depends significantly on our success in a number of factors.
We have no cell-therapy products approved for commercial sale, have not generated any revenue from cell-therapy product sales, and do not anticipate generating any revenue from cell-therapy product sales until sometime after we have received regulatory approval for the commercial sale of a product candidate. Our ability to generate revenue and achieve profitability depends significantly on our success in many factors, including:
|
|
•
|
completing research regarding, and nonclinical and clinical development of, our product candidates;
|
|
|
•
|
obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical studies;
|
|
|
•
|
developing a sustainable and scalable manufacturing process for our product candidates, including establishing and maintaining commercially viable supply relationships with third parties and establishing our own manufacturing capabilities and infrastructure;
|
|
|
•
|
launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;
|
|
|
•
|
obtaining market acceptance of our product candidates as viable treatment options, and obtaining adequate coverage, reimbursement, and pricing by third-party payors, integrated delivery networks, and government authorities;
|
|
|
•
|
addressing any competing technological and market developments;
|
|
|
•
|
Celgene’s efforts in its territories to further develop and commercialize the product candidates for which Celgene exercises an option under the Celgene Collaboration Agreement, such as the product candidates in our CD19 program;
|
|
|
•
|
Celgene exercising any other of its options under our Celgene Collaboration Agreement;
|
|
|
•
|
JW Therapeutics (Shanghai) Co., Ltd’s ability to develop and commercialize product candidates in China;
|
|
|
•
|
identifying, assessing, acquiring and/or developing new product candidates;
|
|
|
•
|
negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;
|
|
|
•
|
maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and
|
|
|
•
|
attracting, hiring, and retaining qualified personnel.
|
Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the U.S. Food & Drug Administration ("FDA"), or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types of studies in addition to those that we currently anticipate. If we are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue 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 our addressable disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.
Our technology platform, including our CAR and high-affinity TCR technologies are new approaches to cancer treatment that present significant challenges.
We have concentrated our research and development efforts on T cell immunotherapy technology, and our future success is highly dependent on the successful development of T cell immunotherapies in general and our CAR and TCR technologies and product candidates in particular. Our approach to cancer treatment aims to alter T cells
ex vivo
through genetic modification using certain viruses designed to reengineer the T cells to recognize specific proteins on the surface or inside cancer cells. Because this is a new approach to cancer immunotherapy and cancer treatment generally, developing and commercializing our product candidates subjects us to a number of challenges, including:
|
|
•
|
obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercial development of genetically modified T cell therapies for cancer;
|
|
|
•
|
developing and deploying consistent and reliable processes for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient;
|
|
|
•
|
conditioning patients with chemotherapy or other non-Juno product treatments in conjunction with delivering each of our products, which may increase the risk of adverse side effects;
|
|
|
•
|
educating medical personnel regarding the potential side effect profile of each of our products, such as the potential adverse side effects related to cytokine release or neurotoxicity;
|
|
|
•
|
developing processes for the safe administration of these products, including long-term follow-up for all patients who receive our product candidates;
|
|
|
•
|
sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;
|
|
|
•
|
developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment;
|
|
|
•
|
establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement, and pricing by third-party payors and government authorities; and
|
|
|
•
|
developing therapies for types of cancers beyond those addressed by our current product candidates.
|
We cannot be sure that our T cell immunotherapy technologies will yield satisfactory products that are safe and effective, scalable, or profitable.
Additionally, because our technology involves the genetic modification of patient cells
ex vivo
using a virus, we are subject to many of the challenges and risks that gene therapies face, including:
|
|
•
|
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. To date, only one product that involves the genetic modification of patient cells has been approved in the United States and only one has been approved in the European Union ("EU").
|
|
|
•
|
Genetically modified products in the event of improper insertion of a gene sequence into a patient’s chromosome could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells.
|
|
|
•
|
Although our viral vectors are not able to replicate, there is a risk with the use of retroviral or lentiviral vectors that they could lead to new or reactivated pathogenic strains of virus or other infectious diseases.
|
|
|
•
|
The FDA recommends a 15 year follow-up observation period for all patients who receive treatment using gene therapies, and we may need to adopt such an observation period for our product candidates.
|
|
|
•
|
Clinical trials using genetically modified cells conducted at institutions that receive funding for recombinant DNA research from the NIH, are subject to review by the Recombinant DNA Advisory Committee ("RAC"). Although the FDA decides whether individual protocols may proceed, the RAC review process can impede the initiation of a clinical trial, even if the FDA has reviewed the study and approved its initiation.
|
Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies
and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.
Our near term ability to generate product revenue is dependent on the success of one or more of our CD19 product candidates, each of which are in clinical development and will require significant additional clinical testing before we can seek regulatory approval and begin commercial sales.
Our near term ability to generate product revenue is highly dependent on our ability to obtain regulatory approval of and successfully commercialize one or more of our CD19 product candidates. Our lead product candidate, JCAR017, is in clinical development, has been tested in a relatively small number of patients, and will require additional clinical and nonclinical development, regulatory review and approval in each jurisdiction in which we intend to market the product, substantial investment, access to sufficient commercial manufacturing capacity, and significant marketing efforts before we can generate any revenue from product sales. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety, purity, and potency of the product candidates in humans. We cannot be certain that any of our product candidates will be successful in clinical studies and they may not receive regulatory approval even if they are successful in clinical studies.
In addition, because our product candidates are based on similar technology, if any of our product candidates encounter safety or efficacy problems, developmental delays, regulatory issues, reagent supply issues, or other problems, our development plans for the affected product candidate and some or all of our other product candidates could be significantly harmed, which would have a material adverse effect on our business. Because JCAR017 is the backbone of our development strategy, a setback for JCAR017 could have a relatively large impact on our plans and business. Further, competitors who are developing products with similar technology may experience problems with their products that could identify problems that would potentially harm our business.
Prior to the Juno-sponsored Phase I trial of JCAR017 and Phase II clinical trial of JCAR015 that began in 2015, third parties had sponsored and conducted all clinical trials of our CD19 product candidates and other product candidates, and our ability to influence the design and conduct of such trials has been limited. We have assumed control over the future clinical and regulatory development of JCAR017 in NHL, and may do so for additional indications or other product candidates, which will entail additional expenses and may be subject to delay. Any failure by a third party to meet its obligations with respect to the clinical and regulatory development of our product candidates may delay or impair our ability to obtain regulatory approval for our products and result in liability for our company.
Prior to the Juno-sponsored Phase I clinical trial of JCAR017 and the Phase II clinical trial of JCAR015, both of which began in 2015, we had not sponsored any clinical trials relating to our CD19 product candidates or other product candidates. Instead, faculty members at our third-party research institution collaborators, or those institutions themselves, sponsored all clinical trials relating to these product candidates, in each case under their own INDs. We have now assumed control of the overall clinical and regulatory development of JCAR017 in NHL for future clinical trials. We may assume control over the clinical and regulatory development of other product candidates in the future, in which case we will need to obtain sponsorship of the INDs or file new Juno-sponsored INDs. Failure to obtain, or delays in obtaining, sponsorship of INDs or in filing new Juno-sponsored INDs for these or any other product candidates we determine to advance could negatively affect the timing of our potential future clinical trials. Any such impacts on timing could increase research and development costs and could delay or prevent obtaining regulatory approval for our product candidates, either of which could have a material adverse effect on our business.
Further, even in the event that the IND sponsorship is or has been obtained for existing and new INDs, we did not control the design or conduct of the previous trials. It is possible that the FDA will not accept these previous trials as providing adequate support for future clinical trials, whether controlled by us or third parties, for any of one or more reasons, including the safety, purity, and potency of the product candidate, the degree of product characterization, elements of the design or execution of the previous trials or safety concerns, or other trial results. We may also be subject to liabilities arising from any treatment-related injuries or adverse effects in patients enrolled in these previous trials. As a result, we may be subject to unforeseen third-party claims and delays in our potential future clinical trials. We may also be required to repeat in whole or in part clinical trials previously conducted by our third-party research institution collaborators, which will be expensive and delay the submission and licensure or other regulatory approvals with respect to any of our product candidates. Any such delay or liability could have a material adverse effect on our business.
Although we have assumed control of the overall clinical and regulatory development JCAR017 in NHL going forward, we expect to be dependent on our contractual arrangements with third-party research institution collaborators for ongoing and
planned trials for our other product candidates, and for JCAR017 other than in NHL, until we determine to assume control of the clinical and regulatory development of those candidates. Such arrangements provide us certain information rights with respect to certain previous, planned, or ongoing trials with respect to our product candidates, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from such trials. Even after we assume control of the overall clinical and regulatory development of a product candidate, including JCAR017, we will still remain dependent on such contractual data rights for use in our clinical and regulatory development activities. If these obligations are breached by our third-party research institution collaborators, or if the data, or our data rights, prove to be inadequate compared to the first-hand knowledge we might have gained had the completed trials been Juno-sponsored trials, then our ability to design and conduct our corporate-sponsored clinical trials may be adversely affected. Additionally, the FDA may disagree with the sufficiency of our right to reference the preclinical, manufacturing, or clinical data generated by these prior investigator-sponsored trials, or our interpretation of preclinical, manufacturing, or clinical data from these clinical trials. If so, the FDA may require us to obtain and submit additional preclinical, manufacturing, or clinical data before we may begin our planned trials and/or may not accept such additional data as adequate to begin our planned trials.
Additionally, we may remain dependent on our third-party research institution collaborators for other support services in connection with our Juno-sponsored clinical trials.
We may encounter substantial delays in our clinical trials, or may not be able to conduct our trials on the timelines we expect.
Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. We expect that the early clinical work performed by our third-party research institution collaborators will help support the filing with the FDA of multiple INDs for product candidates in the next five years. However, we cannot be sure that we will be able to submit INDs at this rate, and we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely completion of clinical development include:
|
|
•
|
inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical studies;
|
|
|
•
|
delays in sufficiently developing, characterizing, or controlling a manufacturing process suitable for advanced clinical trials;
|
|
|
•
|
delays in developing suitable assays for screening patients for eligibility for trials with respect to certain product candidates;
|
|
|
•
|
delays in reaching a consensus with regulatory agencies on study design;
|
|
|
•
|
the FDA may not allow us to use the clinical trial data from a research institution to support an IND if we cannot demonstrate the comparability of our product candidates with the product candidate used by the relevant research institution in its clinical studies;
|
|
|
•
|
delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
|
|
|
•
|
delays in obtaining required institutional review board ("IRB") approval at each clinical study site;
|
|
|
•
|
imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND application or amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our clinical study operations or study sites; developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of the technology broadly; or if FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;
|
|
|
•
|
delays in recruiting suitable patients to participate in our clinical studies;
|
|
|
•
|
difficulty collaborating with patient groups and investigators;
|
|
|
•
|
failure by our CROs, other third parties, or us to adhere to clinical study requirements;
|
|
|
•
|
failure to perform in accordance with the FDA’s good clinical practice ("GCP") requirements, or applicable regulatory guidelines in other countries;
|
|
|
•
|
transfer of manufacturing processes to Celgene or any other commercialization partner for the manufacture of product candidates in trials outside of the United States;
|
|
|
•
|
delays in having patients complete participation in a study or return for post-treatment follow-up;
|
|
|
•
|
patients dropping out of a study;
|
|
|
•
|
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 studies of our product candidates being greater than we anticipate;
|
|
|
•
|
clinical studies of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon product development programs;
|
|
|
•
|
transfer of manufacturing processes from our academic collaborators to larger-scale facilities operated by either a CMO or by us, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;
|
|
|
•
|
delays or failure to secure supply agreements with suitable reagent suppliers, or any failures by suppliers to meet our quantity or quality requirements for necessary reagents; and
|
|
|
•
|
delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing.
|
Any inability to successfully complete preclinical and clinical development 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 study 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 harm our business and results of operations.
We have entered into collaborations, including our Celgene collaboration, and strategic alliances, and may enter into additional arrangements like these in the future, and we may not realize the anticipated benefits of such collaborations or alliances.
Research and development collaborations, including those we have entered into with Celgene, Fate Therapeutics, Editas Medicine, and MedImmune, are subject to numerous risks, which may include the following:
|
|
•
|
collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration, and may not commit sufficient efforts and resources, or may misapply those efforts and resources;
|
|
|
•
|
collaborators may not pursue development and commercialization of collaboration product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results or changes in their strategic focus;
|
|
|
•
|
collaborators may delay, provide insufficient resources to, or modify or stop clinical trials for collaboration product candidates;
|
|
|
•
|
collaborators could develop or acquire products outside of the collaboration that compete directly or indirectly with our products or product candidates (for instance, Celgene and bluebird bio are collaborating on an anti-BCMA CAR T product candidate);
|
|
|
•
|
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;
|
|
|
•
|
disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;
|
|
|
•
|
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and
|
|
|
•
|
collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property.
|
In particular, for product candidates in our CD19 program and product candidates from any other programs for which Celgene opts to exercise its options under the Celgene Collaboration Agreement, we may have limited influence or control over their approaches to development and commercialization in the territories in which they lead development and commercialization, including the choice of which product candidates Celgene determines to advance in those territories. Although we will still lead development and commercialization activities in North America and China for our product candidates arising from our CD19 program and any other program for which Celgene exercises an option, Celgene’s development and commercialization activities in the territories where it is the lead party may adversely impact our own efforts in North America and China and lead to changes to clinical and regulatory development strategy for associated product candidates that may impact development timelines. Celgene will also require some level of assistance from us with respect to product candidates from the CD19 program and product candidates from any other programs it opts into, and this assistance could be burdensome on our organization and resources and disrupt our own development and commercialization activities. Celgene will also be subject to many of the same risks that are set forth in this "Risk Factors" section pertaining to operations and government regulation, which may adversely affect Celgene’s ability to develop and commercialize collaboration products.
In early 2016, we and WuXi AppTec formed a new company, JW Therapeutics (Shanghai) Co., Ltd, to develop and commercialize cell-based immunotherapies for patients with hematologic and solid organ cancers in China. We have limited control over JW Therapeutics (Shanghai) Co., Ltd and so we will be subject to many of the same risks set forth above with respect to collaborations. JW Therapeutics (Shanghai) Co., Ltd will also be subject to many of the same risks that are set forth in this "Risk Factors" section pertaining to operations, government regulation, and intellectual property, which may adversely affect JW Therapeutics (Shanghai) Co., Ltd’s ability to develop and commercialize products.
We may form or seek further strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Such alliances will be subject to many of the risks set forth above. Moreover, any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex.
As a result of these risks, we may not be able to realize the benefit of our existing collaborations or any future collaborations or licensing agreements we may enter into. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies, which could harm our business prospects, financial condition, and results of operations.
The FDA or comparable foreign regulatory authorities may disagree with our regulatory plans, including our plans to seek accelerated approval, and we may fail to obtain regulatory approval of our product candidates.
We are conducting a Phase I trial in adult r/r NHL with JCAR017 and are planning to commence a registration trial in r/r NHL this year, and we plan to conduct additional clinical trials in other B cell malignancies, including r/r CLL, adult r/r ALL, and pediatric r/r ALL, using this product candidate or a similar product candidate. If the results of these trials are sufficiently compelling, we intend to discuss with the FDA filing BLAs for accelerated approval of the associated product candidates as treatments for patients who are refractory to currently approved treatments in these indications.
The FDA generally requires a BLA to be supported by two adequate and well-controlled Phase III studies or one large and robust, well-controlled Phase III study in the patient population being studied that provides substantial evidence that a biologic is safe, pure and potent. Phase III clinical studies typically involve hundreds of patients, have significant costs and take years to complete. However, product candidates studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other
clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA may require a sponsor of a drug or biologic receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug or biologic may be subject to withdrawal procedures by the FDA that are more accelerated than those available for regular approvals. We believe our accelerated approval strategy is warranted given the currently limited alternative therapies for patients with r/r NHL. r/r CLL, and r/r ALL, but the FDA may not agree or alternative therapies may enter the market that cause the FDA to determine that the accelerated approval framework is no longer appropriate in those indications. The FDA may ultimately require one or multiple Phase III clinical trials prior to approval, particularly because our product candidates are novel and personalized treatments.
As part of its marketing authorization process, the European Medicines Agency ("EMA") may grant marketing authorizations on the basis of less complete data than is normally required, when, for certain categories of medicinal products, doing so may meet unmet medical needs of patients and serve the interest of public health. In such cases, it is possible for the Committee for Medicinal Products for Human Use ("CHMP") to recommend the granting of a marketing authorization, subject to certain specific obligations to be reviewed annually, which is referred to as a conditional marketing authorization. This may apply to medicinal products for human use that fall under the jurisdiction of the EMA, including those that aim at the treatment, the prevention, or the medical diagnosis of seriously debilitating diseases or life-threatening diseases and those designated as orphan medicinal products.
A conditional marketing authorization may be granted when the CHMP finds that, although comprehensive clinical data referring to the safety and efficacy of the medicinal product have not been supplied, all the following requirements are met:
|
|
•
|
the risk-benefit balance of the medicinal product is positive;
|
|
|
•
|
it is likely that the applicant will be in a position to provide the comprehensive clinical data;
|
|
|
•
|
unmet medical needs will be fulfilled; and
|
|
|
•
|
the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required.
|
The granting of a conditional marketing authorization is restricted to situations in which only the clinical part of the application is not yet fully complete. Incomplete nonclinical or quality data may only be accepted if duly justified and only in the case of a product intended to be used in emergency situations in response to public-health threats.
Conditional marketing authorizations are valid for one year, on a renewable basis. The holder will be required to complete ongoing studies or to conduct new studies with a view to confirming that the benefit-risk balance is positive. In addition, specific obligations may be imposed in relation to the collection of pharmacovigilance data.
The granting of a conditional marketing authorization will allow medicines to reach patients with unmet medical needs earlier than might otherwise be the case and will ensure that additional data on a product are generated, submitted, assessed and acted upon. Although we may seek a conditional marketing authorization for one or more of our product candidates by the EMA, the EMA or CHMP may ultimately not agree that the requirements for such conditional marketing authorization have been satisfied. Even if conditional marketing authorization is granted, we cannot guarantee that the EMA or CHMP will renew the authorization annually. Celgene may seek conditional marketing approval in the EU for our CD19 product candidates.
Our clinical trial results may also not support approval, whether accelerated approval, conditional marketing authorizations, or regular approval. The results of preclinical and clinical studies may not be predictive of the results of later-stage clinical trials, and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. In addition, our product candidates could fail to receive regulatory approval for many reasons, including the following:
|
|
•
|
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
|
|
|
•
|
the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;
|
|
|
•
|
we may be unable to demonstrate that our product candidates’ risk-benefit ratios for their proposed indications are acceptable;
|
|
|
•
|
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
|
|
|
•
|
we may be unable to demonstrate that the clinical and other benefits of our product candidates outweigh their safety risks;
|
|
|
•
|
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
|
|
|
•
|
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions 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, our own manufacturing facilities, or a third-party manufacturer’s facilities 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 clinical data insufficient for approval.
|
Further, failure to obtain approval for any of the above reasons may be made more likely by the fact that the FDA and other regulatory authorities have very limited experience with commercial development of genetically engineered T cell therapies for cancer. Failure to obtain regulatory approval to market any of our product candidates would significantly harm our business, results of operations, and prospects.
Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization.
The clinical trials of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. In particular, 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. The risk/benefit profile required for product licensure will vary depending on these factors and may include not only the ability to show tumor shrinkage, but also adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival. For example, response rates from the use of our product candidates may not be sufficient to obtain regulatory approval unless we can also show an adequate duration of response. 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 and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of studies in one set of patients or line of treatment may not be predictive of those obtained in another. We expect there may be greater variability in results for products processed and administered on a patient-by-patient basis, as anticipated for our product candidates, than for "off-the-shelf" products, like many other drugs. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. 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.
Data from studies conducted by the third-party research institutions that are our collaboration partners, such as FHCRC, MSK, SCRI, and the NCI, should not be relied upon as evidence that later or larger-scale clinical trials will succeed. Some future trials may have different patient populations than current studies and will test our product candidates in different indications, among other differences. In addition, our manufacturing processes for our CD19 product candidates include what we believe to be process improvements that are not part of the production processes that have been used in the clinical trials conducted by the research institutions. Accordingly, our results with our CD19 product candidates may not be consistent with the results of the clinical trials conducted by our research institute collaborators.
In addition, even if such 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.
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.
As with most biological drug products, use of our product candidates could be associated with side effects or adverse events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. It is not uncommon for there to be treatment-related deaths in clinical trials in advanced cancer patients, and even some standard of care treatments, such as HSCT, are associated with a level of treatment-related mortality. Undesirable side effects or unacceptable toxicities caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials. We have seen CRS or neurotoxicity in patients who received JCAR015, JCAR017, and JCAR014. We have also seen CRS with JCAR018 and JTCR016. These events may require admission to the intensive care unit and, in some severe cases, have resulted in death. Characteristic symptoms of CRS include fever, low blood pressure, nausea, difficulty breathing, and oxygen deficiency. Characteristic symptoms of neurotoxicity include encephalopathy, headache, seizure, tremor, confusion, and aphasia. Fatal events of cerebral edema have also been observed. Other treatment emergent adverse events, whether or not treatment related, occurring in at least 25% of patients across our CD19 product candidates include cytopenias, febrile neutropenia, electrolyte abnormalities, hypotension, infections, pyrexia, fatigue, and hyperglycemia.
Undesirable side effects or deaths in clinical trials with our product candidates may cause the FDA or comparable foreign regulatory authorities to place a clinical hold on the associated clinical trials or otherwise to delay or deny approval of our product candidates for any or all targeted indications. For instance, in July 2016, the FDA placed our JCAR015 Phase II trial in r/r ALL on clinical hold after we observed an increased incidence of severe neurotoxicity, including two patients who died in late June 2016 from cerebral edema. After a protocol amendment, the clinical hold was removed a few days later and the trial resumed. However, in November 2016, the FDA again placed our trial on clinical hold after the occurrence of two more deaths from cerebral edema in the trial. Following the November 2016 events, we conducted an investigation into the toxicity and identified multiple factors that may have contributed to this increased risk, including patient specific factors, the conditioning chemotherapy patients received, and factors related to the product, but we cannot know that we have identified the root causes of the toxicity to sufficiently prevent its occurrence in the future. We subsequently determined to discontinue Juno development of JCAR015. We cannot provide any assurances that there will not be further treatment-related severe adverse events or deaths with other product candidates, from cerebral edema or otherwise, that the trials for those other product candidates will not be placed on clinical hold in the future, or that patient recruitment for trials with our other product candidates will not be adversely impacted by the events with JCAR015, any of which could materially and adversely affect our business and prospects.
Negative side effects could also result in a more restrictive label for any product that is approved. Side effects such as toxicity or other safety issues associated with the use of our product candidates could also require us or our collaborators to perform additional studies or halt development or sale of these product candidates.
Treatment-related side effects or clinical holds could also affect patient recruitment or the ability of enrolled subjects to complete the trial, or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff, particularly outside of the research institutions that collaborate with us, as toxicities resulting from personalized T cell therapy are not normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand their side effect profiles, both for our planned clinical trials and upon any commercialization of any product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in adverse effects to patients, including death. Any of these occurrences may materially and adversely harm our business, financial condition and prospects.
Undesirable side effects or deaths in clinical trials conducted by others in the engineered T cell therapy field may also adversely impact our own prospects with the FDA or comparable foreign regulatory authorities and may adversely impact our own patient recruitment activities if enthusiasm for the prospects of engineered T cell therapy generally is diminished.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, including during any long-term follow-up observation period recommended or required for patients who receive treatment using our products, a number of potentially significant negative consequences could result, including:
|
|
•
|
regulatory authorities may withdraw approvals of such product;
|
|
|
•
|
regulatory authorities may require additional warnings on the label;
|
|
|
•
|
we may be required by the FDA to create a risk evaluation and mitigation strategy ("REMS") plan, 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;
|
|
|
•
|
we could be sued and held liable for harm caused to patients; and
|
|
|
•
|
our reputation may suffer.
|
Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations, and prospects.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:
|
|
•
|
the size and nature of the patient population;
|
|
|
•
|
the patient eligibility criteria defined in the protocol;
|
|
|
•
|
the size of the study population required for analysis of the trial’s primary endpoints;
|
|
|
•
|
the proximity of patients to trial sites;
|
|
|
•
|
the design of the trial;
|
|
|
•
|
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
|
|
|
•
|
competing clinical trials for similar therapies or other new therapeutics not involving T cell based immunotherapy;
|
|
|
•
|
clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;
|
|
|
•
|
our ability to obtain and maintain patient consents; and
|
|
|
•
|
the risk that patients enrolled in clinical trials will not complete a clinical trial.
|
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and hematopoietic cell transplantation, rather than enroll patients in any future clinical trial.
Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.
Clinical trials are expensive, time-consuming and difficult to design and implement, and our clinical trial costs may be higher than for more conventional therapeutic technologies or drug products.
Clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because our product candidates are based on new technologies and manufactured on a patient-by-patient basis, we expect that they will require extensive research and development and have substantial manufacturing costs. In addition, costs to treat patients with relapsed/refractory cancer and to treat potential side effects that may result from our product candidates can be significant. Some clinical trial sites may not bill, or obtain coverage from, Medicare, Medicaid, or other third-party payors for some or all of these costs for patients enrolled in our clinical trials, and we may be required by those trial sites to pay such costs. Accordingly, our clinical trial costs are likely to be significantly higher per patient than those of more
conventional therapeutic technologies or drug products. In addition, our proposed personalized product candidates involve several complex and costly manufacturing and processing steps, the costs of which will be borne by us. Depending on the number of patients we ultimately enroll in our trials, and the number of trials we may need to conduct, our overall clinical trial costs may be higher than for more conventional treatments.
Research and development of biopharmaceutical products is inherently risky. We may not be successful in our efforts to use and enhance our technology platform and CAR and TCR technologies to create a pipeline of product candidates and develop commercially successful products, or we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates or diseases that may be more profitable or for which there is a greater likelihood of success. If we fail to develop additional product candidates, our commercial opportunity will be limited.
We and our collaborators are simultaneously pursuing clinical development of multiple product candidates developed employing our CAR and TCR technologies. We are at an early stage of development and our technology platform has not yet led, and may never lead, to approved or commercially successful products.
Even if we are successful in continuing to build our pipeline, obtaining regulatory approvals and commercializing additional product candidates may require substantial additional funding and are prone to the risks of failure inherent in medical product development.
Investment in biopharmaceutical product development involves significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide you any assurance that we will be able to successfully advance any of these additional product candidates through the development process. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following:
|
|
•
|
our platform may not be successful in identifying additional product candidates;
|
|
|
•
|
we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates;
|
|
|
•
|
our product candidates may not succeed in preclinical or clinical testing;
|
|
|
•
|
a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
|
|
|
•
|
competitors may develop alternatives that render our product candidates obsolete or less attractive;
|
|
|
•
|
product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;
|
|
|
•
|
the market for a product candidate may change during our program so that the continued development of that product candidate is no longer reasonable;
|
|
|
•
|
a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
|
|
|
•
|
a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if applicable.
|
If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, discover, develop, or commercialize additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.
Even if we receive FDA approval to market additional product candidates, whether for the treatment of cancers or other diseases, we cannot assure you that any such product candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Further, because of our limited financial and managerial resources, we are required to focus our research programs on certain product candidates and on specific diseases. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forgo or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, 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 retain sole development and commercialization rights. For additional information regarding the factors that will affect our ability to achieve revenue from product sales, see the
risk factor above "—
We have never generated any revenue from sales of cell-therapy products and our ability to generate revenue from cell-therapy product sales and become profitable depends significantly on our success in a number of factors.
"
Our product candidates are biologics and the manufacture of our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-out of our manufacturing capabilities. If we, Celgene, or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
Our product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The manufacture of our product candidates involves complex processes, including harvesting T cells from patients, genetically modifying the T cells
ex vivo,
multiplying the T cells to obtain the desired dose, and ultimately infusing the T cells back into a patient’s body. As a result of the complexities, the cost to manufacture biologics in general, and our genetically modified cell product candidates in particular, is generally higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. Our manufacturing process will be susceptible to product loss or failure, or product variation that may adversely impact patient outcomes, due to logistical issues associated with the collection of white blood cells, or starting material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues or different product characteristics resulting from the differences in patient starting materials, variations between reagent lots, interruptions in the manufacturing process, contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If for any reason we lose a patient’s starting material or later-developed product at any point in the process, the manufacturing process for that patient will need to be restarted and the resulting delay may adversely affect that patient’s outcome. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Because our product candidates are manufactured for each particular patient, we will be required to maintain a chain of identity with respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market.
Historically, our product candidates have been manufactured using unoptimized processes by our third-party research institution collaborators that we do not intend to use for more advanced clinical trials or commercialization. Although we are working to develop commercially viable processes, including for JCAR017, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. As a result of these challenges, we may experience delays in our clinical development and/or commercialization plans. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.
We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of our ongoing clinical trials, future clinical trials, or the performance of the product, once commercialized. In some circumstances, changes in the manufacturing process may require us to perform
ex vivo
comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical phases or at earlier portions of a trial to the product used in later clinical phases or later portions of the trial. We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes. We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process. If clinical data are not ultimately comparable to that seen in the earlier trials in terms of safety or efficacy, we may be required to make further changes to our process and/or undertake additional clinical testing, either of which could significantly delay the clinical development or commercialization of the associated product candidate.
We expect our manufacturing strategy will involve the use of our manufacturing facility in Bothell, Washington, and potentially additional Juno-operated manufacturing facilities or one or more CMOs, to manufacture our product candidates. We also plan
to manufacture certain of the reagents used for making our product candidates ourselves. We expect that development of our own manufacturing capabilities, as well as manufacturing some of our own reagents, will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins. However, we have limited experience as a company manufacturing product candidates for use in the clinic and no experience as a company manufacturing product candidates for commercial supply, and we have only limited experience (through our German subsidiary) in manufacturing reagents. We may never be successful in manufacturing product candidates or reagents in sufficient quantities or with sufficient quality for clinical or commercial use. We may establish multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly.
Even if we are successful in developing our manufacturing capabilities sufficient for clinical and commercial supply, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, availability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.
Furthermore, if contaminants are discovered in our supply of our product candidates or in our manufacturing facilities or those of our CMOs, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, we and our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If we or our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.
In addition, the manufacturing process for any products that we may develop is subject to FDA and foreign regulatory authority approval process, and we will need to meet, and our CMOs will need to meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. If we or our CMOs are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.
We also will need to assist Celgene with the transfer of our manufacturing processes for our CD19 product candidates, and product candidates for any other programs for which they exercise an option, to geographies outside of North America and China. The transfer of process to Celgene, or to CMOs selected by Celgene, and the actual manufacture of our product candidates by Celgene or its selected CMOs, will be subject to the same types of risk as set forth above and may not ultimately be successful or may take longer to succeed than expected, which could delay or impair development and commercialization activities in those geographies, which would have an adverse effect on our business. Such transfer activities will also require a significant amount of attention from our personnel, which may disrupt our other development and commercialization activities, which in turn may have an adverse effect on our business. Additionally, in the interim we may need to manufacture product candidates out of our existing facilities for use in clinical trials in the Celgene territories, which may disrupt our own clinical activities and, to the extent we are not able to produce product candidate in the volumes required by Celgene or experience difficulties coordinating manufacturing in the United States with patient material collection and treatment centers in the Celgene territories, may also lead to delays in development plans in such Celgene territories. To the extent product candidates need to be shipped across international borders for use in clinical trials in the Celgene territories, there may be shipping, customs, or other import/export related delays that could lead to a loss of a patient’s manufactured product, which could prevent patients from being treated or require a new batch to be manufactured from the patient’s starting material. Losses of this sort could cause delays in the associated clinical trials, which could delay or prevent the clinical development and commercialization of our product candidates in the Celgene territories.
We rely on third parties for certain aspects of the manufacture our clinical product supplies, and we intend to rely on third parties for at least a portion of the manufacturing process of our product candidates, if approved. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.
We currently rely on outside vendors for certain aspects of the manufacturing process for our product candidates. We have not yet caused our product candidates to be manufactured or processed on a commercial scale and may not be able to do so for any of our product candidates. Although our manufacturing and processing approach originates with the approach undertaken by our third-party research institution collaborators, we have limited experience in managing the T cell engineering process, and our process may be more difficult or expensive than the approaches in use by others. We have made and will continue to make changes as we work to optimize the manufacturing process, and we cannot be sure that even minor changes in the process will not result in significantly different T cells that may not be as safe and effective as any T cell therapy deployed by our third-party research institution collaborators.
Although we have brought a Juno-operated manufacturing facility online for clinical manufacturing, we also intend to continue to use third parties as part of our manufacturing process, including for the manufacturing of viral vector, and for filling some of our product candidate manufacturing requirements. Our anticipated reliance on a limited number of third-party manufacturers exposes us to the following risks:
|
|
•
|
We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA must approve any manufacturers. This approval would require new testing and good manufacturing practices compliance inspections by FDA. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products.
|
|
|
•
|
Our manufacturers may have little or no experience with autologous cell products, which are products made from a patient’s own cells, and therefore may require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our product candidates.
|
|
|
•
|
Our third-party manufacturers might be unable to timely manufacture our product or the custom materials or reagents used in the manufacture thereof, or produce the quantity and quality required to meet our clinical and commercial needs, if any.
|
|
|
•
|
Contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately.
|
|
|
•
|
Our future contract manufacturers may not perform as agreed, may not devote sufficient resources us, or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store, and distribute our products or the custom materials or reagents used in the manufacture thereof.
|
|
|
•
|
Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with current good manufacturing practices ("cGMPs") and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.
|
|
|
•
|
We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our products, or in the manufacture of the custom materials or reagents used in the manufacture thereof.
|
|
|
•
|
Our third-party manufacturers could breach or terminate their agreement with us.
|
|
|
•
|
Raw materials, reagents, and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects, or may introduce variability into our final products.
|
|
|
•
|
Our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters.
|
|
|
•
|
Our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields.
|
Celgene may similarly rely on third parties for manufacturing activities in the territories where Celgene leads development and commercialization of product candidates from programs for which it has exercised an option, and therefore Celgene’s activities may be subject to the same risks. Each of these risks could delay or prevent the completion of clinical trials or the approval of
any of our product candidates by the FDA or comparable regulatory authorities outside of the United States, result in higher costs, or adversely impact commercialization of our product candidates. In addition, we will rely on third parties to perform certain specification tests on our product candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious harm and the FDA or comparable regulatory authorities outside of the United States could require additional clinical trials or place significant restrictions on our company until deficiencies are remedied.
Cell-based therapies rely on the availability of reagents, specialized equipment, and other specialty materials, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.
Manufacturing our product candidates requires many reagents, which are substances used in our manufacturing processes to bring about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics production. We currently depend on a limited number of vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. Reagents and other key materials from these suppliers may have inconsistent attributes and introduce variability into our manufactured product candidates, which may contribute to variable patient outcomes and possible adverse events. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing.
For some of these reagents, equipment, and materials, we rely and may in the future rely on sole source vendors or a limited number of vendors. An inability to continue to source product from any of these suppliers, which could be due to regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business.
As we continue to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for product candidate that is already in clinical testing, the change may require us to perform both
ex vivo
comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials.
We do and will continue to rely in significant part on outside scientists and their third-party research institutions for research and development and early clinical testing of our product candidates. These scientists and institutions may have other commitments or conflicts of interest, which could limit our access to their expertise and harm our ability to leverage our technology platform.
We rely to a large extent at present on our third-party research institution collaborators for research and development capabilities. Currently, SCRI is conducting a Phase I/II clinical trial using JCAR017 to address pediatric ALL and a Phase I trial using JCAR023 to address refractory or recurrent pediatric neuroblastoma; FHCRC is conducting a Phase I/II clinical trial using JCAR014 to address ALL, NHL, and CLL, a Phase Ib trial using JCAR014 in combination with durvalumab to address NHL, a Phase I trial using our CD19-directed product candidate incorporating a fully human binding domain to address certain adult B cell malignancies, a Phase I trial using JCAR024 to address ROR-1 expressing cancers, a Phase I/II trial using JTCR016 to address newly diagnosed or relapsed high risk AML, and a Phase I/II trial using JTCR016 to address advanced NSCLC and mesothelioma; MSK is conducting Phase I clinical trial using a BCMA-directed product candidate to address multiple myeloma and a Phase I trial with JCAR020 to address ovarian cancer; and Peter MacCallum Cancer Centre is conducting a Phase I clinical trial using a Lewis Y-directed CAR T cell product candidate to address lung cancer. Each of these clinical trials addresses a limited number of patients. We expect to use the results of these trials, if favorable, to help support the filing with the FDA of Juno-sponsored INDs to conduct more advanced clinical trials with the corresponding product candidates. We are conducting the Phase I clinical trial of JCAR017 in aggressive r/r NHL under a Juno-sponsored IND.
With respect to our CD22 product candidate, JCAR018, the NCI is conducting a clinical trial of the product candidate for the treatment of pediatric and young adult r/r ALL and r/r NHL. If the results of this trial are compelling, we expect to use the
results of the NCI's clinical trial to support the filing with the FDA of a Juno-sponsored IND to conduct more advanced clinical trials of JCAR018 or another CD22-directed product candidate, alone or in combination with CD19-directed therapy.
We also fund research and development under agreements with FHCRC, MSK, and SCRI, among other institutions. However, the research we are funding constitutes only a small portion of the overall research of each research institution. Other research being conducted by these institutions may at times receive higher priority than research on the programs we are funding. We typically have less control of the research, clinical trial protocols, and patient enrollment than we might with activity led by Juno employees.
The outside scientists who conduct the clinical testing of our current product candidates, and who conduct the research and development upon which our product candidate pipeline depends, are not our employees; rather they serve as either independent contractors or the primary investigators under research collaboration agreements that we have with their sponsoring academic or research institution. Such scientists and collaborators may have other commitments that would limit their availability to us. Although our scientific advisors generally agree not to do competing work, if an actual or potential conflict of interest between their work for us and their work for another entity arises, we may lose their services. These factors could adversely affect the timing of the clinical trials, the timing of receipt and reporting of clinical data, the timing of Juno-sponsored IND filings, and our ability to conduct future planned clinical trials. It is also possible that some of our valuable proprietary knowledge may become publicly known through these scientific advisors if they breach their confidentiality agreements with us, which would cause competitive harm to, and have a material adverse effect on, our business.
Our existing agreements with our collaboration partners may be subject to termination by the counterparty upon the occurrence of certain circumstances as described in more detail under the caption "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report. If any of our collaboration partners terminates their collaboration agreement, the research and development of the relevant product candidate would be suspended, and we may be unable to research, develop, and license future product candidates. We may be required to devote additional resources to the development of our product candidates or seek a new collaboration partner, and the terms of any additional collaborations or other arrangements that we establish may not be favorable to us. In addition, there is a natural transition period when a new third-party begins work. In addition, switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines.
We will be highly dependent on the NCI for early clinical testing of JCAR018.
In December 2014, we entered into an exclusive license agreement with Opus Bio pursuant to which Opus Bio has granted us an exclusive, worldwide, sublicensable license under certain patent rights related to a CD22-directed CAR product candidate, JCAR018. In connection therewith, the NCI agreed to separate the activities that are exclusively related to CD22 under its agreement with Opus Bio and to enter into a separate agreement with us (the "Juno CRADA"), on the same terms as such agreement and incorporate such activities into its agreement with us.
The NCI has commenced a Phase I clinical trial of JCAR018 for the treatment of pediatric and young adult r/r ALL and r/r NHL. If the results of this trial are compelling, we expect to use the results of the NCI's clinical trial to support the filing with the FDA of a Juno-sponsored IND to conduct more advanced clinical trials of JCAR018 or another CD22-directed product candidate, alone or in combination with CD19-directed therapy. However, we will have limited control over the nature or timing of the NCI's clinical trial and limited visibility into their day-to-day activities, including manufacturing activities. For example, the clinical trial will constitute only a small portion of the NCI's overall research and the research of the principal investigators. Other research being conducted by the principal investigators may at times receive higher priority than research on JCAR018. We will also be dependent on the NCI to provide us with data, include batch records, to support the filing of our IND. These factors could adversely affect the timing of our IND filing. Additionally, the NCI manufactures drug product and we do not control the process or facility. While JCAR018 was not impacted, certain non-Juno product candidates’ development was delayed in 2016 due to contamination issues at another NCI cell manufacturing facility.
The NCI may unilaterally terminate our rights under the Juno CRADA at any time for any reason or for no reason upon at least 60 days prior written notice. If the NCI unilaterally terminates the Juno CRADA, the research and development under the Juno CRADA would be suspended and we may lose certain of our data rights, which may impair our ability to obtain regulatory approval of JCAR018.
Our results of operations and financial position could be negatively impacted if our tax positions are challenged by tax authorities or if there are adverse changes in tax laws and regulations .
We are a U.S.-based multinational company subject to tax in certain U.S. and foreign tax jurisdictions. United States federal, state and local, as well as international tax laws and regulations are extremely complex and subject to varying interpretations.
Although we believe that our tax estimates and tax positions are reasonable, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. If we are unsuccessful in such a challenge, the relevant tax authorities may assess additional taxes, which could result in adjustments to, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect our results of operations and financial position. Presently, our German subsidiary is under examination by the German tax authorities for the years ended December 31, 2013 through December 31, 2015.
We could also be adversely affected in the future by changes in applicable tax laws, regulations, or administrative interpretations thereof. The Trump Administration and key members of Congress have made public statements indicating that U.S. corporate tax reform is a high priority, and the U.S. Congress is expected to propose sweeping changes to the U.S. tax system, including changes to corporate tax rates and the taxation of income earned outside the United States (including the taxation of previously unrepatriated foreign earnings). A change to the U.S. tax system, a change to the tax system in a jurisdiction where we have significant operations, or a change in tax law in other jurisdictions where we do business, could have a material and adverse effect on our business and on the results of our operations.
If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates.
Our operations have required substantial amounts of cash since inception. We expect to continue to spend substantial amounts to continue the clinical development of our product candidates, including our ongoing and planned clinical trials for our CD19 and BCMA product candidates. If approved, we will require significant additional amounts in order to launch and commercialize our product candidates.
As of
December 31, 2016
, we had
$922.3 million
in cash, cash equivalents, and marketable securities. We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months. However, changing circumstances or business opportunities, within or beyond our control, may lead us to use our capital faster than we currently anticipate. We may ultimately need to raise additional funds for the further development and commercialization of our product candidates or to pursue strategic transactions and other business opportunities that arise.
We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital and 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 our product candidates or other research and development initiatives. Our license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under the agreements. We could be required to seek additional collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
If Celgene declines to exercise its option with respect to one or more product candidates covered by our Celgene Collaboration Agreement, or if a license agreement with Celgene for a program for which has exercised an option is terminated, we will need to secure funding to advance worldwide development of those programs on our own or secure relationships with collaborators that have the necessary capital and expertise. In addition, we may need additional funding to advance product candidates prior to Celgene’s decisions regarding option exercise with respect to such product candidate if development of that program is not discontinued. Even after Celgene exercises an option for a program, we will still be responsible for a portion of worldwide development expenses for the associated product candidates and will be responsible for all commercialization expenses in the territories in which Juno leads development and commercialization activities. In addition, if we exercise our option to any of Celgene’s in-licensed programs to co-develop and co-commercialize products, then we may need to secure additional funding to support our obligations to pay one-half of the acquisition costs of any such in-licensed program.
If we are unable to obtain sufficient financing when needed, it could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.
Any future revenue from the license agreement with Penn and Novartis is highly dependent upon milestone and contingent royalty payments generated from the efforts of Penn and Novartis, over which we have no control, and we may not realize the intended benefits of this agreement.
On April 4, 2015, the parties to
Trustees of the University of Pennsylvania v. St. Jude Children’s Research Hospital
, Civil Action No. 2:13-cv-01502-SD (E.D. Penn.), agreed to settle the case, which was dismissed on April 7, 2015. In connection with this settlement we entered into a sublicense agreement with Penn and an affiliate of Novartis pursuant to which we granted Novartis a non-exclusive, royalty-bearing sublicense under certain patent rights, including U.S. Patent No. 8,399,645, to develop, make and commercialize licensed products and licensed services for all therapeutic, diagnostic, preventative and
palliative uses. In exchange for this sublicense, Novartis is obligated to pay us mid-single digit royalties on the U.S. net sales of products and services related to the disputed contract and patent claims, a low double digit percentage of the royalties Novartis pays to Penn for global net sales of those products, and milestone payments upon the achievement of specified clinical, regulatory and commercialization milestones for licensed products. The sublicense agreement with Novartis and Penn is terminable by Novartis at will without notice to us and without our consent.
Our receipt of royalty and milestone payments from Novartis is subject to many risks and uncertainties. In particular, these payments are dependent upon Novartis’ ability to make U.S. and global sales of its products and services, and its ability to achieve clinical, regulatory and commercialization milestones for the licensed products. We will have no control over the nature or timing of Novartis’ efforts towards making these sales or achieving these milestones. Furthermore, in the course of developing and commercializing its products, Novartis and Penn will likely be subject to many risks and uncertainties similar to those faced by our company and our product candidates as described in this section, and may be subject to other risks specific to Novartis and Penn. Additionally, if Novartis or Penn breaches our sublicense agreement, we may determine to terminate the agreement, or may be required to do so by St. Jude pursuant to the terms of our license agreement with St. Jude. To the extent Novartis fails, for any of the reasons outlined above or any other reason, to remit royalty payments or milestone payments under our sublicense agreement, or fails to remit these payments in the amount anticipated, or to the extent that our sublicense agreement with Novartis and Penn is terminated, we may not realize the potential benefits of the sublicense agreement with Penn and Novartis.
We may never formalize our agreement in principle with Celgene to license Celgene a subset of the acquired AbVitro technology or the final terms of the agreement may not be as favorable to us as expected.
We and Celgene have agreed in principle to enter into an agreement to license Celgene a subset of the acquired AbVitro technology and to grant Celgene options to certain related potential product rights emanating from the acquired technology. However, we may never come to agreement with Celgene on the formal terms of such an agreement, in which case we will not receive the financial benefits of such an agreement. Even if we do come to agreement with Celgene, it may not be on terms that are favorable to us as expected.
We will rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize our product candidates.
We will depend upon independent investigators to conduct our clinical trials under agreements with universities, medical institutions, CROs, strategic partners, and others. At present, we contract directly with all of our trial sites, and therefore have to negotiate budgets and contracts with each trial site, which may result in delays to our development timelines and increased costs. If we transition to a CRO to manage the conduct of our clinical trials, we will also have to negotiate budgets and contracts with such CRO, which may similarly lead to delays and increased costs.
We will rely heavily on third parties over the course of our clinical trials, and as a result will have limited control over the clinical investigators and limited visibility into their day-to-day activities, including with respect to how they are providing and administering T cell therapy. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory, and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional nonclinical or clinical trials before approving our marketing applications. We cannot be certain that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMP regulations and will require a large number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing preclinical, clinical, and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed. We have disclosed in this report and various corporate presentations certain third party investigator-reported interim data from some of our trials, including interim data for which we have not yet independently reviewed the source data. We also sometimes rely on such investigator-reported interim data in making business decisions. Independent review of the data could fail to confirm the investigator- reported interim data, which may lead to revisions in disclosed clinical trial results in the future. Any such revisions that reveal more negative data than previously disclosed investigator-reported interim data could have an adverse impact on our business prospects and the trading price of our common stock. Such revisions could also reduce investor confidence in investigator-reported interim data that we disclose in the future.
If any of our relationships with trial sites, or any CRO that we may use in the future, terminate, we may not be able to enter into arrangements with alternative trial sites or CROs or do so on commercially reasonable terms. Switching or adding additional trial sites or CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO begins work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines and such delays could have a material adverse impact on our business, financial condition, and prospects.
The market opportunities for our product candidates may be limited to those patients who are ineligible for or have failed prior treatments and may be small.
Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only for third line use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure. Whenever first line therapy, usually chemotherapy, hormone therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of more chemotherapy, radiation, antibody drugs, tumor targeted small molecules, or a combination of these. Third line therapies can include bone marrow transplantation, antibody and small molecule targeted therapies, more invasive forms of surgery, and new technologies. We expect to initially seek approval of our product candidates as a third line therapy for patients who have failed other approved treatments.
Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval as a second line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if approved, would be approved for second line or first line therapy. In addition, we may have to conduct additional clinical trials prior to gaining approval for second line or first line therapy.
Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position to receive third line therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. For instance, with our CD19 product candidates we expect to initially target a small patient population that suffers from certain types of aggressive NHL, r/r CLL, and r/r ALL. Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including use as a first or second line therapy.
Our market opportunities may also be limited by competitor treatments that may enter the market. See the risk factor below "
—We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
"
We plan to seek orphan drug designation for some or all of our CD19 product candidates across various indications, 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.
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 in the United States, or a patient population greater than 200,000 in the United States 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. 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 user-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. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval of that particular product 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 BLA, to market the same biologic (meaning, a product with the same principal molecular structural features) 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 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. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve other biologics that do not have the same principal molecular structural features for use in treating the same indication or disease or the same biologic for a different indication or disease during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product or if a subsequent applicant demonstrates clinical superiority over our product.
We plan to seek orphan drug designation for some or all of our CD19 product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. We have obtained orphan drug designation for JCAR017 for the treatment of each of DLBCL, CLL, and ALL. Even when we obtain orphan drug designation, exclusive marketing rights in the United States may be limited if we 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 or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, although we intend to seek orphan drug designation for other product candidates, we may never receive such designations.
We plan to seek but may fail to obtain breakthrough therapy designation, and Celgene may seek but may fail to obtain access to PRIME, for some or all of our CD19 product candidates across various indications.
In 2012, the FDA established a breakthrough therapy designation which is intended to expedite the development and review of product candidates that treat serious or life-threatening diseases when "preliminary clinical evidence indicates that the drug 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 of a product candidate as a breakthrough therapy provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate and ensure collection of appropriate data needed to support approval; more frequent written correspondence from FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase I; organizational commitment involving senior managers; and eligibility for rolling review and priority review. Similarly, the EMA has established the PRIME scheme to expedite the development and review of product candidates that show a potential to address to a significant extent an unmet medical need, based on early clinical data.
We intend to seek breakthrough therapy designation, and Celgene may seek access to PRIME, for some or all of our CD19 product candidates that may qualify. We have obtained breakthrough therapy designation for JCAR017 for the treatment of r/r aggressive large B cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma (PMBCL), or follicular lymphoma grade 3B. Celgene has obtained access to PRIME for JCAR017 for the treatment of r/r DLBCL. There is no assurance that we will obtain breakthrough therapy designation, or that Celgene will obtain access to PRIME, for any of our other product candidates.
Breakthrough therapy designation and PRIME eligibility do not change the standards for product approval, and there is no assurance that such designation or eligibility will result in expedited review or approval. Additionally, breakthrough therapy designation and access to PRIME can each be revoked if the criteria for eligibility cease to be met as clinical data emerges.
We currently have very limited marketing and sales organization and have no experience as a company in marketing products. If we are unable to establish marketing and sales capabilities on our own or through our collaboration with Celgene or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.
Although we have begun to assemble a marketing and sales organization, the team is still very limited and we have no commercial product distribution capabilities and have no experience as a company in marketing products. We intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources,
and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, and retain marketing and sales personnel.
Under our collaboration with Celgene, for Juno-developed programs that Celgene opts into, such as our CD19 program, Celgene will lead development and commercialization activities outside of North America and China, but we will still be responsible for leading such activities in North America and China. If Celgene does not opt into a program for one of our product candidates that we move to commercialization, we will alone be responsible for commercialization activities worldwide, unless we find another collaborator to assist with the sales and marketing of our products.
If we are unable or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all products we develop, we will likely pursue further collaborative arrangements regarding the sales and marketing of our products. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product in the United States or other territories, and as a result, we may not be able to generate product revenue.
A variety of risks associated with operating our business internationally could materially adversely affect our business.
As a result of the Stage acquisition, we acquired a German subsidiary with employees in Germany. We also plan to seek regulatory approval of our product candidates outside of the United States. Accordingly, we expect that we, Celgene, JW Therapeutics (Shanghai) Co., Ltd, and any other potential collaborators that have operations in foreign jurisdictions, will be subject to additional risks related to operating in foreign countries, including:
|
|
•
|
differing regulatory requirements in foreign countries;
|
|
|
•
|
unexpected changes in tariffs, trade barriers, taxes, price and exchange controls, or price and currency fluctuations;
|
|
|
•
|
weak economic conditions, labor unrest, political instability, war, or terror;
|
|
|
•
|
compliance with applicable tax, employment, immigration, data privacy, and labor laws for employees living or traveling abroad;
|
|
|
•
|
difficulties staffing operations and managing foreign employees;
|
|
|
•
|
potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws;
|
|
|
•
|
challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; and
|
|
|
•
|
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad.
|
These and other risks associated with our planned international operations may materially adversely affect our ability to attain or maintain profitable operations.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T cells in particular, is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations as well as established sales forces. Smaller or early- stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or
biologic products that are more effective, safer, more easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.
Specifically, genetically engineering T cells faces significant competition in both the CAR and TCR technology space from multiple companies and their collaborators, such as Novartis/University of Pennsylvania, Kite / Amgen / NCI, Cellectis / Pfizer / Servier, Johnson & Johnson / Transposagen Biopharmaceuticals, bluebird bio, Bellicum, Celyad, Cell Design Labs, NantKwest, Intrexon / Ziopharm / MD Anderson Cancer Center, Unum Therapeutics, Adaptimmune / GlaxoSmithKline, ImmunoCellular Therapeutics, Adicet Bio, and Autolus. We also face competition from non-cell based treatments offered by companies such as Amgen, Pfizer, Abbvie, AstraZeneca, Bristol-Myers, Incyte, Merck, Roche, Regeneron, Corvus, Macrogenics, and Johnson & Johnson.
Even if we obtain regulatory approval of our product candidates, we may not be the first to market and that may affect the price or demand for our product candidates. Additionally, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances. Additionally, a competitor could obtain orphan product exclusivity from the FDA with respect to such competitor’s product. If such competitor product is determined to be the same product as one of our product candidates, that may prevent us from obtaining approval from the FDA for such product candidate for the same indication for seven years, except in limited circumstances.
For additional information regarding our competition, see the section captioned "Competition" in Part I—Item 1—"Business" located elsewhere in this report.
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, particularly our chief executive officer, Hans Bishop, and our scientific and medical personnel. The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in product development and harm our business.
We conduct most of our operations at our facilities in Seattle and Bothell, Washington, in a region that is headquarters to many other biopharmaceutical companies and many academic and research institutions. We also have operations in Massachusetts and Germany and currently have employees in both geographies. Competition for skilled personnel is intense in all of these geographies and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we will need to recruit talent from outside of the regions in which we currently operate, and doing so may be costly and difficult. Further expansion into additional states or countries could also increase our regulatory and legal risks.
To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided restricted stock and stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain "key man" insurance policies on the lives of all of these individuals or the lives of any of our other employees.
We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.
As of
December 31, 2016
, we had
553
employees worldwide, most of whom are full time. As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we must add a significant number of additional research and development, managerial, operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:
|
|
•
|
identifying, recruiting, integrating, maintaining, and motivating additional employees;
|
|
|
•
|
managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and
|
|
|
•
|
improving our operational, financial and management controls, reporting systems, and procedures.
|
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. Our efforts to manage our growth are complicated by the fact that all of our executive officers other than our chief executive officer have joined us since January 2014. This lack of long-term experience working together may adversely impact our senior management team’s ability to effectively manage our business and growth.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals.
We have engaged in and may in the future engage in acquisitions or strategic partnerships, which could divert management’s attention, increase our capital requirements, dilute our stockholders, be difficult to integrate, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We have made or entered into several acquisitions or strategic partnerships, such as our AbVitro and RedoxTherapies acquisitions in 2016, and we may continue to evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses.
Any acquisition or strategic partnership may entail numerous risks, including:
|
|
•
|
increased operating expenses and cash requirements;
|
|
|
•
|
the assumption of additional indebtedness or contingent liabilities, including any earn-out milestones;
|
|
|
•
|
the issuance of our equity securities;
|
|
|
•
|
assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;
|
|
|
•
|
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;
|
|
|
•
|
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
|
|
|
•
|
expense or diversion of efforts related to the development of acquired technology under any diligence obligation required of us with respect to earn out milestones for an acquisition transaction, where we may not undertake such expense or efforts absent such diligence obligations;
|
|
|
•
|
risk that the other party or parties to an acquisition transaction may claim that we have not satisfied any earn out diligence obligation and seek damages or other legal or equitable relief;
|
|
|
•
|
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and
|
|
|
•
|
our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
|
In addition, if we undertake additional acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
Our success payment obligations to FHCRC and MSK may result in dilution to our stockholders, may be a drain on our cash resources, or may cause us to incur debt obligations to satisfy the payment obligations.
We have agreed to make success payments to each of FHCRC and MSK pursuant to the terms of our agreements with each of those entities. These success payments will be based on increases in the estimated fair value of our common stock, payable in cash or publicly-traded equity at our discretion. The term of these obligations may last up to 11 years. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation measurement dates during the term of the success payment agreement: (1) December 19, 2014, which was the date our common stock first became publicly traded; (2) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (3) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); (4) any date on which ARCH Venture Fund VII, L.P. or C.L. Alaska L.P. transfers a majority of its shares of company capital stock held by it on such date to a third party; (5) every second anniversary of any event described in the preceding clauses (1), (2), (3) or (4), but, in the case of FHCRC, only upon a request by FHCRC made within 20 calendar days after receiving written notice from us of such event; and (6) the last day of the 11 year period. The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending, in the case of FHCRC, from $20.00 per share to $160.00 per share and, in the case of MSK, from $40.00 per share to $120.00 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. Each threshold is associated with a success payment, ascending, in the case of FHCRC, from $10.0 million at $20.00 per share to $375.0 million at $160.00 per share and, in the case of MSK, from $10.0 million at $40.00 per share to $150.0 million at $120.00 per share, payable if such threshold is reached. The maximum aggregate amount of success payments to FHCRC is $375.0 million and to MSK is $150.0 million, in each case subject to cost offsets related to our cash payments for collaboration activities. In December 2015, success payments to FHCRC were triggered in the aggregate amount of
$75.0 million
, less indirect cost offsets of
$3.3 million
, and a success payment to MSK was triggered in the amount of
$10.0 million
, less indirect cost offsets of
$1.0 million
. We elected to make the payment to FHCRC and MSK in shares of our common stock, and thereby issued
1,601,085
and
240,381
shares of our common stock to FHCRC in December 2015 and to MSK in March 2016, respectively. In April 2016, we agreed to repurchase the shares issued to MSK at a price per share equal to
$41.90
. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" in this report for further discussion of these success payments.
The next anticipated valuation measurement date at which success payments may be triggered is December 19, 2018. Success payments will only be triggered on that date to the extent the average closing price of a share of our common stock over the consecutive 90 calendar day period preceding December 19, 2018 meets or exceeds $60.00, subject to adjustment for any stock dividend, stock split, combination of shares, and other similar events. In order to satisfy our obligations to make these success payments, if and when they are triggered, we may issue equity securities that may cause dilution to our stockholders, or we may use our existing cash or incur debt obligations to satisfy the success payment obligation in cash, which may adversely affect our financial position.
The success payment obligations to FHCRC and MSK may cause GAAP operating results to fluctuate significantly from quarter to quarter, which may reduce the usefulness of our GAAP financial statements.
Our success payment obligations to FHCRC and MSK are recorded as a liability on our balance sheet. Under generally accepted accounting principles in the United States ("GAAP"), we are required to estimate the fair value of this liability as of each quarter end and changes in estimated fair value are amortized using the accelerated attribution method over the remaining term of the corresponding collaboration agreement. Factors that may lead to increases or decreases in the estimated fair value of this liability include, among others, changes in the value of the common stock, change in volatility, changes in the applicable term of the success payments, changes in the risk free rate, and changes in the estimated indirect costs that are creditable against FHCRC and MSK success payments. A small change in the inputs and related assumptions may have a relatively large change in the estimated valuation and associated liability and resulting expense or gain. For instance, see Note 7 to our audited consolidated financial statements included in this report for a sensitivity analysis showing the impact that a hypothetical change in the value of our common stock would have had on our results for the year ended December 31, 2016. As a result, our operating results and financial condition as reported by GAAP may fluctuate significantly from quarter to quarter and from year to year and may reduce the usefulness of our GAAP financial statements.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships, and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.
If we, our CROs or our CMOs use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.
Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by us or third parties, such as CROs and CMOs. We and such third parties are subject to federal, state, and local laws and regulations in the United States governing the use, manufacture, storage, handling, and disposal of medical and hazardous materials. Although we believe that our and such third parties’ procedures for using, handling, storing, and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state, or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition, or results of operations.
Our internal computer systems, or those used by our third-party research institution collaborators, CROs or other contractors or consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our future CROs and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party research institution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information or patient information, we could incur liability and the further development and commercialization of our product candidates could be delayed.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our third-party research institution collaborators, CROs, CMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. Our headquarters and our Juno-operated manufacturing facility are both located in King County, Washington, and therefore could both be similarly affected by the same event. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers in part to produce and process our product candidates or to supply us with certain reagents or specialized equipment or materials used our manufacturing process. Our ability to obtain clinical or commercial supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Damage or extended periods of interruption to our corporate, development, research, or manufacturing facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business
interruption insurance coverage, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
|
|
•
|
decreased demand for our products;
|
|
|
•
|
injury to our reputation;
|
|
|
•
|
withdrawal of clinical trial participants and inability to continue clinical trials;
|
|
|
•
|
initiation of investigations by regulators;
|
|
|
•
|
costs to defend the related litigation;
|
|
|
•
|
a diversion of management’s time and our resources;
|
|
|
•
|
substantial monetary awards to trial participants or patients;
|
|
|
•
|
product recalls, withdrawals or labeling, marketing or promotional restrictions;
|
|
|
•
|
exhaustion of any available insurance and our capital resources;
|
|
|
•
|
the inability to commercialize any product candidate; and
|
|
|
•
|
a decline in our share price.
|
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Although we currently carry
$10.0 million
of clinical trial insurance, the amount of such insurance coverage may not be adequate, we may be unable to maintain such insurance, or we may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of
December 31, 2016
, we had U.S. federal net operating loss carryforwards of approximately
$249.4 million
, which will begin to expire in
2033
. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50-percentage- point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. As a result of our transactions that have occurred since our incorporation in August 2013, including our initial public offering, we have experienced such "ownership changes," but we have determined that our use of pre-change net operating loss carryforwards and other pre-change tax attributes is not subject to a material annual limitation. However, we may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which changes are outside our control. As a result, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to further limitation.
Risks Related to Government Regulation
The FDA regulatory approval process is lengthy, time-consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and regulatory approval, if any, of our product candidates.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA and other regulatory authorities in the United States. We are not permitted to market any biological drug product in the United States until we receive approval of a BLA from the FDA. We have not previously submitted a BLA to the FDA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-license inspection. We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA has limited experience with commercial development of genetically modified T cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the product candidates based on the completed clinical trials. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive, and lengthy, and approval may not be obtained. In addition, clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:
|
|
•
|
obtaining regulatory approval to begin a trial, if applicable;
|
|
|
•
|
the availability of financial resources to begin and complete the trials;
|
|
|
•
|
reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
|
|
|
•
|
obtaining approval at each clinical trial site by an independent IRB;
|
|
|
•
|
recruiting suitable patients to participate in a trial in a timely manner;
|
|
|
•
|
having patients complete a trial or return for post-treatment follow-up;
|
|
|
•
|
clinical trial sites deviating from trial protocol, not complying with GCPs, or dropping out of a trial;
|
|
|
•
|
addressing any patient safety concerns that arise during the course of a trial;
|
|
|
•
|
addressing any conflicts with new or existing laws or regulations;
|
|
|
•
|
adding new clinical trial sites; or
|
|
|
•
|
manufacturing qualified materials under cGMPs for use in clinical trials.
|
Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors. See the risk factor above "—
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected
" for additional information on risks related to patient enrollment.
Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted, or the FDA or other regulatory authorities 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 adequate benefit from using a product candidate, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. Some studies, including our TRANSCEND trial for JCAR017, include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides a recommendation for whether or not a study should move forward at designated check points based on access to certain data from the study and may recommend the suspension of the clinical trial if it determines that there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy, insufficient pace of enrollment, or lack of adherence to protocol. The recommendations of the data safety monitoring board are then considered by us, the trial site IRBs, and the FDA or other regulatory agencies, and may impact our or their decisions regarding the continuation, suspension, or termination of a clinical trial.
If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition,
any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue.
Our third-party research institution collaborators may also experience similar difficulties in completing ongoing clinical trials and conducting future clinical trials of product candidates. 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.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
If our product candidates are approved, they 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, and in certain cases Good Tissue Practices 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 BLA, other marketing application, and previous responses to inspectional observations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.
Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS program as a condition of approval of our product candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, we will have to comply with requirements including submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.
The FDA may impose consent decrees or 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 our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or 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 our products, withdrawal of the product from the market, or voluntary or mandatory product recalls;
|
|
|
•
|
fines, warning letters, or holds on clinical trials;
|
|
|
•
|
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;
|
|
|
•
|
product seizure or detention, or refusal to permit the import or export of our product candidates; and
|
|
|
•
|
injunctions or the imposition of civil or criminal penalties.
|
The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications 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, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. 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. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. Notably, on January 23, 2017, President Trump ordered a hiring freeze for all executive departments and agencies, including the FDA, which prohibits the FDA from filling employee vacancies or creating new positions. Under the terms of the order, the freeze will remain in effect until implementation of a plan to be recommended by the Director for the Office of Management and Budget ("OMB") in consultation with the Director of the Office of Personnel Management, to reduce the size of the federal workforce through attrition. An under-staffed FDA could result in delays in FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order directing all executive agencies, including the FDA, that, for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirement will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose restrictions on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted. In addition, 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.
In addition, if we were able to obtain accelerated approval of any of our CD19 product candidates or any of our other product candidates, the FDA would require us to conduct a confirmatory study to verify the predicted clinical benefit and additional safety studies. The results from the confirmatory study may not support the clinical benefit, which would result in the approval being withdrawn. While operating under accelerated approval, we will be subject to certain restrictions that we would not be subject to upon receiving regular approval.
Our product candidates are regulated as biologic products, which may face competition sooner than anticipated.
The Affordable Care Act, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. 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. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers, and others in the medical community.
The use of engineered T cells as a potential cancer treatment is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers, and others in the medical community. We expect physicians in the large bone marrow transplant centers to be particularly influential, and we may not be able to convince them to use our product candidates for many reasons. For example, certain of the product candidates that we will be developing target a cell surface marker that may be present on cancer cells as well as non-cancerous cells. It is possible that our product candidates may kill these non-cancerous cells, which may result in unacceptable side effects, including death. Additional factors will influence whether our product candidates are accepted in the market, including:
|
|
•
|
the clinical indications for which our product candidates are approved;
|
|
|
•
|
physicians, hospitals, cancer treatment centers, and patients considering our product candidates, or CAR or TCR product candidates generally, as a safe and effective treatment;
|
|
|
•
|
the potential and perceived advantages of our product candidates over alternative treatments;
|
|
|
•
|
the prevalence and severity of any side effects;
|
|
|
•
|
product labeling or product insert requirements of the FDA or other regulatory authorities;
|
|
|
•
|
limitations or warnings contained in the labeling approved by the FDA;
|
|
|
•
|
the timing of market introduction of our product candidates as well as competitive products;
|
|
|
•
|
the cost of treatment in relation to alternative treatments;
|
|
|
•
|
the amount of upfront costs or training required for physicians to administer our product candidates;
|
|
|
•
|
the availability of adequate coverage, reimbursement, and pricing by third-party payors and government authorities;
|
|
|
•
|
the willingness of patients to pay out-of-pocket in the absence of coverage and reimbursement by third-party payors and government authorities;
|
|
|
•
|
relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and
|
|
|
•
|
the effectiveness of our sales and marketing efforts and distribution support.
|
In addition, although we are not utilizing embryonic stem cells or replication competent vectors, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may limit market acceptance our product candidates. If our product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue.
Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.
Successful sales of our product candidates, if approved, depend on the availability of adequate coverage and reimbursement from third-party payors. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, commercial payors, and integrated delivery networks are critical to new product acceptance.
Government authorities and third-party payors, such as private health insurers and health maintenance organizations, and integrated delivery networks decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:
|
|
•
|
a covered benefit under its health plan;
|
|
|
•
|
safe, effective and medically necessary;
|
|
|
•
|
appropriate for the specific patient;
|
|
|
•
|
neither experimental nor investigational.
|
In the United States, no uniform policy of coverage and reimbursement for products exists among third- party payors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our genetically modified products. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Because our product candidates have a higher cost of goods than conventional therapies, and may require long- term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the EU, the pricing of biologics is subject to governmental control and other market regulations which could put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidates and may be affected by existing and future health care reform measures.
Healthcare legislative reform measures, or public focus on product pricing, may have a material adverse effect on our business and results of operations.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in 2010, the Affordable Care Act was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed 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, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future, particularly in light of the new presidential administration and U.S. Congress. In addition, Congress
could consider subsequent legislation to replace repealed elements of the Affordable Care Act. At this time, the full effect that the Affordable Care Act and any subsequent legislation would have on our business remains unclear.
We expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. Since taking office, President Trump has continued to support the repeal of all or portions of the Affordable Care Act. In January 2017, the House and Senate passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the Affordable Care Act and permits such legislation to pass with a majority vote in the Senate. President Trump has also recently issued an executive order in which he stated that it is his administration’s policy to seek the prompt repeal of the Affordable Care Act and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.
In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. More recently, the 21
st
Century Cures Act changed the reimbursement methodology for infusion drugs and biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. For instance, there have recently been public hearings in the U.S. Congress concerning pharmaceutical product pricing. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
|
|
•
|
the demand for our product candidates, if we obtain regulatory approval;
|
|
|
•
|
our ability to set a price that we believe is fair for our products;
|
|
|
•
|
our ability to generate revenue and achieve or maintain profitability;
|
|
|
•
|
the level of taxes that we are required to pay; and
|
|
|
•
|
the availability of capital.
|
Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.
There has also been, and may in the future be, public attention on product pricing, and that may result in political, interest group, or media criticism of companies whose pricing or potential pricing is perceived by the public as high. If we were to become subject to such criticism, it could harm our reputation, create adverse publicity, and impact our relationships with our suppliers, collaborators, medical providers, and patients, each which could adversely affect our business and results of operations.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the laws of the FDA and other similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report
financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person or government agency could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, physician payment transparency laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These laws may impact, among other things, our current activities with clinical study investigators and research subjects, as well as proposed sales, marketing, and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
|
|
•
|
the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. 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 False Claims Act;
|
|
|
•
|
federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which impose criminal and civil penalties, including through civil "qui tam" or "whistleblower" actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation;
|
|
|
•
|
the federal Health Insurance Portability and Accountability Act of 1996, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
|
|
|
•
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that
|
involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;
|
|
•
|
the federal Physician Payment Sunshine Act, created under the Affordable Care Act, and its implementing regulations, which require manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services under the Open Payments Program, information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;
|
|
|
•
|
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
|
|
|
•
|
analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer protection and unfair competition laws which may apply to pharmaceutical business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensations and other remuneration and items of value provided to healthcare professionals and entities; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
|
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
Risks Related to Intellectual Property
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.
We are dependent on patents, know-how, and proprietary technology, both our own and licensed from others. Any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. See the section captioned "Licenses and Third-Party Collaborations" in Part I—Item 1—"Business" of this report for additional information regarding our license agreements.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including those relating to:
|
|
•
|
the scope of rights granted under the license agreement and other interpretation-related issues;
|
|
|
•
|
whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;
|
|
|
•
|
our right to sublicense patent and other rights to third parties under collaborative development relationships;
|
|
|
•
|
whether we are complying with our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates; and
|
|
|
•
|
the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and by us and our partners.
|
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.
We depend, in part, on our licensors to file, prosecute, maintain, defend, and enforce patents and patent applications that are material to our business.
Patents relating to our product candidates are controlled by certain of our licensors. Each of our licensors generally has rights to file, prosecute, maintain, and defend the patents we have licensed from such licensor. We generally have the first right to enforce our patent rights, although our ability to settle such claims often requires the consent of the licensor. If our licensors or any future licensees having rights to file, prosecute, maintain, and defend our patent rights fail to conduct these activities for patents or patent applications covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using, or selling competing products. We cannot be certain that such activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights. Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents and, even if we are permitted to pursue such enforcement or defense, we cannot ensure the cooperation of our licensors. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that we may need to operate our business. In addition, even when we have the right to control patent prosecution of licensed patents and patent applications, enforcement of licensed patents, or defense of claims asserting the invalidity of those patents, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to or after our assuming control.
We may not be successful in obtaining or maintaining necessary rights to product components and processes for our product development pipeline.
We own or license from third parties certain intellectual property rights necessary to develop our product candidates. The growth of our business will likely depend in part on our ability to acquire or in-license additional proprietary rights. For example, our programs may involve additional product candidates that may require the use of additional proprietary rights held by third parties. Our product candidates may also require specific formulations to work effectively and efficiently. These formulations may be covered by intellectual property rights held by others. We may be unable to acquire or in-license any relevant third-party intellectual property rights that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitors’ access to the same technologies licensed to us.
Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.
The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. There can be no assurance that we will be able to successfully complete such
negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates that we may seek to acquire.
We are dependent on intellectual property sublicensed to us by Opus Bio from the NIH for development of JCAR018. Failure to meet our own obligations to Opus Bio and the NIH may result in the loss of our rights to such intellectual property, which could harm our business.
Under our license agreement with Opus Bio, we are obligated to make certain pass-through payments to the NIH as well as to meet certain development benchmarks within certain time periods. We may be unable to make these payments or meet these benchmarks or may breach our other obligations under this license agreement, which could lead to the termination of the license agreement.
In addition, the NIH has the right to require us to grant mandatory sublicenses to the intellectual property licensed from the NIH under certain specified circumstances, including if it is necessary to meet health and safety needs that we are not reasonably satisfying or if it is necessary to meet requirements for public use specified by federal regulations. Any required sublicense of these licenses could result in the loss of significant rights and could harm our ability to commercialize licensed products.
We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates.
We anticipate that we will file additional patent applications both in the United States and in other countries, as appropriate. However, we cannot predict:
|
|
•
|
if and when any patents will issue;
|
|
|
•
|
the degree and range of protection any issued patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;
|
|
|
•
|
whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent applications; or
|
|
|
•
|
whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be costly whether we win or lose.
|
Composition of matter patents for biological and pharmaceutical products such as CAR or TCR product candidates are generally considered to be the strongest form of intellectual property protection for those types of products, as such patents provide protection without regard to any method of use. We cannot be certain, however, that the claims in our pending patent applications covering the composition of matter of our product candidates will be considered patentable by the United States Patent and Trademark Office ("USPTO"), or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the United States or foreign countries. Method of use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products "off-label" for those uses that are covered by our method of use patents. Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.
The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable. For example, in 2015, Kite filed a petition with the USPTO for inter partes review of U.S. Patent No. 7,446,190, a patent that we have exclusively licensed from MSK. Although the USPTO upheld all the claims of this patent in December 2016, Kite has appealed this decision. If Kite is successful in its appeal, one or more of the patent's claims could be narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our product candidates is threatened, this could dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Because
patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Furthermore, for U.S. applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For U.S. applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law in view of the passage of the America Invents Act, which brought into effect significant changes to the U.S. patent laws, including new procedures for challenging pending patent applications and issued patents.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, outside scientific advisors, contractors, and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, outside scientific advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results, and financial condition.
Third-party claims of intellectual property infringement against us or our collaborators may prevent or delay our product discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Third parties may assert that we infringe their patents, or that we are otherwise employing their proprietary technology without authorization, and may sue us. For instance, Novartis Pharmaceutical Corporation has asserted in writing its belief that we infringe the following patents controlled by Novartis Pharmaceutical Corporation: U.S. Patent Nos. 7,408,053, 7,205,101, 7,527,925, and 7,442,525. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture, or methods of use or treatment that cover our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies or the manufacture, use, or sale of our product candidates infringes upon these patents. If any such third-party patents were held by a court of competent jurisdiction to cover our technologies or product candidates, the holders of any such patents may be able to block our ability to commercialize the applicable product candidate unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.
Third parties asserting their patent rights against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement
against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.
We have limited intellectual property rights outside the United States, and, in particular, some of our patents directed to CAR constructs do not extend outside of the United States. Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can have a different scope and strength than do those in the United States. In addition, the laws of some foreign countries, such as China, Brazil, Russia, India, and South Africa, do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or adequate to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, such as China, Brazil, Russia, India, and South Africa, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patents or other intellectual property rights, or the marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Furthermore such proceedings could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time- consuming. In addition, in an infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Interference or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference, or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or before the USPTO or comparable foreign authority.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review, and equivalent proceedings in foreign jurisdictions, such as opposition or derivation proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves, both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in
Assoc. for Molecular Pathology v. Myriad Genetics, Inc.
, the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress, or the USPTO may impact the value of our patents.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
The lives of our patents may not be sufficient to effectively protect our products and business.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic medications. Our patents issued as of December 31, 2016 will expire on dates ranging from 2019 to 2033, subject to any patent extensions that may be available for such patents. If patents are issued on our patent applications pending as of December 31, 2016, the resulting patents are projected to expire on dates ranging from 2021 to 2037. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our products, our business and results of operations will be adversely affected.
We may face competition from biosimilars, which may have a material adverse impact on the future commercial prospects of our product candidates.
Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competition from biosimilars. In the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biological products that are demonstrated to be "highly similar," or biosimilar, to or "interchangeable" with an FDA-approved biological product. This new pathway could allow competitors to reference data from innovative biological products 12 years after the time of approval of the innovative biological product. This data exclusivity does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. Data exclusivity only assures that another company cannot rely upon the data within the innovator’s application to support the biosimilar product’s approval. In his proposed budget for fiscal year 2014, President Obama proposed to cut this 12-year period of exclusivity down to seven years. He also proposed to prohibit additional periods of exclusivity due to minor changes in product formulations, a practice often referred to as "evergreening." It is possible that Congress may take these or other measures to reduce or eliminate periods of exclusivity. The Biologics Price Competition and Innovation Act of 2009 is complex and only beginning to be interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning is subject to uncertainty. Although it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our product candidates.
In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In Europe, a competitor may reference data supporting approval of an innovative biological product, but will not be able to get it on the market until 10 years after the time of approval of the innovative product. This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products.
If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Risks Related to Our Common Stock
We expect that our stock price will fluctuate significantly.
The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this report, these factors include:
|
|
•
|
adverse results, clinical holds, or delays in the clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;
|
|
|
•
|
any disruption in our ability to manufacture drug product that impacts our clinical trial enrollment, regulatory approval timelines, or commercial supply;
|
|
|
•
|
any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a "refusal to file" letter or a request for additional information;
|
|
|
•
|
regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products, including clinical trial requirements for approvals;
|
|
|
•
|
our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at acceptable prices;
|
|
|
•
|
any failure to commercialize our product candidates or if the size and growth of the markets we intend to target fail to meet expectations;
|
|
|
•
|
additions or departures of key scientific or management personnel;
|
|
|
•
|
unanticipated serious safety concerns related to cancer immunology or the use of our product candidates;
|
|
|
•
|
introductions or announcements of new products offered by us or significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our collaborators or our competitors and the timing of such introductions or announcements;
|
|
|
•
|
announcements relating to future collaborations or our existing collaboration with Celgene, including decisions regarding the exercise by Celgene or us of any of our or their options thereunder, or any exercise or non-exercise by Celgene of a right to purchase shares of our common stock;
|
|
|
•
|
our ability to effectively manage our growth;
|
|
|
•
|
our ability to successfully treat additional types of cancers or at different stages;
|
|
|
•
|
changes in the structure of healthcare payment systems;
|
|
|
•
|
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
|
|
|
•
|
publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
|
|
|
•
|
market conditions in the pharmaceutical and biotechnology sectors or the economy generally;
|
|
|
•
|
our ability or inability to raise additional capital through the issuance of equity or debt or collaboration arrangements and the terms on which we raise it;
|
|
|
•
|
trading volume of our common stock;
|
|
|
•
|
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
|
|
|
•
|
rumors and market speculation involving us or other companies in our industry, regardless of the accuracy of such rumors or speculation;
|
|
|
•
|
clinical trial, regulatory, or commercial setbacks to other companies in our field, which may impact perceptions of value or risk to our business; and
|
|
|
•
|
significant lawsuits, including patent or stockholder litigation.
|
The stock market in general, and market prices for the securities of biopharmaceutical companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. The defense and disposition of any such lawsuits could be costly and divert the time and attention of our management and harm our operating results, regardless of the merits of such a claim.
We are involved in a securities class action that may be expensive and time consuming, and if resolved adversely, could harm our business, financial condition, or results of operations.
As described in Part I—Item 3—"Legal Proceedings," a consolidated securities class action is pending against Juno and two of our executive officers. Defending against this lawsuit will be costly and may significantly divert management’s time and attention from our business. There can be no assurance that a favorable outcome will be obtained. A negative outcome, whether by final judgment or an unfavorable settlement, could result in payments of significant monetary damages or fines, which could adversely affect our business, financial condition, or results of operations.
An active trading market for our common stock may not be sustained.
Prior to our initial public offering in December 2014, there was no public market for our common stock. Although our common stock is listed on The NASDAQ Global Select Market, the market for our shares has demonstrated varying levels of trading activity. Furthermore, an active trading market may not be sustained in the future. The lack of an active market may impair investors’ ability to sell their shares at the time they wish to sell them or at a price that they consider reasonable, may reduce the market value of their shares and may impair our ability to raise capital.
If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Future sales of our common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
As of
December 31, 2016
, we had
106,008,751
shares of common stock outstanding, including
2,606,006
shares of restricted stock that remained subject to vesting requirements. All
10,275,265
shares acquired by Celgene from us to date under the Celgene Share Purchase Agreement are subject to a market standoff agreement through March 27, 2017, which is 364 days from the date of Celgene’s most recent acquisition of stock from us. Any subsequent acquisitions of shares of our common stock by Celgene will commence another 364 day market standoff period for all Juno shares held by Celgene, subject to certain exceptions.
We have also registered the offer and sale of all shares of common stock that we may issue under our equity compensation plans, including upon the exercise of stock options. These shares can be freely sold in the public market upon issuance.
As of
December 31, 2016
, the holders of as many as
29.0 million
shares, or
27.4%
of our common stock outstanding, will have rights, subject to some conditions, under the investor rights agreement with such holders to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Additionally, any shares of common stock issued in the future upon payment of success payments with FHCRC and MSK or upon achievement of the remaining milestone payable in equity under the license with Opus Bio will also be entitled to registration rights under the investor rights agreement. Once we register the offer and sale of shares for the holders of registration rights, they can be freely sold in the public market. In connection with the Celgene Share Purchase
Agreement, we have also entered into a registration rights agreement with Celgene, pursuant to which upon the written request of Celgene at certain times and subject to the satisfaction of certain conditions, we have agreed to prepare and file with the SEC a registration statement on Form S-3 for purposes of registering the resale of the shares specified in Celgene’s written request or, if we are not at such time eligible for the use of Form S-3, use commercially reasonable efforts to prepare and file a registration statement on a Form S-1 or alternative form that permits the resale of the shares.
In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise, including up to 30% of shares of our outstanding common stock to Celgene. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.
Additionally, sales of our common stock by our executive officers or directors, even when done during an open trading window under Juno's policies with respect to insider sales or done under a trading plan adopted in accordance with the guidelines set forth by Rule 10b5-1, may adversely impact the trading price of our common stock. Although we do not expect that the relatively small volume of such sales will itself significantly impact the trading price of our common stock, the market could react negatively to the announcement of such sales, which could in turn affect the trading price of our common stock.
Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.
Our executive officers, directors and our 10% or greater stockholders, together with their respective affiliates, beneficially owned approximately
41.0%
of our capital stock as of
December 31, 2016
, excluding shares underlying outstanding options and restricted stock units. Accordingly, such persons and entities, if they acted together, would be able to determine the composition of the board of directors, retain the voting power to approve many matters requiring stockholder approval, including mergers and other business combinations, and continue to have significant influence over our operations. In addition, other than in connection with a change of control, in any vote or action by written consent of our stockholders, including, without limitation, with respect to the election of directors, Celgene has agreed to vote or execute a written consent with respect to all of our voting securities held by Celgene in accordance with the recommendation of our board of directors, limiting the ability of Celgene to contrary to our board of directors that you otherwise may believe is in your best interest as our stockholder. This concentration of ownership amongst our significant holders, including Celgene, could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us that you may believe are in your best interests as one of our stockholders. This in turn could have a material adverse effect on our stock price and may prevent attempts by our stockholders to replace or remove the board of directors or management.
Celgene has acquired
10,275,265
shares of our common stock to date under the Celgene Share Purchase Agreement and, subject to certain conditions, may purchase additional shares annually to obtain and maintain a
9.76%
ownership percentage through June 29, 2020. Furthermore, between June 29, 2019 and June 29, 2025 and between June 29, 2024 and the expiration of the Celgene Collaboration Agreement, subject to certain conditions, Celgene has the option to acquire and maintain an ownership of up to 19.99% and up to 30%, respectively, of our then outstanding shares of common stock. We have also entered into a voting and standstill agreement with Celgene, pursuant to which we have agreed to give Celgene certain board designation rights until at least June 29, 2020, and thereafter for as long as Celgene and its affiliates beneficially own at least 7.5% of the voting power of our outstanding shares. As a result of the concentration of ownership, Celgene could have the ability to delay or prevent a change in our control or otherwise discourage a potential acquirer from attempting to obtain control of us that you may believe are in your best interests as our stockholder.
Anti-takeover provisions in our charter documents and under Delaware or Washington law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and adversely affect our stock price.
Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws will:
|
|
•
|
permit the board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate;
|
|
|
•
|
provide that the authorized number of directors may be changed only by resolution of the board of directors;
|
|
|
•
|
provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
|
|
|
•
|
divide the board of directors into three classes;
|
|
|
•
|
provide that a director may only be removed from the board of directors by the stockholders for cause;
|
|
|
•
|
require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be taken by written consent;
|
|
|
•
|
provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as to the form and content of a stockholder’s notice;
|
|
|
•
|
prevent cumulative voting rights (therefore allowing the holders of a plurality of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);
|
|
|
•
|
require that, to the fullest extent permitted by law, a stockholder reimburse us for all fees, costs and expenses incurred by us in connection with a proceeding initiated by such stockholder in which such stockholder does not obtain a judgment on the merits that substantially achieves the full remedy sought;
|
|
|
•
|
provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer (or president, in the absence of a chief executive officer) or by the board of directors; and
|
|
|
•
|
provide that stockholders will be permitted to amend the bylaws only upon receiving at least two- thirds of the total votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class.
|
Furthermore, pursuant to the voting and standstill agreement with Celgene, until the later of the fifth anniversary of the date of such agreement and the expiration or earlier termination of our Celgene Collaboration Agreement, it will be bound by certain "standstill" provisions which generally will prevent it from purchasing outstanding shares of our common stock, making a tender offer or encouraging or supporting a third party tender offer, nominating a director whose nomination has not been approved by our board of directors, soliciting proxies in opposition to the recommendation of our board of directors or assisting a third party in taking such actions, entering into discussions with a third party as to such actions, or requesting or proposing in writing to our board of directors or any member thereof that we amend or waive any of these limitations. As a result, the ability of Celgene to act in contrary to our board of directors is severely limited and any attempts by Celgene to acquire us or encourage a third party to acquire us are prohibited by this voting and standstill agreement. In addition, subject to certain exceptions—including a vote in connection with a change in control of our company—Celgene has agreed to vote or execute a written consent with respect to all of our voting securities held by Celgene in accordance with the recommendation of our board of directors, limiting the ability of Celgene to contrary to our board of directors that you otherwise may believe is in your best interest as our stockholder.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a "target corporation" from engaging in any of a broad range of business combinations with any stockholder constituting an "acquiring person" for a period of five years following the date on which the stockholder became an "acquiring person."
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a
court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Complying with the laws and regulations affecting public companies has increased and will increase our costs and the demands on management and could harm our operating results.
As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also anticipate that we will incur costs associated with relatively recently adopted corporate governance requirements, including requirements of the SEC and NASDAQ. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
For example, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. Section 404 of the Sarbanes-Oxley Act ("Section 404") requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404, including the requirement that our independent registered public accounting firm undertake an assessment of our internal control over financial reporting, will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.
Our management team has broad discretion to use the net proceeds from the initial payments to us under our Celgene Collaboration Agreement and from the sale of our shares to Celgene and its investment of these proceeds may not yield a favorable return. We may invest the proceeds of the Celgene transaction in ways with which investors disagree.
Our management has broad discretion over the use of proceeds from the initial payments to us under our Celgene Collaboration Agreement and from the sale of our shares to Celgene, and we could spend the proceeds from these transactions in ways our stockholders may not agree with or that do not yield a favorable return, if at all. In addition, until the proceeds are used, they may be placed in investments that do not produce significant income or that may lose value. If we do not invest or apply the proceeds in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline.