UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2018
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number: 001-37923
CRISPR THERAPEUTICS AG
(Exact name of Registrant as specified in its charter)
Switzerland |
Not Applicable |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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Baarerstrasse 14 6300 Zug, Switzerland |
Not Applicable |
(Address of principal executive offices) |
(zip code) |
+41 (0)41 561 32 77
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
☐ |
Accelerated filer |
☒ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of November 1, 2018, there were 51,896,995 shares of registrant’s common shares outstanding.
CRISPR Therapeutics AG
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share data)
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As of |
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September 30, |
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December 31, |
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2018 |
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2017 |
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Assets |
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|||||||
Current assets: |
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Cash |
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$ |
487,295 |
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$ |
239,758 |
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Accounts receivable, including related party amounts of $457 and $821 as of September 30, 2018 and December 31, 2017, respectively |
|
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552 |
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2,626 |
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Prepaid expenses and other current assets, including related party amounts of $52 and $1,871 as of September 30, 2018 and December 31, 2017, respectively |
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8,841 |
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6,001 |
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Total current assets |
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496,688 |
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248,385 |
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Property and equipment, net |
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18,097 |
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18,857 |
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Intangible assets, net |
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303 |
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344 |
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Restricted cash |
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3,165 |
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3,154 |
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Other non-current assets |
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650 |
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|
606 |
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Total assets |
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$ |
518,903 |
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$ |
271,346 |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
5,221 |
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$ |
1,639 |
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Accrued expenses, including related party amounts of $234 and $0 as of September 30, 2018 and December 31, 2017, respectively |
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25,835 |
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11,361 |
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Accrued tax liabilities |
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24 |
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|
347 |
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Deferred rent |
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1,027 |
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1,027 |
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Other current liabilities |
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171 |
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137 |
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Total current liabilities |
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32,278 |
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14,511 |
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Deferred revenue non-current, including related party amounts of $0 and $91 as of September 30, 2018 and December 31, 2017, respectively |
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57,806 |
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56,928 |
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Deferred rent non-current |
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11,232 |
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11,761 |
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Other non-current liabilities |
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273 |
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314 |
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Total liabilities |
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101,589 |
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83,514 |
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Commitments and contingencies, see Note 5 |
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Shareholders’ equity: |
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Common shares, CHF 0.03 par value, 51,893,132 and 41,092,969 shares authorized at September 30, 2018 and December 31, 2017, respectively, 51,862,415 and 41,037,121 shares issued at September 30, 2018 and December 31, 2017, respectively, 51,554,479 and 40,592,248 shares outstanding at September 30, 2018 and December 31, 2017, respectively, 19,520,914 and 16,419,632 shares in conditional capital at September 30, 2018 and December 31, 2017, respectively. |
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1,575 |
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1,240 |
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Treasury shares, at cost, 307,936 and 444,873 shares at September 30, 2018 and December 31, 2017, respectively |
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(57 |
) |
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- |
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Additional paid-in capital |
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659,776 |
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312,018 |
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Accumulated deficit |
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(243,979 |
) |
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(125,440 |
) |
Accumulated other comprehensive income |
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(1 |
) |
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14 |
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Total shareholders' equity |
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417,314 |
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187,832 |
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Total liabilities and shareholders’ equity |
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$ |
518,903 |
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$ |
271,346 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited, in thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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Collaboration revenue (1) |
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$ |
563 |
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$ |
2,387 |
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$ |
3,009 |
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$ |
8,672 |
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Operating expenses: |
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Research and development (2) |
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39,820 |
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17,845 |
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84,972 |
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49,770 |
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General and administrative |
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10,175 |
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8,112 |
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31,752 |
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24,522 |
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Total operating expenses |
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49,995 |
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25,957 |
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116,724 |
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74,292 |
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Loss from operations |
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(49,432 |
) |
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(23,570 |
) |
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(113,715 |
) |
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(65,620 |
) |
Other (expense): |
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Loss from equity method investment |
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(1,012 |
) |
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(359 |
) |
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(3,256 |
) |
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(1,310 |
) |
Other income (expense), net |
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(130 |
) |
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(71 |
) |
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(101 |
) |
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(238 |
) |
Total other (expense), net |
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(1,142 |
) |
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(430 |
) |
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(3,357 |
) |
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(1,548 |
) |
Net loss before income taxes |
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(50,574 |
) |
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(24,000 |
) |
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(117,072 |
) |
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(67,168 |
) |
Provision for income taxes |
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(137 |
) |
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(707 |
) |
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(319 |
) |
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(1,330 |
) |
Net loss |
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(50,711 |
) |
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(24,707 |
) |
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(117,391 |
) |
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(68,498 |
) |
Foreign currency translation adjustment |
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(6 |
) |
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8 |
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(15 |
) |
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38 |
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Comprehensive loss |
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$ |
(50,717 |
) |
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$ |
(24,699 |
) |
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$ |
(117,406 |
) |
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$ |
(68,460 |
) |
Reconciliation of net loss to net loss attributable to common shareholders: |
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Net loss |
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$ |
(50,711 |
) |
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$ |
(24,707 |
) |
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$ |
(117,391 |
) |
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$ |
(68,498 |
) |
Net loss per share attributable to common shareholders—basic and diluted |
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$ |
(1.07 |
) |
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$ |
(0.62 |
) |
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$ |
(2.51 |
) |
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$ |
(1.72 |
) |
Weighted-average common shares outstanding used in net loss per share attributable to common shareholders—basic and diluted |
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47,391,988 |
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40,088,718 |
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46,709,388 |
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39,904,863 |
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(1) Including the following revenue from a related party, see Notes 6 & 10: |
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$ |
443 |
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$ |
1,249 |
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$ |
2,406 |
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$ |
3,888 |
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(2) Including the following research and development expense with a related party, see Notes 6 & 10: |
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$ |
418 |
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$ |
1,208 |
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$ |
2,770 |
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$ |
3,699 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
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Nine Months Ended September 30, |
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2018 |
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2017 |
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Operating activities: |
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Net loss |
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$ |
(117,391 |
) |
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$ |
(68,498 |
) |
Reconciliation of net loss to net cash and restricted cash used in operating activities: |
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Depreciation and amortization |
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2,574 |
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2,218 |
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Equity-based compensation |
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21,960 |
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11,894 |
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Unrealized foreign currency remeasurement loss |
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- |
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(9 |
) |
Loss from equity method investment |
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3,256 |
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1,310 |
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Expense related to ViaCyte transaction |
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15,109 |
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- |
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Other income, non-cash |
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(169 |
) |
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- |
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Changes in: |
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- |
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Accounts receivable |
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2,074 |
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(54 |
) |
Prepaid expenses and other assets |
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(2,502 |
) |
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(304 |
) |
Accounts payable and accrued expenses |
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7,982 |
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(2,979 |
) |
Deferred revenue |
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(270 |
) |
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2,043 |
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Deferred rent |
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(528 |
) |
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(903 |
) |
Other liabilities, net |
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38 |
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|
31 |
|
Net cash and restricted cash (used in) operating activities |
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(67,867 |
) |
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(55,251 |
) |
Investing activities: |
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Purchase of property and equipment |
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(1,773 |
) |
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(7,609 |
) |
Purchase of available for sale debt security |
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- |
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|
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(500 |
) |
Net cash and restricted cash (used in) investing activities |
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(1,773 |
) |
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(8,109 |
) |
Financing activities: |
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Proceeds from issuance of common shares, net of issuance costs |
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|
309,019 |
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- |
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Proceeds from exercise of options |
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|
8,241 |
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|
1,324 |
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Repurchase of common shares |
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(57 |
) |
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|
- |
|
Net cash provided by financing activities |
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|
317,203 |
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|
|
1,324 |
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Effect of exchange rate changes on cash |
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(15 |
) |
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|
39 |
|
Increase (decrease) in cash and restricted cash |
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|
247,548 |
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|
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(61,997 |
) |
Cash and restricted cash, beginning of period |
|
|
242,912 |
|
|
|
318,670 |
|
Cash and restricted cash, end of period |
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$ |
490,460 |
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$ |
256,673 |
|
Supplemental disclosure of non-cash investing and financing activities |
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|
|
|
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Costs for supplemental offering in accounts payable and accrued expenses |
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$ |
1,980 |
|
|
$ |
- |
|
Property and equipment purchases in accounts payable and accrued expenses |
|
$ |
- |
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|
$ |
118 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Organization and Operations
The Company
CRISPR Therapeutics AG (“CRISPR” or the “Company”) was formed on October 28, 2013 in Basel, Switzerland. The Company was established to translate CRISPR/Cas9, a genome editing technology, into transformative gene-based medicines for the treatment of serious human diseases. The foundational intellectual property underlying the Company’s operations was licensed to the Company and its subsidiaries in April 2014. The Company devotes substantially all of its efforts to product research and development activities, initial market development and raising capital. The Company’s principal offices are in Zug, Switzerland and operations are in Cambridge, Massachusetts.
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.
The Company had an accumulated deficit of $244.0 million as of September 30, 2018 and has financed its operations to date from proceeds obtained from its IPO, subsequent offerings of its common shares in January 2018 and September 2018, a series of preferred shares and convertible loan issuances, and upfront fees received under its collaboration and joint venture arrangements. The Company will require substantial additional capital to fund its research and development and ongoing operating expenses.
Liquidity
In January 2018, the Company completed an offering of 5,750,000 common shares, which were sold at a price to the public of $22.75 per share. This offering resulted in $122.6 million of net proceeds to the Company. In September 2018, the Company completed an offering of 4,210,526 common shares, which were sold at a price to the public of $47.50 per share. This offering resulted in $187.6 million of net proceeds to the Company. In addition, $3.1 million of stamp taxes on the issuance proceeds from the January and September offerings were recorded as an offset to additional paid in capital. The Company expects its cash of $487.3 million at September 30, 2018 to be sufficient to fund its current operating plan through at least the next 24 months. Thereafter, the Company will be required to obtain additional funding. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.
In August 2018, the Company entered into an At-The-Market (“ATM”) sales agreement with Jefferies LLC (“Jefferies”), under which it may offer and sell from time to time common shares having aggregate gross proceeds of up to $125.0 million. We have not yet issued or sold any securities under this sales agreement. We have incurred $0.2M in costs related to this sales agreement, which are included in other current assets as of September 30, 2018 and will be offset against future offering proceeds.
Unaudited Interim Financial Information
The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “Annual Report”).
2. Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies”, in the Annual Report. Significant changes to the Company’s accounting policies are discussed below:
Revenue Recognition
In May 2014, the Financing Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes existing revenue recognition guidance. The Company adopted ASU 2014-09 and its related amendments (collectively known as “ASC 606”) on January 1, 2018 using the modified
5
retrospective method, by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of equity at January 1, 2018. The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). The Company has elected a practical expedient and applied ASC 606 only to contracts that are not completed at the date of initial application.
ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. The Company’s revenue is from collaboration agreements. Within collaboration agreements, a counterparty may be a collaborator or partner that shares in the risks and benefits of developing a product to be marketed. These arrangements generally are in the scope of ASC 808, Collaborative Arrangements (“ASC 808”) yet may also contain vendor-customer aspects. Therefore, the Company considers all of the facts and circumstances to determine which transactions have a vendor-customer relationship that is subject to ASC 606. At the inception of each agreement the Company must determine which promised goods and services are under the scope of ASC 606 versus ASC 808 (discussed in the Collaborative Arrangements note below).
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps:
1) Identify the contract with the customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) the Company determines that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, the Company must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period for any changes. Determining the transaction price requires significant judgment, which is discussed in further detail for each of the Company’s contracts with customers in Note 6.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized over time if either 1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, 2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. Examples of control are using the asset to produce goods or services, enhance the value of other assets, settle liabilities, and holding or selling the asset. ASC 606 requires the Company to select
6
a single revenue recognition method for the performance obligation that faithfully depicts the Company’s performance in transferring control of the goods and services. The guidance allows entities to choose between two methods to measure progress toward complete satisfaction of a performance obligation:
|
1. |
Output methods - recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract (e.g. surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units of produced or units delivered); and |
|
2. |
Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. |
The Company has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (i.e. R&D services), as such the Company has elected a practical expedient to recognize revenue in the amount to which the entity has a right to invoice for such services.
The terms of the Company’s collaboration and license agreements contain multiple promised goods and services, which include options to license CRISPR/Cas9-based therapeutic products directed to specific targets, referred to as co-exclusive or exclusive licenses, joint steering committee participation, as well as research and development activities to be performed by the Company on behalf of the collaboration partner related to the licensed targets. Payments that the Company may receive under these agreements include nonrefundable upfront fees, payments for research activities, payments based upon the achievement of specified milestones and royalties on any resulting net product sales.
To date, the Company’s only source of revenue has been the collaboration and license and joint development and commercialization agreement with Vertex Pharmaceuticals, Incorporated (“Vertex”) as well as research and development services provided to Casebia Therapeutics LLP (“Casebia”) under the joint venture with Bayer HealthCare LLC (“Bayer”). Please refer to Note 6 for the specific accounting treatment and revenue recognized during the period for each of these arrangements.
Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company must consider the nature of the intellectual property to which the customer will have rights (i.e. access at a point in time or benefit of intellectual property enhancements over time). The Company recognizes revenue from non-refundable, up-front fees allocated to the license at a point in time/over the period the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Milestone payments: At the inception of each arrangement that includes development, regulatory or commercial milestone payments for promised goods and services, the Company evaluates the circumstances of whether the milestones will be reached and estimates the amount to be included in the transaction price that will not cause a significant revenue reversal. The Company will evaluate these types of payments for customer options once those options have been exercised. ASC 606 suggests two alternatives to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. The Company will use the most likely amount method for development and regulatory milestone payments. Management believes the most likely amount method is the better predictor as the Company expects to be entitled to only one of two possible amounts. Additionally, management believes that the most likely amount of milestone consideration is its stated amount. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is then allocated to performance obligations on a specific basis or on a relative stand-alone selling price basis. The Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates whether it is probable that a significant revenue reversal will not occur in future periods, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Up-front payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess
7
whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Contract Balances
The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as a receivable (i.e. accounts receivable). A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. The contract liabilities (i.e. deferred revenue) primarily relate to contracts where we have received payment but we have not yet satisfied the related performance obligations. The advance consideration received from customers for R&D services or licenses bundled with other promises is a contract liability, recorded as deferred revenue, until the underlying performance obligations are transferred to the customer. The change in deferred revenue from December 31, 2017 to September 30, 2018 is primarily related to the transition adjustment upon the adoption of ASC 606.
Costs to Obtain and Fulfill a Contract with Customer
The Company recognizes an asset related to incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The Company will recognize an asset from costs incurred to fulfill a contract only if such costs relate directly to a contract that the entity can specifically identify, the costs generate or enhance resources of the Company that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered. Any assets recognized related to costs to obtain or fulfill a contract are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.
Income Taxes
The adoption of ASC 606 resulted in a reduction of cumulative revenue as of January 1, 2018, which in turn generated additional deferred tax assets. As the Company fully reserves its net deferred tax assets in the jurisdictions impacted by the adoption of ASC 606, this impact was offset by a corresponding change to the valuation allowance.
Impact of Adopting ASC 606 on the Financial Statements
The Company adopted ASC 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. The Company elected to apply a practical expedient to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to the consolidated balance sheet as of January 1, 2018:
|
As Reported December 31, 2017 |
|
|
ASC 606 Adjustment |
|
|
Adjusted January 1, 2018 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
137 |
|
|
$ |
102 |
|
|
$ |
239 |
|
Total current liabilities |
|
$ |
14,511 |
|
|
$ |
102 |
|
|
$ |
14,613 |
|
Deferred revenue |
|
$ |
56,928 |
|
|
$ |
1,046 |
|
|
$ |
57,974 |
|
Total liabilities |
|
$ |
83,514 |
|
|
$ |
1,148 |
|
|
$ |
84,662 |
|
Accumulated deficit |
|
$ |
(125,440 |
) |
|
$ |
(1,148 |
) |
|
$ |
(126,588 |
) |
Total shareholders' equity |
|
$ |
187,832 |
|
|
$ |
(1,148 |
) |
|
$ |
186,684 |
|
Total liabilities and shareholders’ equity |
|
$ |
271,346 |
|
|
$ |
- |
|
|
$ |
271,346 |
|
8
Impact of New Revenue Guidance on Financial Statement Line Items
The following table compares the reported condensed consolidated balance sheet, statement of operations and cash flows, as of and for the three and nine months ended September 30, 2018, to the pro-forma amounts had the previous guidance been in effect:
|
|
As of September 30, 2018 |
|
|||||||||||
|
|
As Reported Under ASC 606 |
|
|
Adjustments |
|
|
Notes |
|
Adjusted Balance Under ASC 605 |
|
|||
Consolidated Balance Sheet Data (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
171 |
|
|
$ |
(102 |
) |
|
(5) |
|
$ |
69 |
|
Total current liabilities |
|
$ |
32,278 |
|
|
$ |
(102 |
) |
|
(5) |
|
$ |
32,176 |
|
Deferred revenue |
|
$ |
57,806 |
|
|
$ |
(794 |
) |
|
(1)(2)(3)(5) |
|
$ |
57,012 |
|
Total liabilities |
|
$ |
101,589 |
|
|
$ |
(896 |
) |
|
(1)(2)(3)(5) |
|
$ |
100,693 |
|
Accumulated deficit |
|
$ |
(243,979 |
) |
|
$ |
895 |
|
|
(1)(2)(3) |
|
$ |
(243,084 |
) |
Total shareholders' equity |
|
$ |
417,314 |
|
|
$ |
896 |
|
|
(1)(2)(3) |
|
$ |
418,210 |
|
Total liabilities and shareholders’ equity |
|
$ |
518,903 |
|
|
$ |
— |
|
|
(1)(2)(3) |
|
$ |
518,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
|||||||||||
Consolidated Statement of Operations Data (in thousands): |
|
As Reported Under ASC 606 |
|
|
Adjustments |
|
|
Notes |
|
Adjusted Balance Under ASC 605 |
|
|||
Collaboration revenue |
|
$ |
563 |
|
|
$ |
(57 |
) |
|
(2)(3) |
|
$ |
506 |
|
Loss from operations |
|
$ |
(49,432 |
) |
|
$ |
(57 |
) |
|
(2)(3) |
|
$ |
(49,489 |
) |
Net loss before income taxes |
|
$ |
(50,574 |
) |
|
$ |
(57 |
) |
|
(2)(3) |
|
$ |
(50,631 |
) |
Net loss |
|
$ |
(50,711 |
) |
|
$ |
(57 |
) |
|
(2)(3) |
|
$ |
(50,768 |
) |
Comprehensive loss |
|
$ |
(50,717 |
) |
|
$ |
(57 |
) |
|
(2)(3) |
|
$ |
(50,774 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|||||||||||
Consolidated Statement of Operations Data (in thousands): |
|
As Reported Under ASC 606 |
|
|
Adjustments |
|
|
Notes |
|
Adjusted Balance Under ASC 605 |
|
|||
Collaboration revenue |
|
$ |
3,009 |
|
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
2,757 |
|
Loss from operations |
|
$ |
(113,715 |
) |
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
(113,967 |
) |
Net loss before income taxes |
|
$ |
(117,072 |
) |
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
(117,324 |
) |
Net loss |
|
$ |
(117,391 |
) |
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
(117,643 |
) |
Comprehensive loss |
|
$ |
(117,406 |
) |
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
(117,658 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(117,391 |
) |
|
$ |
(252 |
) |
|
(2)(3) |
|
$ |
(117,643 |
) |
Reconciliation of net loss to net cash and restricted cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
(270 |
) |
|
$ |
354 |
|
|
(1)(2)(3)(4)(5) |
|
$ |
84 |
|
Other liabilities, net |
|
$ |
38 |
|
|
$ |
(102 |
) |
|
(1)(2)(3)(4)(5) |
|
$ |
(64 |
) |
Net cash and restricted cash (used in) operating activities |
|
$ |
(67,867 |
) |
|
$ |
— |
|
|
|
|
$ |
(67,867 |
) |
Increase (decrease) in cash and restricted cash |
|
$ |
247,548 |
|
|
$ |
— |
|
|
|
|
$ |
247,548 |
|
Cash and restricted cash, end of period |
|
$ |
490,460 |
|
|
$ |
— |
|
|
|
|
$ |
490,460 |
|
9
|
(1) |
Adjustment of $1,148 to reverse the ASC 606 transition adjustment from retained earnings and deferred revenue. |
|
(2) |
Adjustment of $31 and $175 for the three and nine months ended September 30, 2018, related to R&D services that would be deferred under ASC 605 versus recognized as invoiced under ASC 606. |
|
(3) |
Adjustment of $26 and $77 for the three and nine months ended September 30, 2018, related to non-exclusive research license revenue that would be recognized upon option exercise under ASC 605 versus recognized overtime under ASC 606. |
|
(4) |
Adjustment to reverse the ASC 606 transition adjustment to retained earnings and deferred revenue netted to zero as the transaction did not impact cash. |
|
(5) |
Adjustment to reclassify $102 from deferred revenue to other current liabilities (current deferred revenue) related to the change in revenue allocated to the non-exclusive research license recognized upon option exercise under ASC 605 versus ratably over time under ASC 606. |
Collaboration Arrangements
The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC 808. Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities, are recorded as collaborative arrangements. The Company considers the guidance in ASC 606 in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants.
The Company evaluates the proper presentation of the commercial activities and the profit and loss sharing associated with the collaboration agreements. ASC 808 states that when payments between parties in a collaborative arrangement are not within the scope of other authoritative accounting literature, the income statement classification should be based on the nature of the arrangement, the nature of its business operations and the contractual terms of the arrangement. To the extent that these payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments shall be based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election.
New Accounting Pronouncements - Recently Adopted
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date.
Financial Instrument Accounting
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The new standard amends certain aspects of accounting and disclosure requirements of financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in the results of operations. The new standard was effective January 1, 2018. The Company adopted ASU 2016-01 in the first quarter of 2018. The adoption of this guidance did not have a material impact on the Company's financial position and results of operations.
Income Taxes
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (“ASU 2016-16”): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes. The amendments in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. The Company adopted ASU 2016-16 in the first quarter of 2018. The adoption of this guidance did not have a material impact on the Company's financial position and results of operations.
Statement of Cash Flows
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending balances
10
shown on the statement of cash flows. The Company adopted ASU 2016-18 retrospectively in the first quarter of 2018 and the change in accounting principle is reflected in the statements of cash flows for the nine months ended September 30, 2018 and 2017 accordingly. The adoption of this guidance did not have a material impact on the Company's financial position and results of operations.
Business Combinations
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”). ASU 2017-01 clarifies whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The purpose of the guidance is to narrow the definition of a business at it relates to recording transactions as business acquisitions or asset acquisitions. The Company adopted ASU No. 2017-01 in the first quarter of 2018. The adoption of this guidance did not have a material impact on the Company's financial position and results of operations.
Stock Compensation
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (“ASU 2017-09”): Scope Modification Accounting. The new standard is intended to reduce the diversity in practice and cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The Company adopted ASU No. 2017-09 in the first quarter of 2018. The adoption of this guidance did not have a material impact on the Company's financial position and results of operations.
In June 2018, the FASB issued ASU No. 2018-07, Stock Compensation (“ASU 2018-07”) which provides improvements to nonemployee share-based payment accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. The scope of ASC 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees) is expanded to include share-based payments issued to nonemployees for goods or services. ASC 505-50, Equity-Equity-Based payments to Non-Employees is superseded and consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The Company early adopted this standard on a prospective basis on July 1, 2018. As a result of adopting this standard, the fair value of outstanding nonemployee awards as of June 30, 2018 will no longer be remeasured each reporting period. All future expense related to these awards will be recorded based on the fair value measured as of June 30, 2018, the last period prior to the adoption of ASU 2018-07. The adoption of this guidance did not have a material impact of the Company’s consolidated financial statements.
New Accounting Pronouncements - to be adopted in future periods
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases and will require lessees to record most leases on the balance sheet but recognize expense in a manner similar to the current standard. In July 2018, the FASB also issued ASU No. 2018-11, Codification Improvements to Topic 842, Leases (“ASU 2018-11”), which clarifies and corrects narrow aspects of the guidance issued in ASU 2016-02. ASU 2016-02 and 2018-11 are effective for fiscal years beginning after December 15, 2018 and interim periods within those years, first of which is the year ending December 31, 2019 for the Company. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company’s project team has reviewed its portfolio of existing leases and current accounting policies to identify and assess the potential differences that would result from applying the requirements of the new standard. The Company anticipates that the amended guidance will result in the recognition of additional right of use assets and corresponding liabilities on its condensed consolidated balance sheets. The Company is also in the process of implementing appropriate changes to its controls to support lease accounting and related disclosures under the new standard.
Net Loss Per Share Attributable to Common Shareholders
Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common shareholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method.
11
The following common share equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in common stock equivalent shares):
|
As of |
|
|||||
September 30, 2018 |
|
|
September 30, 2017 |
|
|||
Outstanding options |
|
6,698,579 |
|
|
|
5,778,629 |
|
Unvested restricted common shares |
|
178,884 |
|
|
|
64,277 |
|
Total |
|
6,877,463 |
|
|
|
5,842,856 |
|
Basis of Presentation and Use of Estimates
The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, and include the accounts of (i) the Company, and (ii) its wholly-owned subsidiaries, CRISPR Therapeutics Ltd., CRISPR Therapeutics Inc., and TRACR Hematology Inc. All intercompany accounts and transactions have been eliminated. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and ASUs of the FASB. The Company accounts for its 50% interest in Casebia under the equity method of accounting. See Note 6 for further details.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, equity-based compensation expense, revenue recognition, equity method investments, fair value of intangible assets, the provision for or benefit from income taxes and reported amounts of research and development expenses during the period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. The consolidated statements reflect all adjustments which are of a normal recurring nature necessary for presentation. Actual results may differ from those estimates or assumptions.
3. Property and Equipment, net
Property and equipment, net, consists of the following (in thousands):
|
|
As of |
|
|||||
|
September 30, |
|
|
December 31, |
|
|||
|
|
2018 |
|
|
2017 |
|
||
Computer equipment |
|
$ |
405 |
|
|
$ |
285 |
|
Furniture, fixtures, and other |
|
|
2,240 |
|
|
|
2,104 |
|
Laboratory equipment |
|
|
7,993 |
|
|
|
6,603 |
|
Leasehold improvements |
|
|
13,776 |
|
|
|
13,776 |
|
Construction work in process |
|
|
127 |
|
|
|
- |
|
|
|
|
24,541 |
|
|
|
22,768 |
|
Accumulated depreciation |
|
|
(6,444 |
) |
|
|
(3,911 |
) |
Property and equipment, net |
|
$ |
18,097 |
|
|
$ |
18,857 |
|
Depreciation expense for the three and nine months ended September 30, 2018 was $0.8 million and $2.5 million, respectively. Depreciation expense for the three and nine months ended September 30, 2017 was $0.8 million and $2.2 million, respectively.
12
Accrued expenses consist of the following (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2018 |
|
|
2017 |
|
||
Payroll and employee-related costs |
|
$ |
5,353 |
|
|
$ |
5,550 |
|
Research costs |
|
|
6,830 |
|
|
|
2,285 |
|
Licensing fees |
|
|
144 |
|
|
|
609 |
|
Professional fees |
|
|
2,397 |
|
|
|
2,176 |
|
Intellectual property costs |
|
|
1,505 |
|
|
|
500 |
|
ViaCyte collaboration agreement |
|
|
7,609 |
|
|
|
- |
|
Other |
|
|
1,997 |
|
|
|
241 |
|
Total |
|
$ |
25,835 |
|
|
$ |
11,361 |
|
5. Commitments and Contingencies
Research Agreements and Manufacturing Agreements
The Company has engaged several research institutions and companies to identify new delivery strategies and applications of the CRISPR/Cas9 technology and has sponsored research programs. In association with these arrangements, the Company has remaining commitments for related research and development services of $0.8 million through 2020.
The Company is also a party to a number of research license agreements which require significant upfront payments, future royalty payments and potential milestone payments from time to time. In association with these agreements, the Company has committed to making payments for related research and development services of $1.0 million through 2020. In connection with these agreements, during the three and nine months ended September 30, 2018, the Company has made payments of $0.3 million and of $1.4 million, respectively. In connection with these agreements, during the three and nine months ended September 30, 2017, the Company has made payments of $0.4 million and of $2.1 million, respectively.
The Company is a party to a number of manufacturing agreements that require upfront payments for the future performance of services. In connection with these agreements, the Company has made upfront payments and recorded $2.4 million as prepaid expenses on the condensed consolidated balance sheet as of September 30, 2018. The Company will amortize the prepaid balance as services are performed.
Litigation
The Company licenses a U.S. patent application from Emmanuelle Charpentier (as described in more detail in this Quarterly Report on Form 10-Q) that is currently subject to interference proceedings declared by the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. Following motions by the parties and other procedural matters, the PTAB concluded in February 2017 that the declared interference should be dismissed because the claim sets of the two parties were not directed to the same patentable invention in accordance with the PTAB’s two-way test for patent interferences. In April 2017, Dr. Charpentier, the regents of the University of California (“UC”), and the University of Vienna (collectively “UC”) appealed the PTAB decision to the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”). In the appeal, UC asked the court to review and reverse of the PTAB’s February 2017 decision, which terminated the interference without determining which inventors actually invented the use of the CRISPR/Cas9 genome editing technology in eukaryotic cells. The Federal Circuit conducted a hearing on the appeal on April 30, 2018. On September 10, 2018, the Federal Circuit affirmed the PTAB’s decision to terminate the interference proceeding.
In February 2018, several parties filed oppositions in the European Patent Office to the grant of the Company’s in-licensed European patent. Opposition proceedings can lead to the revocation of a patent in its entirety; the maintenance of the patent as granted, or the maintenance of a patent in amended form. Opposition proceedings typically take years to resolve, including the time taken by appeals that can be filed by any of the parties. The Company cannot guarantee the outcome of the oppositions to its in-licensed European patent, and an adverse result could preclude the Company from enforcing its rights in Europe against third parties.
On December 15, 2016, the Company entered into a Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement (the “Invention Management Agreement”) with the University of California, University of Vienna, Dr. Emmanuelle Charpentier, Intellia Therapeutics, Inc. Caribou Biosciences, Inc., ERS Genomics Ltd. and TRACR Hematology Ltd. Under the Invention Management Agreement, the Company is obligated to share costs related to patent maintenance, defense and
13
prosecution. During the three and nine months ended September 30, 2018, the Company incurred $0.5 million and $1.6 million, respectively, in shared costs. During the three and nine months ended September 30, 2017, the Company incurred $0.1 million, and $1.1 million, respectively, in shared costs. The Company recorded accrued legal costs from the cost sharing of $1.4 million and $0.4 million as of September 30, 2018 and December 31, 2017, respectively. The Company is unable to predict the outcome of these matters and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.
6. Significant Contracts
Collaboration Agreement with and Joint Development Agreement with Vertex Pharmaceuticals, Incorporated
Summary of Agreement
On October 26, 2015, the Company entered into a strategic collaboration, option, and license agreement (as may be amended from time to time, “Collaboration Agreement”) with Vertex, focused on the use of CRISPR’s gene editing technology, known as CRISPR/Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. On December 12, 2017, the Company and Vertex entered into Amendment No. 1 to the Collaboration Agreement (the “Amendment”) and the Joint Development Agreement (the “JDA”). The Amendment, among other things, modified certain definitions and provisions of the Collaboration Agreement to make them consistent with the JDA and clarified how many options are exercised (or deemed exercised) in connection with certain targets specified under the Collaboration Agreement. The Amendment also amended other provisions of the Collaboration Agreement, including the expiration terms of the Collaboration Agreement.
In connection with the Collaboration Agreement, Vertex made a nonrefundable upfront payment of $75.0 million. Under the Collaboration Agreement, Vertex will fund all of the discovery activities conducted pursuant to the agreement while retaining options to co-exclusive and exclusive licenses. In December 2017, upon execution of the JDA and Amendment, Vertex exercised its option to obtain a co-exclusive license to develop and commercialize hemoglobinopathy and beta-globin targets. As such, for potential hemoglobinopathy treatments, including treatments for sickle cell disease, the Company and Vertex will share equally all research and development costs and worldwide revenues. For other targets that Vertex elects to license, Vertex will lead all development and global commercialization activities. For each of up to four remaining targets that Vertex elects to license, the Company has the potential to receive up to $420.0 million in development, regulatory and commercial milestones and royalties on net product sale.
In connection with entering into the JDA, the Company received a $7.0 million up-front payment from Vertex and is eligible for a one-time low seven-digit milestone payment upon the dosing of the second patient in a clinical trial with the initial product candidate. The net profits and net losses, as applicable, incurred under the JDA will be shared equally between the Company and Vertex.
Accounting for the Collaboration Agreement, Amendment and JDA
As the overall arrangement was modified in December 2017, the Company applied the practical expedient in ASC 606-10-65-1 in identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price under the practical expedient in ASC 606.
The arrangement includes components of a customer-vendor relationship and a collaborative arrangement as defined under ASC 808. The Company will apply the guidance of ASC 606 by analogy to the vendor-customer performance obligations of the Collaboration Agreement and the performance obligations of the JDA subject to ASC 606 as outlined below. The Company will apply the guidance of ASC 808 to those elements in which there is a collaboration relationship in which both parties share equally in the risks and rewards of the research and development which include (i) development and commercialization services for currently identified shared products; (ii) R&D services for any follow-on products subject to the JDA; and (iii) committee participation.
The Company evaluated the Collaboration Agreement, Amendment and JDA in accordance with the provisions of ASC 606. The Company identified the following performance obligations: (i) the non-exclusive research license; (ii) four material rights representing the option for up to four exclusive licenses to develop and commercialize the collaboration targets; (iii) a combined performance obligation representing the co-exclusive research license, and a development and commercialization license to develop and commercialize hemoglobinopathies and beta-globin targets; and (iv) the performance of R&D Services.
The selling price of each performance obligation was determined based on the Company’s estimated standalone selling price (the “ESSP”). The Company developed the ESSP for all the performance obligations included in the Collaboration Agreement and JDA with the objective of determining the price at which it would sell such an item if it were to be sold regularly on a standalone basis. The ESSP for material rights was determined based on the incremental discount given to Vertex based on the ESSP of the four remaining exclusive licenses and the exercise price paid at the time of exercise.
14
The Company developed the ESSP for the R&D Services primarily based on the nature of the services to be performed and estimates of the associated effort and cost of the services, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts. The Company’s ESSP for the satisfied and unsatisfied R&D Services was $19.3 million.
The Company’s ESSP for each of the remaining material rights to obtain an exclusive license to develop and commercialize a single collaboration target are $45.6 million, $38.4 million, $17.3 million and $17.3 million for a total of $118.6 million. ESSPs for these items were determined based on probability and present value adjusted cash flows from the milestones payments owed for exclusive licenses outlined in the Collaboration Agreement less the price paid to exercise the material right option. ESSP reflects the level of risk and expected probability of success inherent in the nature of the associated research area.
The Company’s ESSP for the co-exclusive research license and the development and commercialization licenses for of the hemoglobinopathy and beta-globin targets is $48.9 million. ESSP for this item was determined based on probability and present value adjusted cash flows from the equal sharing of projected worldwide net profit or net loss. ESSP reflects the level of risk and expected probability of success inherent in the nature of the associated research area.
The Company used a market-based approach to determine the ESSP of the non-exclusive research license of $1.0 million. The Company determined ESSP by use of comparative data, including in-licensed research agreements negotiated and executed within the Company.
As the Company has a right to consideration from Vertex in an amount that corresponds directly with the value of the Company’s performance completed to date for the R&D services, thus the Company will recognize revenue related to the R&D services as invoiced, in line with the practical expedient in ASC 606-10-55-18.
The transaction price is comprised of: (i) original upfront payment of $75.0 million, (ii) an upfront payment of $7.0 million under the JDA, and (iii) $19.3 million of variable consideration associated with the R&D services. The R&D services revenue will be recognized as invoiced and specifically allocated to the R&D services performance obligation. The remaining transaction price of $82.0 million was allocated among the performance obligations using the relative selling price method as follows: (i) a non-exclusive research license: $0.5 million; (ii) a material right to discounts for exclusive licenses for up to four Collaboration Targets: $22.2 million, $18.7 million, $8.4 million and $8.4 million for a total of $57.7 million; and (iii) co-exclusive development and commercialization licenses for hemoglobinopathy and beta-globin targets identified in the JDA and co-exclusive research license for the follow-on products: $23.8 million.
The Company determined that the non-exclusive research license is symbolic intellectual property as Vertex receives value from the license through the Company’s ongoing activities, as such, the revenue related to the non-exclusive research license is recognized ratably over the term of the arrangement. Upon the execution of the JDA, a co-exclusive research, development and commercialization license was granted for hemoglobinopathy and beta-globin targets. The Company determined that the revenue related to these licenses was recognized at a point in time, in which they were delivered at inception of the JDA in December 2017. As Vertex has material right in its option to obtain four additional exclusive licenses to develop and commercialize four additional collaboration targets, the Company determined that consideration allocated to these material rights would be included in the transaction price of the exclusive license and recognized at a point in time, upon the exercise of the option by Vertex or expiration.
Milestones under the Collaboration Agreement
The Company has evaluated all of the milestones that may be received in connection with the Collaboration Agreement and JDA. The first potential milestone the Company will be entitled to receive is the milestone in the JDA to receive a one-time low seven-digit milestone payment in any clinical trial in the initial shared product and is currently fully constrained. The remaining milestones are predominately related to the development and commercialization of a product resulting from the arrangement and are payable with respect to each selected exclusive license which have yet to be exercised and are not currently included in the determination of the transaction price. Each milestone is payable only once per collaboration target, regardless of the number of products directed to such collaboration target that achieve the relevant milestone event. There are nine remaining clinical development and regulatory approval milestones which may trigger proceeds of up to $90.0 million and $235.0 million, respectively, for each selected exclusive license, and two commercial milestones which may trigger proceeds of up to $75.0 million for each selected exclusive license (which, when combined with the $10.0 million due upon exercise of the exclusive option and the $10.0 million development milestone associated with an Investigational New Drug- enabling application, total $420.0 million for each selected Exclusive License), as follows:
Developmental Milestone Events
|
1. |
Initiation of the first Clinical Trial of a Product |
15
|
3. |
Initiation of the first Phase 3 Clinical Trial of a Product |
|
4. |
Acceptance of Approval Application by the U.S. Food and Drug Administration for a Product |
|
5. |
Acceptance of Approval Application by the European Medicines Agency for a Product |
|
6. |
Acceptance of Approval Application by a Regulatory Authority in Japan for a Product |
|
7. |
Marketing Approval in the U.S. for a Product |
|
8. |
Marketing Approval in the EU for a Product |
|
9. |
Marketing Approval in Japan for a Product |
Commercial Milestone Events
|
1. |
Annual Net Sales for Products with respect to a Collaboration Target exceed $500 million; and |
|
2. |
Annual Net Sales for Products with respect to a Collaboration Target exceed $1.0 billion |
There is uncertainty that the events to obtain the developmental milestones will be achieved given the nature of clinical development and the stage of the CRISPR/Cas9 technology. Upon exercise of the exclusive license options, developmental milestones will be constrained until the Company is sure that a significant revenue reversal will not occur. Commercial milestones and royalties relate predominantly to a license of intellectual property and are determined by sales or usage-based thresholds. The commercial milestones and royalties will be accounted for under the royalty recognition constraint and will be accounted for as constrained variable consideration. The Company will apply the royalty recognition constraint for each commercial milestone and will not recognize revenue for each until the subsequent sale of a licensed product (achievement of each) occurs.
Collaborative elements
The Company evaluated the Collaboration Agreement, Amendment and JDA in accordance with the provisions of ASC 808. The Company identified the following elements of ASC 808: (i) development and commercialization services for shared products; (ii) R&D services for follow-on products; and (iii) committee participation.
The Company evaluated that the nature of the arrangement and determined the arrangement is a cost/profit sharing arrangement and not a revenue arrangement. Therefore, the related impact of the cost sharing associated with research and development will be included in R&D expense. Expenses related to services performed by the Company will be classified as R&D expense. Payments received from Vertex for partial reimbursement of expenses are recorded as a reduction of R&D expense.
During the three and nine months ended September 30, 2018, the Company recognized $0.1 million and $0.5 million of revenue related to the collaboration with Vertex, respectively. During the three and nine months ended September 30, 2017, the Company recognized $1.2 million and $4.8 million of revenue related to the collaboration with Vertex, respectively. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and nine months ended September 30, 2018 was $0.1 million and $0.5 million, respectively. Research and development expense incurred by the Company in relation to its performance under the Collaboration Agreement for the three and nine months ended September 30, 2017 was $2.1 million and $8.0 million, respectively. Research and development expense incurred by the Company in relation to its performance under the JDA for the three and nine months ended September 30, 2018 was $8.7 million and $24.9 million, respectively. Reimbursements from Vertex under the JDA for the three and nine months ended September 30, 2018 was $3.7 million and $10.4 million, respectively. As of September 30, 2018, and December 31, 2017, there was $57.8 million and $56.8 million of non-current deferred revenue related to the Collaboration Agreement, respectively. The transaction price allocated to the remaining performance obligations is $57.9 million. The remaining performance obligations will be recognized as follows: four material rights to obtain an exclusive commercialization and development license at a point in time, upon exercise; and the non-exclusive research license ratably over/within the remaining two-and-a-half-year research term. As of September 30, 2018, the remaining amount to be recognized for the non-exclusive research license is not significant. R&D services will be recognized as invoiced under the practical expedient and are not disclosed within the remaining performance obligation balance. Reported amounts for 2018 are reflective of accounting under ASC 606 and amounts for 2017 are reflective of accounting under ASC 605 and therefore may not be comparable.
16
Joint Venture with Bayer Healthcare LLC
On December 19, 2015, the Company entered into an agreement with Bayer, to establish a joint venture (“Bayer Joint Venture”) to focus on the research the development of new therapeutics to cure blood disorders, blindness, and congenital heart disease. On February 12, 2016, the Company and Bayer completed the formation of the joint venture entity, Casebia, a limited liability partnership formed in the United Kingdom. Bayer and the Company each received a 50% equity interest in the entity in exchange for their respective contributions to the entity. The Company contributed $0.1 million in cash and licensed its proprietary CRISPR/Cas9 gene editing technology and intellectual property for selected disease indications. Bayer contributed its protein engineering expertise and relevant disease know-how.
Under the agreement, Casebia has paid the Company $35.0 million in exchange for a worldwide, exclusive license to commercialize the Company’s CRISPR/Cas9 technology specifically for the indications covered by the license. There are no milestone, royalties or other payments due to the Company under this aspect of the agreement. The Company determined that the contribution of the CRISRP/Cas9 technology by license to Casebia did not meet the definition of a business under ASC 805.
The Company also entered into a separate services agreement with Casebia, under which the Company agreed to provide compensated research and development services.
Concurrent with the execution of the Bayer Joint Venture agreement, the Company also issued a convertible note to Bayer BV (the “Bayer Convertible Loan”) for gross proceeds of $35.0 million which was immediately converted to the Company’s Series B Preferred Shares at a conversion price of $13.43 per share. Concurrent with the Company’s initial public offering in October 2016, the Company issued and sold 2,500,000 common shares to Bayer BV, at the public offering price of $14.00 per share, resulting in aggregate net proceeds of $35.0 million.
As the agreements relating to the Bayer Joint Venture (including the CRISPR/Cas9 technology license and the research and development services) and the Bayer Convertible Loan were executed at the same time, the Company determined that the contracts should be combined and evaluated as a single arrangement. Additionally, the Company also determined that ASC 845, Nonmonetary Transactions (“ASC 845”) did not apply to this arrangement given the Company’s significant continuing involvement with Casebia and the amount of cash involved in the arrangement. As a result, the Company analogized to the guidance within ASC 606 regarding the allocation of arrangement consideration, however elements under transaction that were not in the scope of ASC 606 were accounted for under accounting literature based on the allocated arrangement consideration.
The Company determined the total consideration to be allocated to various elements of the transaction includes (i) the total cash payment by Casebia for the technology access fee, net of the Company’s $0.1 million contribution, of $34.9 million, (ii) the fair value of the equity interest in the Joint Venture of $36.4 million, (iii) the $35.0 million received from the issuance of the Bayer Convertible Loan, and (iv) $6.3 million of estimated cash consideration to be received under the research and development service arrangement, accumulating to $112.6 million.
The Company identified the following performance obligations in the combined transaction:
(i) Combined element of an exclusive, worldwide, royalty free, license to the CRISPR/Cas9 technology specifically for the indications designated by Casebia, and delivery of the consents of the assignors of the underlying patents to the technology to develop, manufacture, and commercialize licensed products under that license
(ii)Research and development services, and
The Company also identified the issuance of the Bayer Convertible Loan as another element to be accounted for under ASC 470, Debt.
The Company allocated consideration to the performance obligations and other elements based on the relative proportion of their standalone selling prices. The Company determined the standalone selling price of the license was $71.4 million based on the consideration paid and the fair value of the 50% interest in Casebia, which was determined utilizing discounted cash flows based on reasonable estimates and assumptions of cash flows expected from Casebia. The standalone selling prices of the separate research and development services was determined to be $6.3 million and of the fair value of the Bayer Convertible Loan was determined to be $24.5 million, based on the fair value of the underlying preferred shares that were exchanged as part of the immediate conversion. Using a relative standalone selling price allocation, the Company allocated the aggregate arrangement consideration paid as follows:
(i) $79.1 million was allocated to the license and patent holder consent combined element;
(ii)$27.2 million was allocated to the Bayer Convertible Loan.
17
The difference between combined above amounts of $106.3 million and the total transaction price of $112.6 million is due to variable consideration of $6.3 million associated with the research and development service arrangement. The amount of the transaction price related to the research and development services ($6.3 million) will be allocated specifically to the research and development performance obligation under the right to invoice practical expedient in ASC 606-10-55-18.
The combined amount attributed to the license and patent holder consent element of $79.1 million was recognized as other income for the year ended December 31, 2016.
During 2016, the Company recorded an equity method investment of $36.5 million equal to the fair value of the Company’s interest in Casebia (which was included in the allocable arrangement consideration described above). During 2016, the Company recorded unrealized equity method losses of up to the remaining amount of the $36.5 million investment.
The R&D services are the only remaining performance obligations as of September 30, 2018.
At September 30, 2018 and December 31, 2017, the value of the Company’s equity method investment in Casebia was zero.
Collaborative elements
The Company also participates in cost sharing activities with Casebia with respect to shared research and technology licenses with other vendors. The Company evaluated that the nature of the activity and determined the arrangement is a cost/profit sharing arrangement and not a revenue arrangement. Therefore, the related impact of the cost sharing is included in R&D expense. The Company received reimbursements of $0.0 and $0.9 million for both research and license agreements during the three and nine months ended September 30, 2018, respectively, which was recorded as a reduction of R&D expense in the income statement. The Company received reimbursements of $0.4 million and $2.1 million for both research and license agreements during the three and nine months ended September 30, 2017, respectively.
Collaboration Revenue
During the three and nine months ended September 30, 2018, the Company recognized $0.4 million and $2.4 million of revenue, respectively, related to the collaboration with Casebia. During the three and nine months ended September 30, 2017, the Company recognized $1.2 million and $3.9 million of revenue, respectively, related to the collaboration with Casebia. Amounts for 2018 are reflective of accounting under ASC 606 and amounts for 2017 are reflective of accounting under ASC 605 and therefore may not be comparable. During the three and nine months ended September 30, 2018, the Company recognized $0.4 million and $2.8 million of research and development expense, respectively, in relation to its performance under the agreement. During the three and nine months ended September 30, 2017, the Company recognized $1.2 million and $3.7 million of research and development expense, respectively, in relation to its performance under the agreement. During the three and nine months ended September 30, 2018, the Company recognized $1.0 million and $3.3 million, respectively, of stock-based compensation expense related to Casebia employees. During the three and nine months ended September 30, 2017, the Company recognized $0.4 million and $1.3 million, respectively, of stock-based compensation expense related to Casebia employees. Deferred revenue related to the Company’s collaboration with Casebia was zero and $0.1 million as of September 30, 2018 and December 31, 2017, respectively. Unrecognized equity method losses in excess of the Company’s equity investment in Casebia was $38.8 million and $21.2 million as of September 30, 2018 and December 31, 2017, respectively.
Total operating expenses of Casebia for the three and nine months ended September 30, 2018 was $12.8 million and $39.1 million, respectively. Total net loss of Casebia for the three and nine months ended September 30, 2018 was $12.6 million and $38.4 million, respectively. Total operating expenses, and net loss of Casebia for the three and nine months ended September 30, 2017 was $10.2 million and $24.7 million, respectively.
Collaboration Agreement with ViaCyte, Inc.
On September 17, 2018, the Company entered into a research collaboration agreement ("ViaCyte Collaboration Agreement") with ViaCyte, Inc. (“ViaCyte”) focused on the discovery, development, and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes. Under the terms of the ViaCyte Collaboration Agreement, the Company and ViaCyte will jointly seek to develop an immune-evasive stem cell line as a first step on the path to an allogeneic stem-cell derived product. Upon successful completion of these studies and identification of a product candidate, the parties will jointly assume responsibility for further development and commercialization worldwide.
18
Upon execution of the agreement, ViaCyte was entitled to receive $15.0 million from the Company that will be paid in two installments in either cash or in common shares at the Company’s election. On September 24, 2018, the Company issued 165,636 common shares to ViaCyte which had a fair value of $7.5 million. The remaining amount will be paid in common shares or cash upon the close of market on the first business day after the Company files this Quarterly Report on Form 10-Q for the three and nine months ending September 30, 2018. The agreement includes certain provisions such that in the event ViaCyte sells shares received from the Company for less than $15.0 million in combined net proceeds, the Company will pay ViaCyte the deficient amount. In the event ViaCyte sells shares received from the Company for greater than $15.0 million in combined net proceeds, ViaCyte will pay the Company the surplus amount. Each party is responsible for certain research and development activities under the agreement and will be responsible for the respective costs of those activities. ViaCyte has the option, under certain circumstances, to receive an additional $10.0 million from the Company in the form of a convertible promissory note at fair value. The ViaCyte Collaboration Agreement may remain in force for up to six years.
The Company determined that the upfront payment of $15.0 million was for intellectual property which did not have an alternative future use, and as a result, the Company recorded the full amount as research and development expense upon execution of the agreement. The Company determined that upon issuing the 165,636 shares on September 24, 2018, there was an outstanding embedded derivative due to the provisions which require the Company and ViaCyte to settle the deficient or surplus amount. As of September 30, 2018, there was an outstanding derivative liability with a fair value of $0.1 million. The fair value of the derivative is determined based on the price of the Company’s common stock and is considered a level 2 fair value instrument. The change in fair value of $0.1 million is included in other expense for the period ended September 30, 2018. The Company’s total liability to ViaCyte was $7.6 million as of September 30, 2018 which is recorded in accrued expenses on the balance sheet.
Subsequent to September 30, 2018, ViaCyte sold the remainder of the shares issued September 24, 2018. The aggregate net proceeds from all shares issued September 24, 2018 was $6.9 million. As a result, the fair value of the remaining amount due to ViaCyte is $8.1 million, which will be paid in either cash or shares. Subsequent to September 30, 2018, the Company will recognize an additional loss of $0.5 million resulting from the change in fair value of the derivative liability ascribed to the shares issued September 24, 2018.
7. Share Capital
The Company had 51,893,132 registered common shares as of September 30, 2018, with a par value of CHF 0.03 per share, which includes 30,717 shares of unvested unissued restricted common shares and 307,936 treasury shares which are legally outstanding but not considered outstanding for accounting purposes.
Conditional Capital Reserved for Future Issuance
The Company had the following conditional capital reserved for future issuance:
|
|
As of |
|
|||||
Conditional Capital |
|
September 30, 2018 |
|
|
December 31, 2017 |
|
||
Unvested unissued restricted stock |
|
|
— |
|
|
|
166,667 |
|
Outstanding stock options |
|
|
6,698,579 |
|
|
|
6,262,339 |
|
Reserved for future issuance under stock option plans (1) |
|
|
7,489,409 |
|
|
|
4,657,700 |
|
Shares available for bonds and similar debt instruments |
|
|
4,919,700 |
|
|
|
4,919,700 |
|
Shares available for employee purchase plans |
|
|
413,226 |
|
|
|
413,226 |
|
Total |
|
|
19,520,914 |
|
|
|
16,419,632 |
|
(1) |
The Company’s Board of Directors and shareholders approved an increase in the number of common shares reserved for issuance under the Company’s Amended and Restated 2016 Stock Option and Incentive Plan of 2,012,684 shares in May 2017, and the Company’s Board of Directors approved an additional increase to the number of common shares reserved for issuance under the Company’s 2018 Stock Option and Incentive Plan of an additional 4,000,000 shares in May 2018. |
8. Equity-based Compensation
The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and restricted stock awards. Stock options and restricted stock awards generally vest over four years with 25% vesting on the first anniversary of
19
service commencement and the remaining 75% vesting monthly thereafter. The following table presents stock-based compensation expense included in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Research and development |
$ |
3,999 |
|
|
$ |
2,420 |
|
|
$ |
12,081 |
|
|
$ |
6,095 |
|
General and administrative |
|
4,056 |
|
|
|
2,448 |
|
|
|
9,879 |
|
|
|
5,799 |
|
Loss from equity method investment |
|
1,012 |
|
|
|
359 |
|
|
|
3,256 |
|
|
|
1,310 |
|
Total |
$ |
9,067 |
|
|
$ |
5,227 |
|
|
$ |
25,216 |
|
|
$ |
13,204 |
|
Grant-Date Fair Value
The Company estimated the fair value of each employee and non-employee stock option award using the Black-Scholes option-pricing model based on the following assumptions:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Employees: |
|
|
|
|
|
|
|
|
Weighted average expected volatility |
|
|
71.9 |
% |
|
|
72.6 |
% |
Expected term (in years) |
|
|
6.0 |
|
|
|
6.0 |
|
Risk free interest rate |
|
2.4%-2.9 |
% |
|
1.8-2.3 |
% |
||
Expected dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
The fair value of the restricted stock awards was determined based on the fair value of the common shares on the grant date. Non-employee stock option and restricted stock awards, including those granted to employees of Casebia, were marked-to-market at each reporting period through June 30, 2018, the last period prior to the adoption of ASU 2018-07. All future expense related to these awards will be recorded based on the fair value measured as of June 30, 2018.
Share Based Payment Activity
Stock Option Awards
The following table summarizes stock option activity for employees and non-employees (intrinsic value in thousands):
|
|
Stock Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2017 |
|
|
6,262,339 |
|
|
$ |
13.24 |
|
|
|
8.8 |
|
|
$ |
64,120 |
|
Granted |
|
|
2,029,497 |
|
|
$ |
52.86 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(870,213 |
) |
|
$ |
11.07 |
|
|
|
|
|
|
|
|
|
Cancelled or forfeited |
|
|
(723,044 |
) |
|
$ |
19.10 |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2018 |
|
|
6,698,579 |
|
|
$ |
24.89 |
|
|
|
8.6 |
|
|
$ |
147,659 |
|
Exercisable at September 30, 2018 |
|
|
2,104,857 |
|
|
$ |
14.28 |
|
|
|
8.0 |
|
|
$ |
64,661 |
|
Vested or expected to vest at September 30, 2018 (1) |
|
|
6,698,579 |
|
|
$ |
24.89 |
|
|
|
8.6 |
|
|
$ |
147,659 |
|
(1) |
Represents the number of vested options at September 30, 2018 plus the number of unvested options expected to vest in the future. |
As of September 30, 2018, total unrecognized compensation expense related to stock options was $90.6 million which the Company expects to recognize over a remaining weighted-average period of 3.1 years.
During the nine months ended September 30, 2018 and 2017, the Company granted options to purchase 0 and 60,000 common shares, respectively, subject to performance-based vesting conditions.
During 2017, the Company also granted 150,000 stock options with market-based vesting conditions in which the recipient is eligible to receive between zero and 150,000 options to purchase common shares at the end of a four-year service period based upon achieving
20
a specified average stock price. As of September 30, 2018, no options to purchase common shares subject to market-based vesting conditions were vested; however 150,000 options were earned as the specified average stock price limits were achieved.
In May 2018, the Company modified the terms of certain options held by a departing employee. The modification resulted in $2.2 million in stock-based compensation expense recorded during the nine months ended September 30, 2018.
Restricted Stock Awards
The following table summarizes restricted stock activity for employees and non-employees during the nine months ended September 30, 2018:
|
|
Reflected as outstanding upon vesting |
|
|
Reflected as outstanding upon grant date |
|
|
Total |
|
|
Weighted- Average Grant Date Fair Value |
|
||||
Unvested restricted common shares as of December 31, 2017 |
|
|
157,515 |
|
|
|
208,886 |
|
|
|
366,401 |
|
|
$ |
8.49 |
|
Granted |
|
|
89,000 |
|
|
|
— |
|
|
|
89,000 |
|
|
|
55.84 |
|
Vested |
|
|
(67,631 |
) |
|
|
(168,613 |
) |
|
|
(236,244 |
) |
|
|
7.69 |
|
Cancelled or forfeited |
|
|
— |
|
|
|
(40,273 |
) |
|
|
(40,273 |
) |
|
|
3.52 |
|
Unvested restricted common shares as of September 30, 2018 |
|
|
178,884 |
|
|
|
— |
|
|
|
178,884 |
|
|
$ |
33.98 |
|
During the nine months ended September 30, 2018, the total fair value of vested restricted common shares was $10.9 million. As of September 30, 2018, total unrecognized compensation expense related to unvested restricted common shares was $5.3 million which the Company expects to recognize over a remaining weighted-average period of 1.7 years.
9. Income Taxes
During the three and nine months ended September 30, 2018, the Company recorded an income tax provision of $0.1 million and $0.3 million, respectively, representing an effective tax rate of -0.3% and -0.3%, respectively. During the three and nine months ended September 30, 2017, the Company recorded an income tax provision of $0.7 million and $1.3 million, respectively, representing an effective tax rate of -2.9%, and -2.0%, respectively. The income tax provision is primarily attributable to the year-to-date pre-tax income earned by the Company’s U.S. subsidiary. The difference in the statutory tax rate and effective tax rate is primarily a result of the jurisdictional mix of earnings and losses that are not benefited. The Company maintains a valuation allowance against certain deferred tax assets that are not more-likely-than-not realizable. As a result, the Company has not recognized a tax benefit related to losses generated in Switzerland in the current periods.
As disclosed in the Company’s Annual Report, the Company recorded provisional amounts in its 2017 financial statements to reflect the federal, state and foreign impacts of the Tax Cuts and Jobs Act of 2017 (the “Act”). These amounts remain provisional and subject to Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” (“SAB 118”) as of September 30, 2018. There have been no changes to the provisional amounts recorded in the 2017 financial statements during the three and nine months ended September 30, 2018.
10. Related Party Transactions
The Company is a party to intellectual property license agreements with Dr. Charpentier. During the three and nine months ended September 30, 2018 and 2017, the Company did not record any sublicensing fees due to Dr. Charpentier in research and development expense related to the Bayer Joint Venture Agreement.
Refer to Note 6, “Joint Venture with Bayer Healthcare LLC”, for discussion of transactions with Casebia, a related party.
11. Subsequent Events
Refer to Note 6 for discussion of changes in the fair value of the liability arising from the ViaCyte Collaboration Agreement.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in our annual report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 8, 2018. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Investors and others should note that we announce material financial information to our investors using our investor relations website (https://crisprtx.gcs-web.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with the public about our company, our business, our product candidates and other matters. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.
Overview
We are a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics. CRISPR/Cas9 stands for Clustered, Regularly Interspaced Short Palindromic Repeats (CRISPR) Associated Protein 9 and is a revolutionary gene editing technology that allows for precise, directed changes to genomic DNA. The application of CRISPR/Cas9 for gene editing was co-invented by one of our scientific founders, Dr. Charpentier, who, along with her collaborators, published work elucidating how CRISPR/Cas9, a naturally occurring viral defense mechanism found in bacteria, can be adapted for use in gene editing. We are applying this technology to potentially treat a broad set of rare and common diseases by disrupting, correcting or regulating the genes related to the disease. We believe that our scientific expertise, together with our approach, may enable an entirely new class of highly active and potentially curative treatments for patients for whom current biopharmaceutical approaches have had limited success.
Since our inception in October 2013, we have devoted substantially all of our resources to our research and development efforts, identifying potential product candidates, undertaking drug discovery and preclinical development activities, building and protecting our intellectual property portfolio, organizing and staffing our company, business planning, raising capital, and providing general and administrative support for these operations. To date, we have primarily financed our operations through public offering of our equity securities, private placements of our preferred shares, convertible loans and collaboration agreements with strategic partners.
In January 2018, we completed an offering of 5,750,000 common shares, which were sold at a price to the public of $22.75 per share. This offering resulted in $122.6 million of net proceeds to us. The underwriting discount of $7.8 million and other expenses of $0.4 million related to the equity offering were recorded as an offset to additional paid-in capital.
In September 2018, we completed an offering of 4,210,526 common shares, which were sold at a price to the public of $47.50 per share. This offering resulted in $187.6 million of net proceeds to us. The underwriting discount of $12.0 million and other expenses of $0.4 million related to the equity offering were recorded as an offset to additional paid-in capital.
In addition, $3.1 million of stamp taxes on the issuance proceeds from the January and September offerings were recorded as an offset to additional paid in capital.
In August 2018, the Company repurchased 64,211 shares of restricted common stock from former employees for less than $0.1 million.
All of our revenue to date has been collaboration revenue. We have incurred significant net operating losses in every year since our inception and expect to continue to incur net operating losses for the foreseeable future. As of September 30, 2018, we had $487.3 million in cash and an accumulated deficit of $244.0 million. We expect to continue to incur significant expenses and
22
increasing operating losses for the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly as we continue our current research programs and development activities; seek to identify additional research programs and additional product candidates; conduct preclinical studies enabling clinical trial applications and initiate clinical trials for our most advanced product candidates which are from our hemoglobinopathy program targeting both beta thalassemia and sickle cell disease; initiate preclinical testing and clinical trials for any other product candidates we identify and develop; maintain, expand and protect our intellectual property portfolio, further develop our gene editing platform; hire additional research, clinical and scientific personnel; acquire or in license other technologies; and incur additional costs associated with operating as a public company.
Collaboration Agreement, Joint Development and Commercialization Agreement- Vertex
In October 2015, we entered into a strategic research collaboration agreement with Vertex focused on the development of CRISPR/Cas9-based therapies. Under the terms of our agreement, we received an upfront, nonrefundable payment of $75.0 million and $30.0 million in convertible loan proceeds.
In December 2017, we and Vertex entered into an amendment to the collaboration agreement (“Amendment”). The Amendment, among other things, modified certain definitions and provisions of the Collaboration Agreement to make them consistent with the Joint Development Agreement (“JDA”) and clarified how many options are exercised (or deemed exercised) in connection with certain targets specified under the collaboration agreement. The Amendment also amended other provisions of the collaboration agreement, including the expiration terms of the collaboration agreement.
In December 2017, we entered into the JDA with Vertex for the development and commercialization of CTX001. The initial focus of the JDA centers on developing CTX001 for beta-thalassemia and SCD. The net profits and net losses, as applicable, incurred under the JDA will be shared equally between us and Vertex.
We obtained Clinical Trial Application, or CTA, approvals in multiple countries for both beta-thalassemia and sickle cell disease (SCD) trials and we and Vertex continue to work closely with various global regulatory authorities in these and other countries. In April 2018, we and Vertex submitted an Investigational New Drug application (“IND”) for CTX001 to the U.S. Food and Drug Administration (the “FDA”) to support the planned initiation of a Phase 1/2 trial in the U.S. in adult patients with SCD. In May 2018, the FDA placed a clinical hold on the IND for CTX001 for the treatment of SCD pending the resolution of certain questions as part of its review of the IND. On October 10, 2018, we and Vertex announced that the FDA has lifted the clinical hold and accepted the IND for CTX001 for the treatment of sickle cell disease. We and Vertex are currently enrolling patients with transfusion dependent β-thalassemia in a Phase 1/2 trial in β-thalassemia in Europe. CTX001 is an investigational autologous gene-edited hematopoietic stem cell therapy for patients suffering from severe hemoglobinopathies.
Joint Venture Agreement- Casebia
In December 2015, we entered into an agreement, (the “JV Agreement”), with Bayer to create a joint venture, Casebia Therapeutics LLP, (“Casebia” or the “JV”), to discover, develop and commercialize CRISPR/Cas9 gene-editing therapeutics to treat the genetic causes of bleeding disorders, autoimmune disease, blindness, hearing loss and heart disease. We and Bayer each have a 50% interest in the JV. Under the JV Agreement, Bayer is making available its protein engineering expertise and relevant disease know-how and we are contributing our proprietary CRISPR/Cas9 gene editing technology and intellectual property. Bayer will also provide up to $300.0 million in research and development investments to the JV over the first five years, subject to specified conditions.
In connection with the JV Agreement, the JV was required to pay us an aggregate amount of $35.0 million technology access fee, consisting of an upfront payment of $20.0 million, which was paid at the closing of the JV Agreement in March 2016, and another payment of $15.0 million for specified intellectual property rights relating to our CRISPR/Cas9 technology outside of the United States, which was paid in December 2016. In January 2016, we also issued the Bayer Convertible Loan to Bayer BV for gross proceeds of $35.0 million which was immediately converted to Series B Preferred Shares at a conversion price of $13.43 per share. Concurrent with our initial public offering in October 2016, we issued and sold 2,500,000 common shares to Bayer BV, at the public offering price of $14.00 per share resulting in aggregate net proceeds of $35.0 million.
Collaboration Agreement- ViaCyte
On September 17, 2018, we entered into a research collaboration agreement ("ViaCyte Collaboration Agreement") with ViaCyte, Inc. (“ViaCyte”) focused on the discovery, development, and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes. Under the terms of the ViaCyte Collaboration Agreement, we and ViaCyte will jointly seek to
23
develop an immune-evasive stem cell line as a first step on the path to an allogeneic stem-cell derived product. Upon successful completion of these studies and identification of a product candidate, we and ViaCyte will jointly assume responsibility for further development and commercialization worldwide.
Upon execution of the agreement, ViaCyte was entitled to receive $15.0 million from us that will be paid in two installments either in cash or in common shares at the Company’s option. On September 24, 2018, we issued 165,636 common shares to ViaCyte which had a fair value of $7.5 million. The remaining amount will be paid in common shares or cash upon the close of market on the first business day after we file our Quarterly Report on Form 10-Q for the three months ending September 30, 2018. The agreement includes certain provisions such that in the event ViaCyte sells shares received from us for less than $15.0 million in combined net proceeds, we will owe ViaCyte the deficient amount. In the event ViaCyte sells shares received from us for greater than $15.0 million in combined net proceeds, ViaCyte will owe us the surplus amount. ViaCyte has the option, under certain circumstances, to receive an additional $10.0 million from us in the form of a convertible promissory note at fair value. The ViaCyte Collaboration Agreement may remain in force for up to six years.
Financial Overview
Revenue
We have not generated any revenue to date from product sales and do not expect to do so in the near future. During the three and nine months ended September 30, 2018, we recognized $0.6 million and $3.0 million, respectively, of revenue related to our collaboration arrangement with Vertex and Casebia. During the three and nine months ended September 30, 2017, we recognized $2.4 million and $8.7 million, respectively, of revenue related to our collaboration agreements with Vertex and Casebia. As of September 30, 2018, we had not received any milestone or royalty payments under the Vertex collaboration agreement. For additional information about our revenue recognition policy, see Note 2 “Summary of Significant Accounting Policies”.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include:
|
• |
employee-related expenses, including salaries, benefits and equity-based compensation expense; |
|
• |
costs of services performed by third parties that conduct research and development and preclinical activities on our behalf; |
|
• |
costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical study materials; |
|
• |
consultant fees; |
|
• |
facility costs, including rent, depreciation and maintenance expenses; and |
|
• |
fees and other payments related to acquiring and maintaining licenses under our third-party licensing agreements. |
Research and development costs are expensed as incurred. Research and development expenses include amounts incurred under the cost sharing agreement with Vertex, net of reimbursements from Vertex for such costs. Nonrefundable advance payments for research and development goods or services to be received in the future are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of any product candidates we may develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:
|
• |
successful completion of preclinical studies and Investigational New Drug-enabling studies; |
|
• |
successful enrollment in, and completion of, clinical trials; |
|
• |
receipt of marketing approvals from applicable regulatory authorities; |
|
• |
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; |
|
• |
obtaining and maintaining patent and trade secret protection and non-patent exclusivity; |
|
• |
launching commercial sales of the product, if and when approved, whether alone or in collaboration with others; |
|
• |
acceptance of the product, if and when approved, by patients, the medical community and third-party payors; |
|
• |
effectively competing with other therapies and treatment options; |
24
|
• |
enforcing and defending intellectual property and proprietary rights and claims; and |
|
• |
achieving desirable medicinal properties for the intended indications. |
A change in the outcome of any of these variables with respect to the development of any product candidates or the subsequent commercialization of any product candidates we may successfully develop could significantly change the costs, timing and viability associated with the development of that product candidate.
Except for activities we perform in connection with our collaborations with Vertex and Casebia, we do not track research and development costs on a program-by-program basis. We plan to track research and development costs for individual development programs when we identify a product candidate from the program that we believe we can advance into clinical trials.
Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our current development programs progress and new programs are added.
General and Administrative Expenses
General and administrative expenses consist primarily of employee related expenses, including salaries, benefits, and equity-based compensation for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.
We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and increased costs of operating as a public company. We anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with exchange listing and SEC requirements, insurance costs and investor relations costs, the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. We also anticipate increased expenses related to the reimbursements of third-party patent related expenses with respect to certain of our in-licensed intellectual property.
Comparison of three Months Ended September 30, 2018 and 2017
The following table summarizes our results of operations for the three months ended September 30, 2018 and 2017, together with the dollar change in those items:
|
|
Three Months Ended September 30, |
|
|
Period to Period |
|
||||||
|
|
2018 |
|
|
2017 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Collaboration revenue |
|
$ |
563 |
|
|
$ |
2,387 |
|
|
$ |
(1,824 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
39,820 |
|
|
|
17,845 |
|
|
|
21,975 |
|
General and administrative |
|
|
10,175 |
|
|
|
8,112 |
|
|
|
2,063 |
|
Total operating expenses |
|
|
49,995 |
|
|
|
25,957 |
|
|
|
24,038 |
|
Loss from operations |
|
|
(49,432 |
) |
|
|
(23,570 |
) |
|
|
(25,862 |
) |
Other expense, net |
|
|
(1,142 |
) |
|
|
(430 |
) |
|
|
(712 |
) |
Net loss before income taxes |
|
|
(50,574 |
) |
|
|
(24,000 |
) |
|
|
(26,574 |
) |
Provision for income taxes |
|
|
(137 |
) |
|
|
(707 |
) |
|
|
570 |
|
Net loss |
|
$ |
(50,711 |
) |
|
$ |
(24,707 |
) |
|
$ |
(26,004 |
) |
Collaboration Revenue
Collaboration revenue for the three months ended September 30, 2018, was $0.6 million, compared to $2.4 million for the three months ended September 30, 2017. The decrease of approximately $1.8 million was due to us entering into the JDA with Vertex in December 2017. This resulted in more research being conducted under the cost sharing arrangement included within the JDA. Please refer to Note 2 for further information.
25
Research and Development Expenses
Research and development expenses were $39.8 million for the three months ended September 30, 2018, compared to $17.8 million for the three months ended September 30, 2017. The increase of approximately $22.0 million was primarily attributable to the following increases: $15.0 million of expenses related to the ViaCyte Collaboration Agreement, $2.6 million of variable research and development costs and license fees, $1.6 million of employee stock based compensation costs and $2.4 million of employee-related costs. Total research and development expenses include $0.1 million related to the collaboration agreement with Vertex and $5.0 million associated with the JDA, which is net of $3.7 million for costs reimbursed by Vertex, for the three months ended September 30, 2018.
General and Administrative Expenses
General and administrative expenses were $10.2 million for the three months ended September 30, 2018, compared to $8.1 million for the three months ended September 30, 2017. The increase of approximately $2.1 million was primarily attributable to an increase of $1.6 million of employee stock based compensation costs.
Other Expense, Net
Other expense, net, was $1.1 million of expense for the three months ended September 30, 2018, compared to $0.4 million of expense for the three months ended September 30, 2017. The increase was primarily due to an increase in the loss from equity method investment from stock based compensation awards granted to employees of Casebia. Other expense for the three months ended September 30, 2018 includes $0.1 million of expense related to the change in fair value of the derivative liability issued under the ViaCyte Collaboration Agreement.
Comparison of nine Months Ended September 30, 2018 and 2017
The following table summarizes our results of operations for the nine months ended September 30, 2018 and 2017, together with the dollar change in those items:
|
|
Nine Months Ended September 30, |
|
|
Period to Period |
|
||||||
|
|
2018 |
|
|
2017 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Collaboration revenue |
|
$ |
3,009 |
|
|
$ |
8,672 |
|
|
$ |
(5,663 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
84,972 |
|
|
|
49,770 |
|
|
|
35,202 |
|
General and administrative |
|
|
31,752 |
|
|
|
24,522 |
|
|
|
7,230 |
|
Total operating expenses |
|
|
116,724 |
|
|
|
74,292 |
|
|
|
42,432 |
|
Loss from operations |
|
|
(113,715 |
) |
|
|
(65,620 |
) |
|
|
(48,095 |
) |
Other (expense) income, net |
|
|
(3,357 |
) |
|
|
(1,548 |
) |
|
|
(1,809 |
) |
Net loss before income taxes |
|
|
(117,072 |
) |
|
|
(67,168 |
) |
|
|
(49,904 |
) |
Provision for income taxes |
|
|
(319 |
) |
|
|
(1,330 |
) |
|
|
1,011 |
|
Net loss |
|
$ |
(117,391 |
) |
|
$ |
(68,498 |
) |
|
$ |
(48,893 |
) |
Collaboration Revenue
Collaboration revenue for the nine months ended September 30, 2018 was $3.0 million, compared to $8.7 million for the nine months ended September 30, 2017. The decrease of $5.7 million was due to us entering into the JDA with Vertex in December 2017. This resulted in more research being conducted under the cost sharing arrangement included within the JDA. Please refer to Note 2 for further information.
Research and Development Expenses
Research and development expenses were $85.0 million for the nine months ended September 30, 2018, compared to $49.8 million for the nine months ended September 30, 2017. The increase of approximately $35.2 million was primarily attributable to the following increases: $15.0 million of expenses related to the Viacyte Collaboration Agreement, $7.4 million of variable research and development costs and license fees, $5.8 million of employee stock based compensation costs, $6.0 million of employee-related costs, and $0.5 million of facility-related costs. Total research and development expenses include $0.5 million related to the collaboration agreement with Vertex and $14.5 million associated with the JDA, which is net of $10.4 million for costs reimbursed by Vertex, for the nine months ended September 30, 2018.
26
General and Administrative Expenses
General and administrative expenses were $31.8 million for the nine months ended September 30, 2018, compared to $24.5 million for the nine months ended September 30, 2017. The increase of $7.2 million was primarily due to the following increases: $4.1 million of employee stock based compensation costs, $2.4 million in intellectual property costs, $1.4 million in employee-related costs. The increases were offset by a reduction of $0.3 million in professional and consulting expenses and $0.3 million of facility-related costs.
Other (Expense) Income, Net
Other (expense) income, net was $3.4 million of expense for the nine months ended September 30, 2018, compared to $1.5 million of expense for the nine months ended September 30, 2017. The increase was primarily due to an increase in the loss from equity method investment from stock based compensation awards granted to employees of Casebia. Other expense for the nine months ended September 30, 2018 includes $0.1 million of expense related to the change in fair value of the derivative liability issued under the ViaCyte Collaboration Agreement.
Liquidity and Capital Resources
As of September 30, 2018, we had cash of approximately $487.3 million of which approximately $481.7 million was held outside of the United States. In January 2018, we completed an offering of 5,750,000 common shares, which were sold at a price to the public of $22.75 per share. This offering resulted in $122.6 million of net proceeds to us. The underwriting discount of $7.8 million and other expenses of $0.4 million related to the equity offering were recorded as an offset to additional paid-in capital. In September 2018, we completed an offering of 4,210,526 common shares, which were sold at a price to the public of $47.50 per share. This offering resulted in $187.6 million of net proceeds to us. The underwriting discount of $12.0 million and other expenses of $0.4 million related to the equity offering were recorded as an offset to additional paid-in capital. In addition, $3.1 million of stamp taxes on the issuance proceeds from the January and September offerings were recorded as an offset to additional paid in capital. With our cash on hand as of September 30, 2018, we expect cash and cash equivalents to be sufficient to fund its current operating plan through at least the next 24 months. As of September 30, 2018, our funds were held in non-interest-bearing deposit accounts.
In August 2018, the Company entered into an At-The-Market (“ATM”) sales agreement with Jefferies, under which it may offer and sell from time to time common shares having aggregate gross proceeds of up to $125.0 million. We have not yet issued or sold any securities under this sales agreement. We have incurred $0.2M in costs related to this sales agreement, which are included in other current assets as of September 30, 2018 and will be offset against future offering proceeds.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, research and development activities, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing and maintenance costs for our licensed intellectual property and general overhead costs. We expect our expenses to increase compared to prior periods in connection with our ongoing activities, particularly as we continue research and development and preclinical activities, and initiate preclinical studies to support initial drug applications.
Because our research programs are still in preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any current or future product candidates, if approved, or whether, or when, we may achieve profitability. Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity, debt financings and payments received in connection with our collaboration agreements. We are entitled to research payments under our collaboration with Vertex. Additionally, we are eligible to earn payments, in each case, on a per-product basis under the JV Agreement with Bayer for Casebia and our collaboration with Vertex. Except for these sources of funding, we do not have any committed external source of liquidity. We intend to consider opportunities to raise additional funds through the sale of equity or debt securities when market conditions are favorable to us to do so. To the extent that we raise additional capital through the future sale of equity or debt securities, the ownership interests of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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Based on our research and development plans and our timing expectations related to the progress of our programs, we expect our existing cash, will enable us to fund our operating expenses and capital expenditures for at least the next 24 months, without giving effect to any additional proceeds we may receive under our Collaboration Agreement and JDA with Vertex and the agreements related to Casebia and any other capital raising transactions we may complete. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Given our need for additional financing to support the long term clinical development of our programs, we intend to consider additional financing opportunities when market terms are favorable to us.
Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including: developing our delivery technologies and our CRISPR/Cas9 technology platform; selecting appropriate product candidates to develop; completing research and preclinical and clinical development of selected product candidates; obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials; developing a sustainable and scalable manufacturing process for product candidates; 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, if approved; addressing any competing technological and market developments; negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; maintaining good relationships with our collaborators and licensors; maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and attracting, hiring and retaining qualified personnel.
Cash Flows
The following table provides information regarding our cash flows for each of the period below:
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Nine Months Ended September 30, |
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Period to Period |
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2018 |
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2017 |
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Change |
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(in thousands) |
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Net cash and restricted cash used in operating activities |
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$ |
(67,867 |
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$ |
(55,251 |
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$ |
(12,616 |
) |
Net cash used in investing activities |
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(1,773 |
) |
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(8,109 |
) |
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6,336 |
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Net cash provided by financing activities |
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317,203 |
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1,324 |
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315,879 |
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Effect of exchange rate changes on cash |
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(15 |
) |
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39 |
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(54 |
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Net increase (decrease) in cash and restricted cash |
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$ |
247,548 |
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$ |
(61,997 |
) |
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$ |
309,545 |
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Net Cash Used in Operating Activities
Net cash used in operating activities was $67.9 million for the nine months ended September 30, 2018 as compared to $55.3 million for the nine months ended September 30, 2017. The net cash used in operating activities for the nine months ended September 30, 2018 primarily consisted of a net loss of $117.4 million adjusted for non-cash items (including equity-based compensation expense of $22.0 million, depreciation and amortization expense of $2.6 million, a loss from an equity method investment of $3.3 million, expense of $15.1 million under the ViaCyte Collaboration Agreement, $7.5 million of which was paid through the issuance of common shares during the period ended September 30, 2018, and $7.6 million of which is accrued as of September 30, 2018), a decrease in accounts receivable of $2.1 million, an increase in prepaid expenses and other assets of $2.5 million, an increase in accounts payable and accrued expenses of $8.0 million, a decrease of $0.5 million in deferred rent and a decrease in deferred revenue of $0.3 million.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2018 was $1.8 million as compared to $8.1 million for the nine months ended September 30, 2017. The net cash used in investing activities for the nine months ended September 30, 2018 consisted primarily of purchases of property and equipment for use in research and development activities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2018 was $317.2 million, compared with $1.3 million for the nine months ended September 30, 2017. The net cash provided by financing activities for the nine months ended September 30, 2018 consisted of proceeds from the issuance of common shares in an offering in January of 2018 which resulted in $122.6 million of net proceeds to the Company, proceeds from the issuance of common shares in an offering in September of 2018 which resulted in $187.6 million of net proceeds to the Company, as well as exercises of stock options. In addition, $3.1 million of
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stamp taxes on the issuance proceeds from the January and September offerings were recorded as an offset to additional paid in capital.
Contractual Obligations
The disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes from the contractual commitments and obligations previously disclosed in our Annual Report on Form 10-K other than the changes described in Note 6 to the accompanying financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2018, we do not have any off-balance sheet arrangements as defined under applicable SEC rules.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. GAAP. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that our most critical accounting policies are those relating to revenue recognition, variable interest entities and equity-based compensation, and there have been significant changes to our revenue recognition, multiple-element and milestone and royalty accounting policies discussed in the Annual Report. Please refer to Note 2, “Significant Accounting Policies”, for the updated revenue recognition policy that encompasses the changes to the historical revenue recognition, multiple-element and milestone and royalty accounting policies.
Recent Accounting Pronouncements
Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Foreign Exchange Market Risk
As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Swiss Franc and British Pound, against the U.S. dollar. The current exposures arise primarily from cash, accounts payable, and intercompany receivables and payables. Changes in foreign exchange rates affect our consolidated statement of operations and distort comparisons between periods. We do not engage in any foreign exchange rate hedging activities and therefore we are subject to foreign currency impacts. Based on our foreign currency exchange rate exposures at September 30, 2018, a hypothetical 10% adverse fluctuation in exchange rates would not have a material impact on the consolidated financial statements.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure
29
that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2018, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. Except as described below, there are currently no claims or actions pending against us that, in the opinion of our management, are likely to have a material adverse effect on our business.
In January 2016, the U.S. Patent and Trademark Office, or USPTO, declared an interference between one of the pending U.S. patent applications we have in-licensed from Dr. Charpentier and twelve issued U.S. patents owned jointly by the Broad Institute and Massachusetts Institute of Technology and, in some instances, the President and Fellows of Harvard College, which we refer to individually and collectively as Broad. The interference was redeclared in March 2016 to add a U.S. patent application owned by Broad. An interference is a proceeding conducted at the USPTO by the Patent Trial and Appeal Board, or PTAB, to determine which party was the first to invent subject matter claimed by at least two parties. There were two parties to this interference being Dr. Charpentier, the regents of the University of California, and the University of Vienna (collectively, “UC”) and Broad.
Following motions by the parties and other procedural matters, in February 2017, the PTAB concluded that the declared interference should be dismissed. In its decision, the PTAB concluded that, although the claims overlap, the respective scope of UC and Broad’s claim sets as presented did not define the same patentable invention and, accordingly, terminated the interference.
In April 2017, UC appealed the PTAB decision to the U.S. Court of Appeals for the Federal Circuit, or the Federal Circuit. In the appeal, UC asked the court to review and reverse the PTAB’s February 2017 decision, which terminated the interference without determining which inventors actually invented the use of the CRISPR/Cas9 genome editing technology in eukaryotic cells. The Federal Circuit conducted a hearing on the appeal on April 30, 2018. On September 10, 2018, the Federal Circuit affirmed the PTAB’s decision to terminate the interference proceeding.
Either party can pursue existing or new patent applications in the U.S. and elsewhere. Going forward, either party and other parties could seek a new interference related to the uses of the technology in eukaryotic cells or other aspects of the technology, and any existing or new patents could be the subject of other challenges to their validity of enforceability. If there is a second interference, either party could again appeal an adverse decision to the Federal Circuit.
In any case, it may be years before there is a final determination on priority. Pursuant to the terms of the license agreement with Dr. Charpentier, we are responsible for covering or reimbursing Dr. Charpentier’s patent prosecution, defense and related costs associated with our in-licensed technology.
In February 2018, several parties filed oppositions in the European Patent Office to the grant of our in-licensed European patent. Opposition proceedings can lead to the revocation of a patent in its entirety; the maintenance of the patent as granted, or the maintenance of a patent in amended form. Opposition proceedings typically take years to resolve, including the time taken by appeals that can be filed by any of the parties. We cannot guarantee the outcome of the oppositions to our in-licensed European patent, and an adverse result could preclude us from enforcing our rights in Europe against third parties.
We are unable to predict the outcome of these matters and are unable to make a meaningful estimate of the amount or range of loss, if
30
any, that could result from an unfavorable outcome. In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. We devote considerable effort in building, maintaining and protecting a broad, worldwide portfolio of intellectual property related to the use of CRISPR/Cas9 genome editing systems to develop therapeutic products. In this regard, we have amassed a portfolio of patents, patent applications and other intellectual property covering, among other things:
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• |
fundamental aspects of CRISPR/Cas9 systems for gene editing via the in-licensed patent rights of Dr. Emmanuelle Charpentier; |
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• |
internally developed platform technologies supporting the use of CRISPR/Cas9 genome editing systems; |
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• |
guide RNAs directed to specific targets as treatments for specific diseases; |
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• |
improved delivery technologies; and |
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• |
all aspects of our specific development candidates. |
Our intellectual property portfolio for our CRISPR/Cas9 technologies and therapeutics includes over 45 active patent families and more than 15 granted or allowed patents in the United States, United Kingdom, Europe, Japan, China, Ukraine, New Zealand, Singapore, Australia, Mexico, Tunisia and South Africa, and pending patent applications in the United States, Europe, China, Japan, Canada, Mexico, Australia and other selected countries in Central America, South America, Asia and Africa. The granted patents and any other patents that may ultimately issue in this patent family are expected to expire starting in 2033, not including any applicable patent term extensions.
As both our platform and development pipeline mature, we intend to continue expanding our intellectual property portfolio through new patent filings that claim aspects of our proprietary technologies and development candidates. Furthermore, as the field of CRISPR/Cas9 technologies and therapeutics is maturing, patent applications are being examined by national patent offices around the world. There is uncertainty about which patents will issue, and, if they do, as to when, to whom and with what claims.
It is likely that there will be significant litigation and other proceedings, such as interference, reexamination, inter partes review, post-grant review and opposition proceedings, in various patent offices relating to patent rights in the CRISPR/Cas9 field. For example, the European patent we in-licensed from Dr. Charpentier has been opposed by several third parties. On September 16, 2012, the America Invents Act went into effect and expanded the opportunities to challenge issued U.S. patents, creating proceedings including inter partes reviews and post-grant reviews. These provide additional opportunities for third parties to challenge patents within our intellectual property portfolio. Given the importance of our intellectual property portfolio to our business operations, we intend to vigorously enforce our rights and defend against challenges that have arisen or may arise in this area, as deemed appropriate.
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.
Item 2. Unregistered Sales of Equity Securities.
During the period between January 1, 2018 and September 30, 2018, we issued to Casebia employees options to purchase an aggregate of 6,000 common shares at a weighted-average exercise price of $50.14 per share. We deemed these issuances to be exempt from registration under the Securities Act either in reliance on Rule 701 of the Securities Act as sales and offers under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701, or in reliance on Section 4(a)(2), as transactions by an issuer not involving a public offering. All recipients either received adequate information about our Company or had access, through employment or other relationships, to such information. No underwriters were involved in the foregoing issuances of securities.
31
† |
Application has been made to the Securities and Exchange Commission for confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission. |
* |
The certification attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of CRISPR Therapeutics AG under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CRISPR Therapeutics AG |
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Dated: November 7, 2018 |
By: |
/s/ Samarth Kulkarni |
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Samarth Kulkarni |
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Chief Executive Officer |
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(Principal Executive Officer)
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Dated: November 7, 2018 |
By: |
/s/ Michael Tomsicek |
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Michael Tomsicek |
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Chief Financial Officer |
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|
(Principal Financial Officer) |
33
Exhibit 3.1
ARTICLES OF ASSOCIATION CRISPR Therapeutics AG with registered office in Zug (Translation; in case of controversy the German text shall prevail) |
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STATUTEN der CRISPR Therapeutics AG mit Sitz in Zug |
I. CORPORATE NAME, PRINCIPAL OFFICE, DURATION AND PURPOSE OF THE COMPANY |
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I. FIRMA, SITZ, DAUER UND ZWECK DER GESELLSCHAFT |
Art. 1 Corporate Name, Principal Office and Duration Under the name CRISPR Therapeutics AG there exists a Company which is subject to the provisions of art. 620 et seq. of the Swiss Code of Obligations (CO) with registered office in Zug, The duration of the Company is unlimited. |
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Art. 1 Firma, Sitz und Dauer Unter der Firma CRISPR Therapeutics AG besteht für unbeschränkte Dauer eine Akti-engesellschaft gemäss Art. 620 ff. OR mit Sitz in Zug. |
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The Company shall maintain a share register in which it shall register the name, first name and place of residence (in,case of legal persons the place of incorporation) of the owners and usufructuaries of its registered shares. Natural and legal persons as well as legal representatives of minors etc. entitled by law to the voting rights of a share which they do not own will be noted in the share register upon request. Upon request, acquirers of shares will be registered in the share register without limitation as shareholders if they expressly certify that they acquired the shares in their own name and for their own account. Persons who do not expressly declare in the registration application that they are holding the shares on their own account (thereafter: nominees) shall forthwith be entered on the share register as shareholders with voting rights up to a maximum of 3 percent of the share capital. Beyond that limit, registered shares of nominees shall only be entered as voting if the nominees in question confirm in writing that they are willing to disclose the names, addresses and shareholdings of the persons on whose account they hold 0.5 percent or more of the share capital. The Board of Directors concludes agreements with nominees that among other things govern the representation of shareholders and the voting rights. After hearing the registered shareholder or nominee, the Board of Directors may remove entries in the share register with retroactive effect as per the date of entry, if such entry was based on false information. The party affected must be informed of such, removal immediately. |
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Art. 4 Aktienbuch Die Gesellschaft führt ein Aktienbuch, worin die Eigentumer und Nutzniesser von Namenaktien mit Namen, Vornamen und Wohnort (bei juristischen Personen Sitz) eingetragen werden. Natürliche und juristische Personen sowie gesetzliche Vertreter von Minderjährigen usw., welchen kraft Gesetzes Stimmrechte eines Anteils zukommen, den sie nicht besitzen, werden auf Anfrage im Aktienregister angemerkt. Erwerber von Aktien werden auf Gesuch hin ohne Begrenzung als Aktionäre mit Stimmrecht im Aktienregister eingetragen, falls sie ausdrucklich erklären, die Aktien im eigenen Namen und auf eigene Rechnung erworben zu haben. Personen, die im Eintragungsgesuch nicht ausdrücklich erklären, die Aktien fur eigene Rechnung zu halten (nachstehend: Nominees) werden ohne weiteres bis maximal 3% des jeweils ausstehenden Aktienkapitals mit Stimmrecht im Aktienbuch eingetragen. liber diese Limite hinaus werden Namenaktien von Nominees nur dann mit Stimmrecht eingetragen, wenn sich der betreffende Nominee schriftlich bereit erklärt, gegebenenfalls die Namen, Adressen und Aktienbestande derjenigen Person offenzulegen, fur deren Rechnung er 0.5% oder mehr des jeweils ausstehenden Aktienkapitals hält. Der Verwaltungsrat schliesst mit Nominees Vereinbarungen ab, die unter anderem die Vertretung der Aktionäre und der Stimmrechte regeln. Nach Anhörung des eingetragenen Aktionärs oder Nominees, kann der Verwaltungsrat die Eintragungen im Aktienregister rückwirkend nach dem Datum der Eintragung entfernen, wenn ein solcher Eintrag aufgrund falscher Angaben erfolgte. Der Betroffene muss über eine solche Entfernung sofort informiert werden. |
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III. ORGANISATION DER GESELLSCHAFT |
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Art. 7 Corporate Bodies The corporate bodies are: A. the General Meeting; B. the Board of Directors; C. the Auditors. |
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Art. 7 Gliederung Gesellschaftsorgane: A. Generalversammlung; B. Verwaltungsrat; C. Revisionsstelle. |
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IV. THE GENERAL MEETING |
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IV. GENERALVERSAMMLUNG |
Art.8 Powers The General. Meeting is the supreme body of the Company. It has the following non delegable powers: |
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Art. 8 Befugnisse Oberstes Organ der Gesellschaft ist die Generalversammlung. Ihr stehen folgende un-übertragbare Befugnisse zu: |
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Subject to the powers of the General Meeting, the Board of Directors determines its own organization. It appoints a Secretary who needs not be a member of the Board of Directors. |
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Art.21 Konstituierung Der Verwaltungsrat konstituiert sich vorbehaltlich der Befugnisse der Generalversammlung selbst. Er bezeichnet insbesondere einen Sekretar, der nicht Mitglied des Verwaltungsrates sein muss. |
Art. 22 Function, Organization It is the Board of Director’s duty to lead the Company and to supervise the management. The Board of Director represents the Company and may take decisions to all affairs which are not assigned to any other body of the Company by law, the Articles of association or Regulations. The Board of Directors shall adopt the organizational regulations and the corresponding contractual relationships. |
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Art. 22 Funktion, Organisation Dem Verwaltungsrat obliegt die oberste Leitung der Gesellschaft und die Uberwachung der Geschaftsfuhrung. Er vertritt die Gesellschaft nach aussen und besorgt alle Angelegenheiten, die nicht nach Gesetz, Statuten oder Reglement einem anderen Organ der Gesellschaft ubertragen sind. Der Verwaltungsrat erlasst das Organisationsreglement und ordnet die entsprechenden Vertragsverhaltnisse. |
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VI. REVISIONSSTELLE |
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Art. 30 Election, Term The General Meeting shall elect one or more accountants as its Auditors in terms of Art. 727 et seq. CO every year with the rights and duties determined by law. The General Meeting may appoint Special Auditors for a term of up to three years who provide the attestations required for capital increases. |
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Art. 30 Wahl, Amtsdauer Die Generalversammlung wahlt jedes Jahr eine oder mehrere naturliche oder juristische Personen als Revisionsstelle im Sinne von Art. 727 ff. OR mit den im Gesetz festgehaltenen Rechten und Pflichten. Die Generalversammlung kann fur die Dauer von bis zu drei Jahren Sonderrevisoren be-stimmen, welche die bei Kapitalerhdhungen erforderlichen Bescheinigungen erbringen. |
Art. 31 Duties The Auditors shall perform their duties to audit and report whether the accounting, the annual accounts and the proposal regarding allocation of profits is in accordance with law and the Articles of association. |
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Art. 31 Aufgaben Die Revisionsstelle priift, ob die Buchfuhrung und die Jahresrechnung sowie der Antrag uber die Verwendung des Bilanzgewinns Gesetz und Statuten entsprechen. |
VII. COMPENSATION AND RELATED PROVISIONS |
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VII. VERGUTUNGEN UND VERWANDTE BESTIMMUNGEN |
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IX. AUFLÖSUNG UND LIQUIDATION |
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Art. 45 Dissolution and Liquidation The dissolution and liquidation of the Company shall take place in accordance with the provisions of the Swiss Code of Obligations. |
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Art. 45 Auflösung und Liquidation Fur die Auflosung und Liquidation der Gesellschaft gelten die Bestimmungen des Schwei-zerischen Obligationenrechts. |
X. NOTICES AND PUBLICATIONS |
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X. MITTEILUNGEN UND BEKANNTMACHUNGEN |
Art. 46 Notices and Publications The Swiss Official Gazette of Commerce is the official publication medium. Shareholder communications and notices the shareholders shall be made by publication in the Swiss Official Gazette of Commerce or sent by mail or e-mail to.the addresses registered in the share register. Unless the law provides otherwise, notices shall be given to creditors by publication in the Swiss Official Gazette of Commerce. The Board of Directors may assign further means of communication. |
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Art. 46 Mitteilungen und Bekanntmachungen Das Schweizerische Handelsamtsblatt (SHAB) ist das offizielle Publikationsmedium. Mitteilungen und Bekanntmachungen an die Aktionäre erfolgen durch Publikation im Schweizerischen Handelsamtsblatt oder durch Brief oder E-Mail an die im Aktienbuch verzeichneten Adressen. Bekanntmachungen an die Gläubiger erfolgen in den vom Gesetz vorgeschriebenen Fällen durch Veröffentlichung im Schweizerischen Handelsamtsblatt, dem Publikationsorgan der Gesellschaft. Der Verwaltungsrat kann weitere Publikationsmittel bezeichnen. |
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 10.1
RESEARCH COLLABORATION AGREEMENT
This RESEARCH COLLABORATION AGREEMENT (this “Agreement”) is entered into as of September 17, 2018 (the “Effective Date”) by and between, on the one hand, ViaCyte, Inc., a corporation organized and existing under the laws of Delaware, and CRISPR Therapeutics AG (“CRISPR”). ViaCyte and CRISPR each may be referred to herein individually as a “Party” or collectively as the “Parties.”
RECITALS
WHEREAS, CRISPR possesses certain Patents, Know-How, technology and expertise with respect to the CRISPR/Cas System (as defined below);
WHEREAS, ViaCyte possesses certain Patents, Know-How, technology and expertise with respect to the field of regenerative medicine;
WHEREAS, ViaCyte and CRISPR desire to enter into a research collaboration focused on Establishment of POC (as defined below) with a Product Candidate (as defined below); and
WHEREAS, in consideration of ViaCyte entering into this Agreement, CRISPR will issue to ViaCyte $15,000,000 of its common shares on the terms and conditions set forth on Schedule A attached hereto and may, subject to the terms and conditions of this Agreement and at the option of ViaCyte, provide funding of up to $10,000,000 through a convertible promissory note on the terms and conditions described further below.
NOW, THEREFORE, in consideration of the respective covenants, representations, warranties and agreements set forth herein, the Parties hereto agree as follows:
DEFINITIONS
For purposes of this Agreement, the following capitalized terms will have the following meanings:
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1.1. |
“Acquisition Transaction” has the meaning set forth in Section 2.10.2. |
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1.2. |
“Affiliate” means, as of any point in time and for so long as such relationship continues to exist with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person. A Person will be regarded as in control of another Person if it (a) owns or controls more than 50% of the equity securities of the subject Person entitled to vote in the election of directors (or, in the case of a Person that is not a corporation, for the election of the corresponding managing authority); provided, however, that the term “Affiliate” will not include subsidiaries or other entities in which a Person owns a majority of the ordinary voting power necessary to elect a majority of the board of directors or other governing board, but is restricted from electing such majority by contract or otherwise, until such time as such restrictions are no longer in effect, or (b) possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of an such Person (whether through ownership of securities or other ownership interests, by contract or otherwise). |
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1.4. |
“Agreement Term” means the period commencing on the Effective Date and ending on the expiration of this Agreement pursuant to Section 9.1, unless terminated earlier as provided herein. |
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1.5. |
“Alliance Manager” has the meaning set forth in Section 3.3.1. |
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1.6. |
“AAA” means the American Arbitration Association. |
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1.7. |
“Applicable Law” means the applicable provisions of any and all national, supranational, regional, state and local laws, treaties, statutes, rules, regulations, administrative codes, guidance, ordinances, judgments, decrees, directives, injunctions, orders, permits (including Marketing Approvals) of or from any court, arbitrator or Governmental Authority having jurisdiction over or related to the subject item. |
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1.8. |
“Approval Application” means a biologics license application, NDA or similar application or submission for a Product filed with a Regulatory Authority in a country or group of countries to obtain marketing approval for a biological or pharmaceutical product in that country or group of countries. |
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1.9. |
“Available” has the meaning set forth in Section 1.19. |
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1.10. |
“Breaching Party” means the Party that is believed by the other Party to be in material breach of this Agreement. |
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1.11. |
“Business Day” means a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in Boston, Massachusetts are obligated to be closed. |
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1.13. |
“Calendar Year” means any calendar year ending on December 31, or the applicable part thereof during the first or last year of the Agreement Term. |
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1.14. |
“cGMP” means current Good Manufacturing Practices as specified in the United States Code of Federal Regulations, ICH Guideline Q7A, or equivalent laws, rules, or regulations of an applicable Regulatory Authority at the time of manufacture. |
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transaction or series of related transactions in which such Party issues new securities solely to institutional investors for cash or the cancellation or conversion of indebtedness or a combination thereof where such transaction(s) are conducted primarily for bona fide equity financing purposes. |
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1.16. |
“Clinical Trial” means a study in humans that is conducted in accordance with GCP and is designed to generate data in support of an Approval Application. |
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known, generally available, in the public domain, disclosed, independently discovered or developed (individually and collectively “Available”), merely because broader or related information is Available, nor shall combinations of elements or principles be considered to be Available merely because individual elements thereof are Available. |
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1.22. |
“Convertible Note Financing” has the meaning set forth in Section 7.5. |
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1.23. |
“Cover,” “Covering” or “Covers” means, as to a product and Patent, that, in the absence of a license granted under, or ownership of, such Patent, the making, using, keeping, selling, offering for sale or importation of such product would infringe such Patent or, as to a pending claim included in such Patent, the making, using, selling, offering for sale or importation of such product would infringe such Patent if such pending claim were to issue in an issued patent without modification. |
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1.24. |
“CREATE Act” means the Cooperative Research and Technology Enhancement Act of 2004, 35 U.S.C. § 103(c)(2)-(c)(3). |
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1.25. |
“CRISPR” has the meaning set forth in the Preamble. |
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1.27. |
“CRISPR Background Know-How” means any Know-How, other than Joint Know-How and CRISPR Program Know-How, that (a) CRISPR or any of its Affiliates Control as of the Effective Date or that comes into the Control of CRISPR or any of its Affiliates during the Agreement Term and (b) is reasonably necessary or reasonably useful for the Research, Development, Manufacture, Commercialization or use of Product Candidates or Products. |
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1.28. |
“CRISPR Background Patents” means any Patent, other than a Joint Patent or CRISPR Program Patent that (a) CRISPR or any of its Affiliates Control as of the Effective Date or |
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that comes into the Control of CRISPR or any of its Affiliates during the Agreement Term and (b) claims or discloses any CRISPR Background Know-How or is otherwise reasonably necessary or reasonably useful for the Research, Development, Manufacture, Commercialization or use of Product Candidates or Products. |
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1.29. |
“CRISPR Background Technology” means the CRISPR Background Know-How and the CRISPR Background Patents. |
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1.30. |
“CRISPR Entity” means, when used in the singular, any one of CRISPR AG and CRISPR Inc. “CRISPR Entities” means, when used in the plural, CRISPR AG and CRISPR Inc. |
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1.31. |
“CRISPR Indemnified Party” has the meaning set forth in Section 8.1. |
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1.33. |
“CRISPR Know-How” means (a) CRISPR Background Know-How, (b) CRISPR Program Know-How and (c) CRISPR’s interest in the Joint Know-How. |
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1.34. |
“CRISPR Patent Challenge” has the meaning set forth in Section 9.2.2(a)(i). |
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1.35. |
“CRISPR Patents” means (a) CRISPR Background Patents, (b) CRISPR Program Patents, and (c) CRISPR’s interest in the Joint Patents. |
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1.36. |
“CRISPR Program Know-How” has the meaning set forth in Section 6.1.2(a). |
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1.37. |
“CRISPR Program Patents” has the meaning set forth in Section 6.1.2(a). |
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1.38. |
“CRISPR Program Technology” has the meaning set forth in Section 6.1.2(a). |
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1.40. |
“CRISPR Technology” means (a) the CRISPR Background Technology, (b) the CRISPR Program Technology, and (c) CRISPR’s interest in any Joint Technology. |
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testing, process development, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, Clinical Trials, regulatory affairs, pharmacovigilance, Clinical Trial regulatory activities and obtaining and maintaining Regulatory Approval. When used as a verb, “Develop” or “Developing” means to engage in Development. |
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1.42. |
“Disclosing Party” has the meaning set forth in Section 10.1. |
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1.43. |
“Dispute” has the meaning set forth in Section 11.1. |
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1.44. |
“Distracted Party” has the meaning set forth in Section 2.10.2. |
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1.45. |
“Distracting Product” means a product comprising or employing, in whole or in part, a cell therapy principally intended for use in the Field. |
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1.46. |
“Divestiture” means, with respect to a Distracting Product, the sale, exclusive license or other transfer by the applicable Party and its Affiliates of all of their development and commercialization rights with respect to such Distracting Product to a Third Party without the retention or reservation of any development or commercialization obligation, interest or participation rights (other than solely an economic interest or the right to enforce customary terms and conditions contained in the relevant agreements effectuating such transaction). When used as a verb, “Divest” means to engage in a Divestiture. |
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1.47. |
“Edited Stem Cell Program Technology” has the meaning set forth in Section 6.1.2(c). |
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1.48. |
“Effective Date” has the meaning set forth in the Preamble. |
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1.49. |
“Enabling Joint Patent” has the meaning set forth in Section 9.3.2(e). |
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1.50. |
“Establishment of POC” with respect to a Product Candidate, that data generated from the Research Program supports initiation of GLP toxicology studies for such Product Candidate as further described on Exhibit A attached hereto. |
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1.51. |
“Executive Officer” means an executive officer of a Party that is designated by such Party as its “Executive Officer” for purposes of this Agreement. The initial Executive Officer (i) with respect to CRISPR, shall be Tony Ho, M.D. the Executive Vice President and Head of Research and Development of CRISPR, and (ii) with respect to ViaCyte, shall be Paul Laikind, Ph.D., the President and Chief Executive Officer of ViaCyte. A Party may replace its then-current Executive Officer from time-to-time by written notice to the other Party. |
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1.52. |
“Expert” has the meaning set forth in Section 11.2. |
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1.53. |
“FDA” means the United States Food and Drug Administration and any successor entity thereto. |
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1.54. |
“FD&C Act” means the United States Federal Food, Drug, and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder. |
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1.55. |
“Field” the treatment of Diabetes type 1, Diabetes type 2 or Insulin dependent/requiring Diabetes. |
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1.57. |
“Force Majeure” means a condition, the occurrence and continuation of which is beyond the reasonable control of a Party and its Affiliates, including an act of God, voluntary or involuntary compliance with any regulation, law or order of any government, war, civil commotion, labor strike or lock-out, epidemic, flood, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe. |
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1.59. |
“GCP” means good clinical practices, which are the then-current standards for Clinical Trials for pharmaceuticals, as set forth in the FD&C Act or other Applicable Law, and such standards of good clinical practice as are required by the regulatory authorities of the European Union and other Governmental Authorities in countries for which the applicable Product Candidate is intended to be Developed, to the extent such standards are not less stringent than United States standards. |
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1.60. |
“Gene Editing Program Know-How” has the meaning set forth in Section 6.1.2(d). |
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1.61. |
“Gene Editing Program Patents” has the meaning set forth in Section 6.1.2(d). |
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1.62. |
“Gene Editing Program Technology” has the meaning set forth in Section 6.1.2(d). |
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1.63. |
“Gene Editing System” means [***]. |
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1.65. |
“Governmental Authority” means any court, agency, department, authority or other instrumentality of any national, state, county, city or other political subdivision. |
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1.66. |
“Granting Party” has the meaning set forth in Section 9.3.2(a)(iii). |
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1.67. |
“IND” means any Investigational New Drug application, filed with the FDA pursuant to Part 312 of Title 21 of the U.S. Code of Federal Regulations, including any supplements or amendments thereto. References herein to IND will include, to the extent applicable, any comparable filings outside the United States. |
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1.69. |
“Indemnifying Party” has the meaning set forth in Section 8.3. |
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1.70. |
“Insolvency Event” has the meaning set forth in Section 9.2.3(a). |
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1.71. |
“Joint Development & Commercialization Agreement” has the meaning set forth in Section 4.1. |
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1.72. |
“Joint Know-How” has the meaning set forth in Section 6.1.2(c). |
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1.74. |
“Joint Technology” has the meaning set forth in Section 6.1.2(c). |
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1.75. |
“Joint Research Committee” or “JRC” has the meaning set forth in Section 3.1.1. |
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1.77. |
“Knowledge” means, (a) when used with respect to CRISPR: the actual knowledge of CRISPR personnel and advisors that would reasonably be anticipated to have knowledge of facts relating to the relevant subject matter after having made reasonable inquiries and (b) when used with respect to ViaCyte: the actual knowledge of ViaCyte personnel and advisors that would reasonably be anticipated to have knowledge of facts relating to the relevant subject matter after having made reasonable inquiries. |
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1.78. |
“Liability” has the meaning set forth in Section 8.1. |
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1.80. |
“Licensed ViaCyte Technology” has the meaning set forth in Section 5.2.2. |
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1.81. |
“Licensee Party” has the meaning set forth in Section 9.2.3(b). |
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1.82. |
“Licensor Party” has the meaning set forth in Section 9.2.3(b). |
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1.83. |
“Manufacture” or “Manufactured” or “Manufacturing” means activities directed to making, having made, producing, manufacturing, processing, filling, finishing, packaging, labeling, quality control testing and quality assurance release, shipping or storage of a product. |
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1.84. |
“Marketing Approval” means, with respect to a Product in a particular jurisdiction, all approvals, licenses, registrations or authorizations necessary for the Commercialization of such Product in such jurisdiction, including, with respect to the United States, approval of an Approval Application for such Product by the FDA and with respect to the European Union, approval of an Approval Application for such Product by the European Commission. |
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1.86. |
“NDA” means a new drug application that is submitted to the FDA for marketing approval for a Product Candidate or Product, pursuant to 21 C.F.R. § 314.3. |
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1.89. |
“Non-Breaching Party” means the Party that believes the other Party is in material breach of this Agreement. |
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1.90. |
“Non-Disclosing Party” has the meaning set forth in Section 10.4.2. |
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1.91. |
“Open JDCA Terms” has the meaning set forth in Section 4.1.1. |
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1.92. |
“Party” or “Parties” has the meaning set forth in the Preamble. |
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1.93. |
“Patent Coordinator” has the meaning set forth in Section 6.3. |
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1.95. |
“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization, including a government or political subdivision or department or agency of a government. |
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1.96. |
“Price Approval” means, in any country where a Governmental Authority authorizes reimbursement for, or approves or determines pricing for, pharmaceutical products, receipt (or, if required to make such authorization, approval or determination effective, publication) of such reimbursement authorization or pricing approval or determination. |
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1.97. |
“Proceeding” means an action, suit or proceeding. |
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1.98. |
“Product Candidate” means an allogeneic cell therapy derived from gene edited human stem cells for use in the Field. References in this Agreement to stem cells include embryonic stem cells or induced pluripotent stem cells. |
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1.99. |
“Product” means any pharmaceutical product, medical therapy, preparation, substance, or formulation comprising or employing, in whole or in part, a Product Candidate. |
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1.100. |
“Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to a Patent, the preparing, filing, prosecuting and maintenance of such Patent, as well as handling re-examinations and reissues with respect to such Patent, together with the conduct of interferences, the defense of oppositions and other similar proceedings with respect to the particular Patent. For clarification, “Prosecution and Maintenance” or “Prosecute and Maintain” will not include any other enforcement actions taken with respect to a Patent. |
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1.103. |
“Regulatory Authority” means, in a particular country or regulatory jurisdiction, any applicable Governmental Authority involved in granting Regulatory Approval or, to the extent required in such country or regulatory jurisdiction, pricing or reimbursement approval of a Product in such country or regulatory jurisdiction. |
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1.104. |
“Research” means conducting research activities to discover and advance Product Candidates and Products, including pre-clinical studies and optimization, but specifically excluding Development and Commercialization. When used as a verb, “Researching” means to engage in Research. |
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1.105. |
“Research Activities” means the CRISPR Activities and the ViaCyte Activities, collectively, which will be focused on achieving Establishment of POC. |
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1.106. |
“Research Data Package” has the meaning set forth in Section 2.6. |
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1.107. |
“Research Plan” means a written plan describing the Research activities to be conducted by each Party with the objective to design and optimize Product Candidates and Products and to generate the data and information required to prepare the applicable Research Data Package, as may be amended by written agreement of the Parties. |
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1.108. |
“Research Program” means a program dedicated to the design, optimization and Research of a Product Candidate through to Establishment of POC pursuant to the Research Plan. |
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1.109. |
“Research Term” has the meaning set forth in Section 2.3. |
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1.110. |
“Research Term Expiration Date” has the meaning set forth in Section 2.3. |
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1.111. |
“Research Term Mutual Termination” has the meaning set forth in Section 2.3. |
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1.112. |
“Selected JRC Dispute” has the meaning set forth in Section 11.2.3. |
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1.113. |
“Stem Cell Program Know-How” has the meaning set forth in Section 6.1.2(e). |
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1.114. |
“Stem Cell Program Patents” has the meaning set forth in Section 6.1.2(e). |
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1.115. |
“Stem Cell Program Technology” has the meaning set forth in Section 6.1.2(e). |
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1.116. |
“Stem Cell Technology” means [***]. |
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1.117. |
“Subcontractor” has the meaning set forth in Section 2.6. |
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1.118. |
“Territory” means all countries of the world. |
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1.120. |
“United States” or “U.S.” means the fifty (50) states of the United States of America and all of its territories and possessions and the District of Columbia. |
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1.121. |
“Valid Claim” means a claim (a) of any issued, unexpired United States or foreign Patent, which will not, in the country of issuance, have been donated to the public, disclaimed, nor held invalid or unenforceable by a court of competent jurisdiction in an unappealed or unappealable decision, or (b) of any United States or foreign patent application, which will not, in the country in question, have been cancelled, withdrawn or abandoned. Notwithstanding the foregoing, on a country-by-country basis, a patent application pending for more than seven (7) years will not be considered to have any Valid Claim for purposes of this Agreement unless and until a patent meeting the criteria set forth in clause (a) above with respect to such application issues. |
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1.122. |
“ViaCyte” has the meaning set forth in the Preamble. |
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1.123. |
“ViaCyte Activities” means any and all Research Program activities conducted by ViaCyte, including those Research activities for which ViaCyte is designated as the responsible Party under the Research Plan. |
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1.124. |
“ViaCyte Background Know-How” means any Know-How, other than Joint Know-How and ViaCyte Program Know-How, that (a) ViaCyte or any of its Affiliates Control as of the Effective Date or that comes into the Control of ViaCyte or any of its Affiliates during the Agreement Term and (b) is reasonably necessary or reasonably useful for the Research, Development, Manufacture, Commercialization or use of Product Candidates or Products. |
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1.125. |
“ViaCyte Background Patents” means any Patent, other than a Joint Patent or ViaCyte Program Patent that (a) ViaCyte or any of its Affiliates Control as of the Effective Date or that comes into the Control of ViaCyte or any of its Affiliates during the Agreement Term and (b) claims or discloses any ViaCyte Background Know-How or is otherwise reasonably necessary or reasonably useful for the Research, Development, Manufacture, Commercialization or use of Product Candidates or Products. |
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1.126. |
“ViaCyte Background Technology” means the ViaCyte Background Know-How and the ViaCyte Background Patents. |
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1.127. |
“ViaCyte Indemnified Party” has the meaning set forth in Section 8.2. |
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1.129. |
“ViaCyte Know-How” means (a) ViaCyte Background Know-How, (b) ViaCyte Program Know-How and (c) ViaCyte’s interest in the Joint Know-How. |
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1.130. |
“ViaCyte Patent Challenge” has the meaning set forth in Section 9.2.2(b)(i). |
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1.131. |
“ViaCyte Patents” means (a) ViaCyte Background Patents, (b) ViaCyte Program Patents, and (c) ViaCyte’s interest in the Joint Patents. |
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1.133. |
“ViaCyte Program Patents” has the meaning set forth in Section 6.1.2(b). |
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1.134. |
“ViaCyte Program Technology” has the meaning set forth in Section 6.1.2(b). |
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1.135. |
“ViaCyte Technology” means (a) the ViaCyte Background Technology, (b) the ViaCyte Program Technology, and (c) ViaCyte’s interest in any Joint Technology. |
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2.5. |
Briefing the JRC. At each regularly scheduled meeting of the JRC, which shall be no less frequent than quarterly, each Party will provide detailed progress updates on Research |
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Activities along with a summary of data associated with such Research Activities, which updates and summaries will be provided to JRC members at least ten (10) days in advance of any JRC meeting. The agenda for meetings of the JRC will be set by the JRC representatives. |
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2.7. |
Subcontractors. Each Party may engage consultants, subcontractors, or other vendors (each, a “Subcontractor”) to perform any Research Activities. Each contract between a Party and a Subcontractor for Research Activities will be consistent with the provisions of this Agreement (including ARTICLE 6 and ARTICLE 10). Each Party will be responsible for the effective and timely management of and payment of its Subcontractors. The engagement of any Subcontractor in compliance with this Section will not relieve the applicable Party of its obligations under this Agreement or the Research Plan. The Parties will each be solely responsible for any taxes, including income, withholding, payroll, VAT, sales tax or the like, that arise from their respective use of a Subcontractor. |
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(a) |
[***]; |
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(b) |
[***]; or |
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(c) |
[***]. |
[***].
ARTICLE 3.
GOVERNANCE
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provide the members periodic updates regarding progress of activities pursuant to this Agreement and to address the matters set forth in Section 3.1.2. The JRC shall have one of its members prepare and circulate agendas to JRC members at least five (5) days prior to each JRC meeting and prepare reasonably detailed minutes for each JRC meeting, which shall be circulated to JRC members within thirty (30) days of such meeting. Each Party will be responsible for its own expenses relating to attendance at or participation in JRC meetings. |
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(a) |
review and approve any proposed amendment to the Research Plan; |
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(b) |
prioritize the performance of activities under the Research Plan; |
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(c) |
provide comments and recommendations to each Party with respect to the conduct of activities under the Research Plan; |
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(d) |
provide a forum for the Parties to discuss the objectives and progress under the Research Plan and to exchange and review scientific information and data relating to the activities being conducted under the Research Plan; and |
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(e) |
perform such other duties as are specifically assigned to the JRC under this Agreement. |
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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3.3.2. |
Specific Responsibilities. The Alliance Managers may be, but will not be required to be, members of the JRC. The Alliance Managers will serve as the primary contact point between the Parties for the purpose of providing each Party with information regarding the other Parties’ activities pursuant to this Agreement and will have the following responsibilities: |
|
(a) |
schedule meetings of the JRC and circulate draft written minutes from each meeting within fourteen (14) days after each such meeting; |
|
(b) |
facilitate the flow of information and otherwise promoting communication, coordination and collaboration between the Parties; |
|
(c) |
provide a single point of communication for seeking consensus both internally within the respective Party’s organization and between the Parties regarding key strategy and planning issues; and |
|
(d) |
perform such other functions as requested by the JRC. |
ARTICLE 4.
MUTUAL DEVELOPMENT AND COMMERCIALIZATION
16
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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Development and Commercialization Agreement at that time, but failure to do so will not impact the effectiveness of the Joint Development and Commercialization Agreement. |
ARTICLE 5.
LICENSE GRANTS
|
5.1.1. |
Research License. Subject to the terms and conditions of this Agreement, CRISPR hereby grants to ViaCyte and its Affiliates a non-exclusive, royalty-free, fully paid-up, worldwide license, with no right to grant sublicenses except to Subcontractors as provided in Section 2.7, to use the CRISPR Technology solely to perform the ViaCyte Activities during the Research Term. |
17
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
5.2.1. |
Research License. Subject to the terms and conditions of this Agreement, ViaCyte hereby grants to CRISPR a non-exclusive, royalty-free, fully paid-up, worldwide license, with no right to grant sublicenses except to Subcontractors as provided under section 2.7, to use the ViaCyte Technology solely to perform the CRISPR Activities during the Research Term. |
18
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
ARTICLE 6.
INTELLECTUAL PROPERTY
19
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
20
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
21
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
22
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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(c) |
CRISPR hereby agrees that it will provide notice to ViaCyte of any intellectual property rights that are available for acquisition or in-license and that relate primarily to Stem Cell Technology (but, for avoidance of doubt, excluding intellectual property rights that pertain to Gene Editing Systems). CRISPR will provide ViaCyte with such available information as CRISPR possesses regarding such intellectual property rights, subject to any confidentiality obligations. If ViaCyte notifies CRISPR that ViaCyte will pursue an acquisition or in-license of such intellectual property rights then: (i) ViaCyte will negotiate in good faith towards such an acquisition or in-license on commercially reasonable terms that result in ViaCyte Controlling such intellectual property rights for purposes of the licenses granted by ViaCyte hereunder and under the Joint Development and Commercialization Agreement and (ii) during such negotiation or the term of any such acquisition or in-license agreement, CRISPR will not pursue, directly or indirectly, an acquisition or in-license of such intellectual property rights without ViaCyte’s prior written consent, not to be unreasonably withheld, delayed or conditioned. Nothing will prevent CRISPR from acquiring or in-licensing such intellectual property rights, at its sole discretion, for any use other than research, development, manufacture or commercialization of any allogeneic cell therapy derived from gene edited human stem cells in the Field. |
|
6.2. |
Prosecution and Maintenance of Patents. The Parties hereby agree as follows with respect to the Prosecution and Maintenance of certain Patents. |
|
6.2.1. |
CRISPR Patents. As between the Parties, CRISPR will control and be responsible for all aspects of the Prosecution and Maintenance of CRISPR Patents (excluding Joint Patents). |
23
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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6.2.2. |
ViaCyte Patents. As between the Parties, ViaCyte will control and be responsible for all aspects of the Prosecution and Maintenance of all ViaCyte Patents (excluding Joint Patents). |
|
(c) |
Neither Party will make any Patent submission (including the filing of patent applications) with respect to any Joint Patent, to the extent that it could reasonably be expected to prejudice or adversely affect the potential patentability of any claimed subject matter of a CRISPR Background Patent (in the case of ViaCyte) or ViaCyte Background Patent (in the case of CRISPR), except with the other Party’s prior written consent (such consent not to be unreasonably withheld and such consent to be negotiated in good faith with all due consideration to any deadlines). |
For ViaCyte: Liz Bui, Ph.D.
For CRISPR: Shelby Walker
24
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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6.5.2. |
Patents Solely Owned by CRISPR. CRISPR will retain all rights to pursue an infringement of any Patent solely owned by CRISPR and CRISPR will retain all recoveries with respect thereto. |
|
6.5.3. |
Patents Solely Owned by ViaCyte. ViaCyte will retain all rights to pursue an infringement of any Patent solely owned by ViaCyte and ViaCyte will retain all recoveries with respect thereto. |
|
6.6. |
CREATE Act. Notwithstanding anything to the contrary in this ARTICLE 6, neither Party will have the right to make an election under the CREATE Act when exercising its rights under this ARTICLE 6 without the prior written consent of the other Party, which will not be unreasonably withheld, conditioned or delayed. With respect to any such permitted election, the Parties will use reasonable efforts to cooperate and coordinate their activities with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in the CREATE Act. |
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
|
7.1. |
Representations and Warranties of ViaCyte. ViaCyte hereby represents and warrants to CRISPR, as of the Effective Date, that, except as otherwise set forth on Schedule 7.1: |
|
7.1.1. |
ViaCyte is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof; |
25
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
7.1.4. |
this Agreement has been duly executed and delivered on behalf of ViaCyte, and constitutes a legal, valid and binding obligation, enforceable against ViaCyte in accordance with the terms hereof; |
|
7.1.7. |
the ViaCyte Technology constitutes all of the Patents and Know-How Controlled by ViaCyte that are necessary to conduct the Research Program; |
26
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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Technology or relating to the transactions contemplated by this Agreement; and |
|
7.2. |
Representations and Warranties of CRISPR. CRISPR hereby represents and warrants to ViaCyte, as of the Effective Date, that, except as otherwise set forth on Schedule 7.2: |
|
7.2.1. |
CRISPR is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof; |
|
7.2.2. |
CRISPR (a) has the requisite corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (b) has taken all requisite corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; |
|
7.2.3. |
CRISPR has the requisite resources and expertise to perform its obligations hereunder; |
|
7.2.4. |
this Agreement has been duly executed and delivered on behalf of CRISPR, and constitutes a legal, valid and binding obligation, enforceable against it in accordance with the terms hereof; |
|
7.2.5. |
the execution, delivery and performance of this Agreement by CRISPR does not and will not constitute a default under or conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, or violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; |
|
7.2.6. |
CRISPR has obtained all necessary consents, approvals and authorizations of all Governmental Authorities and other Persons or entities required to be obtained by CRISPR in connection with the execution and delivery of this Agreement; |
|
7.2.7. |
the CRISPR Technology constitutes all of the Patents and Know-How Controlled by CRISPR that are necessary to conduct the Research Program; |
|
7.2.8. |
CRISPR is the sole and exclusive owner or exclusive licensee of the CRISPR Background Patents, free and clear of any liens, charges and encumbrances (other than encumbrances under the terms of any agreement pursuant to which any such Patents are licensed to CRISPR), and neither any license granted by CRISPR to any Third Party, nor any license granted by any Third Party to CRISPR conflicts with the license grants to ViaCyte under Section 5.1 and CRISPR is entitled to grant all rights and licenses (or sublicenses, as the case may be) under CRISPR Background Patents it purports to grant to ViaCyte under this Agreement; |
27
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
7.2.11. |
there are no judgments or settlements against or [***] pending or threatened claims or litigation, in either case relating to the CRISPR Background Technology; |
|
7.2.12. |
[***]; and |
|
7.2.13. |
CRISPR has not employed (and, to CRISPR’s Knowledge, CRISPR has not used a contractor or consultant that has employed) any Person debarred by the FDA (or subject to a similar sanction of EMA or foreign equivalent), or any Person that is the subject of an FDA debarment investigation or proceeding (or similar proceeding of EMA or foreign equivalent), in any capacity in connection with this Agreement. |
|
7.3. |
CRISPR Covenants. CRISPR hereby covenants to ViaCyte that, except as expressly permitted under this Agreement: |
|
7.3.3. |
it will not, and will cause its Affiliates not to license, sell, assign or otherwise transfer to any Person any CRISPR Technology (or agree to do any of the foregoing), except as will not adversely restrict, limit or encumber the rights granted to ViaCyte under Section 5.2 of this Agreement; |
|
7.3.4. |
it will notify ViaCyte of any intellectual property rights of any Third Party that relate primarily to Gene-Editing Systems and CRISPR determines are necessary for the practice of any CRISPR Background Technology and are not subject to a CRISPR In-License Agreement; |
|
7.3.5. |
it will use Commercially Reasonable Efforts to obtain and maintain the requisite resources and expertise to perform its obligations hereunder; |
28
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
grant exclusive license rights to CRISPR with a right to grant sublicenses through multiple tiers; |
|
7.3.7. |
it will not engage, in any capacity in connection with this Agreement any Person who either has been debarred by the FDA, is the subject of a conviction described in Section 306 of the FD&C Act or is subject to any such similar sanction; and |
|
7.3.8. |
CRISPR will inform ViaCyte in writing promptly if it or any Person engaged by CRISPR or any of its Affiliates who is performing CRISPR Activities under this Agreement is debarred or is the subject of a conviction described in Section 306 of the FD&C Act, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to CRISPR’s Knowledge, is threatened, relating to the debarment or conviction of CRISPR, any of its Affiliates or any such Person performing CRISPR Activities hereunder. |
|
7.4. |
ViaCyte Covenants. ViaCyte hereby covenants to CRISPR that, except as expressly permitted under this Agreement: |
|
7.4.1. |
ViaCyte will maintain and not breach any ViaCyte In-License Agreements that provide a grant of rights from such Third Party to ViaCyte that are Controlled by ViaCyte and are licensed or may become subject to a license from ViaCyte to CRISPR for a Product Candidate or Product under this Agreement; |
|
7.4.2. |
ViaCyte will promptly notify CRISPR of any material breach by ViaCyte or a Third Party of any ViaCyte In-License Agreements (including any New ViaCyte In-License) that provides a grant of rights from such Third Party to ViaCyte and are licensed or may become subject to a license from ViaCyte to CRISPR to conduct CRISPR Activities or for a Product Candidate or Product under this Agreement; |
|
7.4.3. |
it will not, and will cause its Affiliates not to license, sell, assign or otherwise transfer to any Person any ViaCyte Technology (or agree to do any of the foregoing), except as will not adversely restrict, limit or encumber the rights granted to CRISPR under Section 5.1 of this Agreement; |
|
7.4.4. |
it will notify CRISPR of any intellectual property rights of any Third Party that relate primarily to Stem Cell Technology, are necessary for the practice of any ViaCyte Background Technology and are not subject to a ViaCyte In-License Agreement; |
|
7.4.5. |
it will use Commercially Reasonable Efforts to obtain and maintain the requisite resources and expertise to perform its obligations hereunder; |
|
7.4.6. |
it will notify CRISPR of any intellectual property rights of any Third Party that all employees and Subcontractors of ViaCyte performing ViaCyte Activities hereunder on behalf of ViaCyte will be obligated to assign to ViaCyte all right, title and interest in and to any inventions developed by them, whether or not patentable, or, solely with respect to Subcontractors, grant exclusive license rights to ViaCyte with a right to grant sublicenses through multiple tiers; |
29
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
7.4.8. |
ViaCyte will inform CRISPR in writing promptly if it or any Person engaged by ViaCyte or any of its Affiliates who is performing ViaCyte Activities under this Agreement or any ancillary agreements is debarred or is the subject of a conviction described in Section 306 of the FD&C Act, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to ViaCyte’s Knowledge, is threatened, relating to the debarment or conviction of CRISPR, any of its Affiliates or any such Person performing ViaCyte Activities hereunder. |
30
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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Development and that neither Party can assure the safety, usefulness or commercial or technical viability of any Product or the results of the Research Program. |
ARTICLE 8.
INDEMNIFICATION; INSURANCE
|
8.1.1. |
[***] |
|
8.1.2. |
[***]. |
|
8.2.2. |
[***]. |
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
33
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
34
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
(ii) |
not interfere with the Licensee Party’s rights under this Agreement, to such intellectual property licensed to the Licensee Party under Section 5.1 or 5.2 of this Agreement, as applicable (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity, to the extent provided in Section 365(n) of the U.S. Bankruptcy Code. |
|
(c) |
All rights, powers and remedies of the Licensee Party provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including the U.S. Bankruptcy Code) in the event of the commencement of a case under the U.S. Bankruptcy Code with respect to the Licensor Party. The Parties agree that they intend the following rights to extend to the maximum extent permitted by Applicable Law, and to be enforceable under U.S. Bankruptcy Code Section 365(n): |
35
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
(i) |
the right of access to any intellectual property rights licensed to the Licensee Party under Section 5.1 or 5.2 of this Agreement, as applicable (including all embodiments thereof), by the Licensor Party, or any Third Party with whom the Licensor Party contracts to perform an obligation of the Licensor Party under this Agreement, and, in the case of any such Third Party, which is necessary for the Research Activities; and |
|
(ii) |
the right to contract directly with any Third Party to complete the Research Activities. |
|
(b) |
Termination or expiration of this Agreement for any reason will be without prejudice to any rights or financial compensation that will have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement. |
36
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
purposes of this Section 9.3.2, CRISPR shall be deemed the Continuing Party and ViaCyte shall be deemed to be the Granting Party. |
|
(c) |
Upon termination of this Agreement for the reasons described in Section 9.3.2(a), (x) the license granted in Section 5.1.2 (only if CRISPR is the Granting Party) or Section 5.2.2 (only if ViaCyte is the Granting Party) shall become exercisable and the license granted by the Continuing Party shall automatically terminate, and (y) the Granting Party shall do the following to allow the Continuing Party to continue researching, developing, commercializing and manufacturing Products and Product Candidates in the Field (it being agreed that the Parties intend to use reasonable efforts to minimize any material business interruptions): |
37
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
38
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
(d) |
Upon termination of this Agreement for the reasons described in Section 9.3.2(a), the Granting Party shall not, itself or with or through any Affiliates or Third Parties, use or reference any Joint Technology to research, develop, manufacture or commercialize Product Candidates or Products for use in the Field on or prior to the second (2nd) anniversary of the effective date of termination of this Agreement. |
39
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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(the economics described in clauses (i) and (ii) hereof are collectively referred to as the “Continuing Payments”), with the amount of each element of the Continuing Payments taking into consideration the status of the Research Program at the time of such termination, the value of the funding provided by CRISPR to ViaCyte in connection with this Agreement, and the reasons for such termination; provided that, if the Parties have not mutually agreed upon each element of the Continuing Payments within ninety (90) days after the effective date of termination (or such longer period as agreed by the Parties in writing), either Party may submit the matter for resolution pursuant to ARTICLE 11. |
If a Party deems it reasonably necessary to disclose Confidential Information belonging to the other Party pursuant to this Section 10.2, the Disclosing Party will to the extent possible give reasonable advance written notice of such disclosure to the other Party and take reasonable measures to ensure confidential treatment of such information.
40
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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country in the Territory; provided, that such Party will reasonably consider the comments of the other Party regarding confidential treatment sought for such disclosure and (ii) to its advisors (including financial advisors, attorneys and accountants), Third Parties conducting due diligence or similar investigations, including actual or potential acquisition or collaboration partners, financing sources or investors and underwriters, on a need to know basis; provided that such disclosure is covered by terms of confidentiality similar to those set forth herein (which may include professional ethical obligations). |
41
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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Section 11.2.4. All proceedings and communications shall be in English. Either Party may apply to the Expert for interim injunctive relief. The Parties shall have the right to be represented by counsel. The Parties acknowledge and agree that any Dispute involving the Continuing Payments shall be limited solely to the amounts thereof (as limited by the provisions of Section 9.3.2(f)) and the associated performance milestone(s), and shall not involve the negotiation of any other provision of this Agreement or the transactions contemplated hereby. |
|
11.2.5. |
Timetable for Completion. The Parties will use, and will direct the Expert to use, commercially reasonable efforts to resolve a dispute within forty-five (45) days after the selection of the Expert or, if resolution within forty-five (45) days is not reasonably achievable, as determined by the Expert, then as soon thereafter as is reasonably practicable. |
|
11.3. |
Award. Any award to be paid by one Party to the other Party as determined by the Expert as set forth above under Section 11.2 shall be promptly paid in U.S. Dollars free of any tax, deduction or offset; and any costs, fees or taxes incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the Party resisting enforcement. |
43
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
|
11.6. |
Confidentiality. The arbitration proceeding shall be confidential and the Expert shall issue appropriate protective orders to safeguard each Party’s Confidential Information. Except as required by Applicable Law, no Party shall make (or instruct the Expert to make) any public announcement with respect to the proceedings or decision of the Expert without prior written consent of the other Party. The existence of any Dispute submitted to arbitration, and the award, shall be kept in confidence by the Parties and the Expert, except as required in connection with the enforcement of such award or as otherwise required by Applicable Law. |
44
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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provisions of this Agreement, the Parties agree that no presumption will exist or be implied against the Party that drafted such terms and provisions. |
If to ViaCyte:
ViaCyte, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attn: President and Chief Executive Officer
with a copy to:
Cooley LLP
Attn: Kay Chandler
4401 Eastgate Mall
San Diego, CA 92121
and:
If to CRISPR:
CRISPR Therapeutics AG
Baarerstrasse 14
6300 Zug
Switzerland
Attn: each of Chief Executive Officer and General Counsel
with copies to:
CRISPR Therapeutics, Inc.
610 Main Street
Cambridge, MA 02139
Attn: General Counsel
email to legal@crisprtx.com
with a copy to:
Goodwin Procter LLP
Attn: Christopher Denn
100 Northern Avenue
Boston, Massachusetts 02210
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith.
45
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
[SIGNATURE PAGE FOLLOWS]
47
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
48
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their representatives thereunto duly authorized as of the Effective Date.
VIACYTE, INC. |
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CRISPR THERAPEUTICS AG |
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By: |
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/s/ Paul K. Laikind, Ph.D. |
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By: |
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/s/ Rodger Novak |
Name: |
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Paul K. Laikind, Ph.D. |
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Name: |
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Rodger Novak |
Title: |
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President and Chief Executive Officer |
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Title: |
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President |
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Establishment of POC
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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Research Plan
[***]
Exhibit C-2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Terms of Joint Development & Commercialization Agreement
The Parties shall negotiate towards a Joint Development and Commercialization Agreement pursuant to which the Parties would jointly develop and commercialize Product Candidates and Products for use in the Field throughout the Territory, which will be consistent with the principal terms set forth in this Exhibit C and include such other terms as mutually agreed to by the Parties. There shall be no final and binding Joint Development and Commercialization Agreement until a final agreement is reached pursuant to Section 4.1.1 of the Research Collaboration Agreement and the Parties execute and deliver such final agreement.
Article 1
DEFINITIONS.
1.1. |
“Accounting Standards” means generally accepted accounting principles in the United States or internationally the international financial reporting standards, as appropriate, as generally and consistently applied in compliance with Applicable Law throughout the relevant company’s organization at the relevant time in the United States or internationally, as appropriate, and means the international financial reporting standards (“IFRS”) at such time as IFRS becomes the generally accepted accounting standard and Applicable Law require that such company use IFRS. |
1.2. |
“Arbitration” means arbitration in accordance with the arbitration procedure set forth on Schedule 2.2 to this Exhibit C. |
1.3. |
“Audited Party” has the meaning set forth in Section 7.6. |
1.4. |
“Auditing Party” has the meaning set forth in Section 7.6. |
1.5. |
“CMC” means chemistry, manufacturing and controls in support of Development. |
1.6. |
“Commercialization Budget” has the meaning set forth in Section 5.1. |
1.7. |
“Commercialization Costs” means the sum of the following costs and expenses incurred by the Parties or their respective Affiliates, for the purpose of, and directly and specifically attributable to, Commercializing the Products (and related Manufacturing activities) in the Field in the Territory, in each case, to the extent incurred in accordance with the Commercialization Plan and Commercialization Budget: |
[***]
All Commercialization Costs shall be as determined from the books and records of the applicable Party and its Affiliates maintained in accordance with the Accounting Standards. Notwithstanding anything in this definition to the contrary, only those Commercialization Costs that are contemplated by, and materially consistent with, the Commercialization Plan and Commercialization Budget for the Product shall be chargeable as Commercialization Costs. For purposes of clarity, no general corporate overhead or fixed charges, such as depreciation, shall constitute Commercialization Costs (except as expressly provided under the definition of Manufacturing Costs).
Exhibit C-3
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
1.8. |
“Commercialization Plan” has the meaning set forth in Section 5.1. |
1.9. |
“Cost of Goods Sold” means, to the extent that a Party or its Affiliate, licensee or sublicensee performs all or any part of the Manufacturing of a Product, [***]. |
1.10. |
“CRISPR JDCA Background Technology” means CRISPR JDCA Background Know-How and CRISPR JDCA Background Patents. |
1.11. |
“CRISPR JDCA Background Know-How” means any Know-How, other than Joint Know-How and CRISPR Program Know-How, that (a) CRISPR or any of its Affiliates Controls as of the Effective Date, during the term of the Research Collaboration Agreement or as of the effective date of the Joint Development & Commercialization Agreement, or that comes into the Control of CRISPR or any of its Affiliates during the term of the Joint Development & Commercialization Agreement and (b) is reasonably necessary or useful for the Development, Manufacture, Commercialization or use of the Products. |
1.12. |
“CRISPR JDCA Background Patents” means any Patent, other than a Joint Patent or CRISPR Program Patent that (a) CRISPR or any of its Affiliates Controls as of the Effective Date, during the term of the Research Collaboration Agreement or as of the effective date of the Joint Development & Commercialization Agreement or that comes into the Control of CRISPR or any of its Affiliates during the term of the Joint Development & Commercialization Agreement and (b) claims or discloses any CRISPR JDCA Background Know-How or is otherwise necessary or useful for the Development, Manufacture, Commercialization or use of the Products. |
1.13. |
“CRISPR JDCA Patents” means CRISPR JDCA Background Patents, CRISPR Program Patents, and CRISPR’s interest in Joint Patents. |
1.14. |
“Development Budget” has the meaning set forth in Section 3.1. |
1.15. |
“Development Costs” means the sum of the following costs and expenses incurred by the Parties and their respective Affiliates in Developing the Product (and related Manufacturing activities) in the Field in the Territory, in each case, to the extent incurred in accordance with the Global Development Plan and the Development Budget subject to Section 7.5, including: |
[***]
All of such Commercialization Costs shall be as determined from the books and records of the applicable Party and its Affiliates maintained in accordance with the Accounting Standards. Notwithstanding anything in this definition to the contrary, only those Development Costs that are contemplated by, and materially consistent (as provided in Section 7.5) with, the Global Development Plan and Development Budget for the Product shall be chargeable as Development Costs. For purposes of clarity, no general corporate overhead or fixed charges, such as depreciation, shall constitute Development Costs (except as expressly provided under the definition of Manufacturing Costs).
1.16. |
“Establishment of hPOC” means, with respect to a Product, that data generated from the Global Development Program for such Product meets the criteria on Schedule 1.16 to this Exhibit C. |
1.17. |
“Expenses” means Out-of-Pocket Costs and FTE Costs. |
Exhibit C-4
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
1.19. |
“FTE” means one employee full-time for one year or more than one person working the equivalent of a full-time person, working directly on performing activities under the Global Development Plan, Medical Affairs Plan or Commercialization Plan, as applicable, where “full-time” is considered [***] hours (based upon a total of [***] weeks for one Calendar Year). No additional payment will be made with respect to any individual who works more than [***] hours per Calendar Year and any individual who devotes less than [***] hours per Calendar Year will be treated as an FTE on a pro rata basis based upon the actual number of hours worked divided by [***]. |
1.20. |
“FTE Rate” means (a) for scientific or technical personnel, [***] per one (1) full scientific or technical FTE per full twelve (12) month Calendar Year, which rate includes all direct and indirect costs of a Party’s FTE, including personnel and travel expenses, and (b) for all distribution, sales and marketing, and other non-scientific and nontechnical personnel, a rate or rates to be negotiated between the Parties in good faith at least one hundred eighty (180) days prior to the date on which a Party begins to incur such costs. Starting January 1, 2019, the foregoing rate will adjust on January 1 of each Calendar Year by an amount equal to the change, if any, in the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, calculated by the Bureau of Labor Statistics during the immediately preceding Calendar Year. Notwithstanding the foregoing, for any Calendar Year during the Term that is less than a full year, the above referenced rate will be proportionately reduced to reflect such portion of FTEs for such full Calendar Year. |
1.21. |
“Global Development Plan” has the meaning set forth in Section 3.1. |
1.22. |
“Global Branding Strategy” has the meaning set forth in Section 5.2.2. |
1.23. |
“Initiation” shall mean, with respect to any Phase II Clinical Trial or Phase III Clinical Trial, [***]. |
1.24. |
“JCC” has the meaning set forth in Section 2.1. |
1.25. |
“JDC” has the meaning set forth in Section 2.1. |
1.26. |
“JSC” has the meaning set forth in Section 2.1. |
1.27. |
“Lead Commercialization Party” has the meaning set forth in Section 5.1. |
1.28. |
[“Licensed Know-How” means ______________________. |
1.29. |
“Licensed Patents” means ___________________.]1 |
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1 |
Note to draft: Definitions to be addressed later in negotiation of the Joint Development & Commercialization Agreement when commercialization strategy and license grants in Article 10 are determined. |
Exhibit C-5
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
1.31. |
“Manufacturing Working Group” has the meaning set forth in Section 6.1. |
1.32. |
“Medical Affairs Activities” means responding to external inquiries or complaints, the planning for and conduct of investigator sponsored Clinical Trials not included in the Global Development Plan, medical education, speaker programs, advisory boards, thought leader activities, educational grants and fellowships, local country government affairs, Phase 3b Clinical Trials, phase IV/post-Regulatory Approval Clinical Trials, generating health economics and outcomes research data from patient reported outcomes, prospective observational studies and retrospective observational studies, and economic models and reimbursement dossiers, deployment of MSLs, medical affairs clinical trial management, doctors in field (other than MSLs), scientific publications and medical communications. |
1.33. |
“Medical Affairs Budget” has the meaning set forth in ARTICLE 4. |
1.34. |
“Medical Affairs Costs” means all Expenses incurred by the Parties in connection with the conduct of Medical Affairs Activities in accordance with the Medical Affairs Plan and the Medical Affairs Budget. |
1.35. |
“Medical Affairs Plan” has the meaning set forth in ARTICLE 4. |
1.36. |
“MSL” means medical science liaisons. |
1.37. |
“Net Sales” means with respect to any Product, the gross amounts billed or invoiced, and if any amount is not billed or invoiced, the gross amounts received, by a Party, its Affiliates and sublicensees (for clarity, excluding any Third Party that functions as a distributor that does not receive a license or sublicense under Patents or Know-How) (each, a “Selling Party”) from Third Party customers for sales or other dispositions of such Product, less the following deductions actually incurred, allowed, paid, accrued or specifically allocated in its financial statements in accordance with the Accounting Standards applied by such Selling Party, for: |
[***]. There shall be no double counting in determining the foregoing deductions from gross amounts invoiced to calculate Net Sales. The calculations set forth in this Section 1.37 shall be determined in accordance with applicable Accounting Standards, as consistently applied by the applicable Selling Party. Transfers of the Product between a Party or its Affiliates and another Selling Party for the purpose of subsequent resale to Third Parties will not generate Net Sales; with respect to such transfers, only the gross amounts invoiced in connection with the subsequent resale of the Product to Third Parties will be included in the calculation of Net Sales. [***]
Exhibit C-6
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
In the event that the Product is sold as part of a Combination Product (where “Combination Product” means any pharmaceutical product which comprises a Product and any other active compound(s), whether combined in a single formulation or package, as applicable, or formulated separately but packaged under a single label approved by a Regulatory Authority and sold together for a single price), the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product by the fraction, [***] In no event will a Product (as the only active component) sold with a delivery device be considered a Combination Product.
In the event that the list price of the Product can be determined but the list price of the other active compound(s) cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A / C where A is the list price of the Product when sold separately in finished form and C is the list price of the Combination Product.
In the event that a Selling Party does not sell the Product included in a Combination Product as a separate product in the country where such sale of Combination Product occurs, but does separately sell all of the other active compound(s) included in the sale of such Combination Product in such country, the calculation of Net Sales resulting from such sale shall be determined by multiplying the actual Net Sales of such Combination Product by the fraction (C-D)/C, where C is the invoice price charged by the Selling Party, in the country where such sale occurs, of the entire Combination Product, and D is the aggregate of invoice price charged by such Selling Party, in such country, of such other active compound(s) included in the Combination Product if sold separately in such country by the Selling Party.
1.38. |
“Out-of-Pocket Costs” means, with respect to certain activities for a Product hereunder, specifically identifiable direct expenses paid or payable by either Party or its Affiliates to Third Parties and specifically documented and incurred to conduct such activities, including payments to any Subcontractors pursuant to any Global Development Plan, Medical Affairs Plan or Commercialization Plan, as well as to Third Parties for the Manufacture of Product. |
1.39. |
“Opt-Out Royalties” has the meaning set forth in Section 11.3. |
1.40. |
“Other Out-of-Pocket Costs” means: [***] |
1.41. |
“Patent Costs” means all Expenses reasonably allocated to the Products for the prosecution, maintenance and enforcement of CRISPR JDCA Patents, CRISPR Program Patents, ViaCyte JDCA Patents, ViaCyte Program Patents and Joint Patents that Cover the Products. |
1.42. |
“Pharmacovigilance Agreement” has the meaning set forth in Section 8.1. |
1.43. |
“Phase III Clinical Trial” means a human clinical trial of a Product in the Field, the principal purpose of which is to gather safety and efficacy data of one or more particular doses in patients being studied that is needed to evaluate the overall benefit and risk relationship of the Product and to provide adequate basis for labeling, as more fully defined in 21 C.F.R. §312(c) or comparable regulations in any country or jurisdiction outside the U.S. (and any amended or successor regulations). |
Exhibit C-7
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
1.44. |
“Program Expenses” means Development Costs, Commercialization Costs, Medical Affairs Costs, Patent Costs and Other Out-of-Pocket Costs. |
1.45. |
“Project Leader” has the meaning set forth in Section 3.1. |
1.46. |
“Project Team” has the meaning set forth in Section 3.1. |
1.47. |
“Research Collaboration Agreement” means the Research Collaboration Agreement dated as of September 17, 2018 between the Parties, as the same may be amended, restated, modified or supplemented from time to time in accordance with its terms. |
1.48. |
“Reconciliation Report” has the meaning set forth in Section 7.4. |
1.49. |
“Subcontract” has the meaning set forth in ARTICLE 9. |
1.50. |
“Subcontractor” has the meaning set forth in ARTICLE 9. |
1.51. |
“Summary Statement” has the meaning set forth in Section 7.3. |
1.52. |
“Trademark” means all trademarks, service marks, trade names, brand names, sub-brand names, trade dress rights, product configuration rights, certification marks, collective marks, logos, taglines, slogans, designs or business symbols and all words, names, symbols, colors, shapes, designations or any combination thereof that function as an identifier of source or origin or quality, whether or not registered, and all statutory and common law rights therein, and all registrations and applications therefor, together with all goodwill associated with, or symbolized by, any of the foregoing. |
1.53. |
“ViaCyte JDCA Background Know-How” means any Know-How, other than Joint Know-How and ViaCyte Program Know-How, that (i) ViaCyte or any of its Affiliates Controls as of the Effective Date, during the term of the Research Collaboration Agreement or as of the effective date of the Joint Development & Commercialization Agreement or that comes into the Control of ViaCyte or any of its Affiliates during the term of the Joint Development & Commercialization Agreement and (ii) is reasonably necessary or useful for the Development, Manufacture, Commercialization or use of Products. |
1.54. |
“ViaCyte JDCA Background Patents” means any Patent, other than a Joint Patent or ViaCyte Program Patent that (i) ViaCyte or any of its Affiliates Controls as of the Effective Date, during the term of the Research Collaboration Agreement or as of the effective date of the Joint Development & Commercialization Agreement or that comes into the Control of ViaCyte or any of its Affiliates during the term of the Joint Development & Commercialization Agreement and (ii) claims or discloses any ViaCyte JDCA Background Know-How or is otherwise necessary or useful for the Development, Manufacture, Commercialization or use of Products. |
1.55. |
“ViaCyte JDCA Background Technology” means ViaCyte JDCA Background Know-How and ViaCyte JDCA Background Patents. |
1.56. |
“ViaCyte JDCA Patents” means ViaCyte JDCA Background Patents, ViaCyte Program Patents, and ViaCyte’s interest in Joint Patents. |
Exhibit C-8
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
All capitalized terms used but not otherwise defined in this Exhibit C shall have the meaning set forth in the Research Collaboration Agreement.
Article 2
GOVERNANCE.
2.1. |
Committees. As soon as practicable (but not later than 10 Business Days after execution of the Joint Development & Commercialization Agreement, the Parties will establish a joint steering committee (the “JSC”) to provide high-level oversight and decision-making regarding the activities of the Parties under the Joint Development & Commercialization Agreement. The JSC shall be comprised of three (3) representatives (or such other number of representatives as the Parties may agree) from each of ViaCyte and CRISPR. Each Party shall provide the other with a list of its initial members of the JSC on the Effective Date. Each Party may replace any or all of its representatives on the JSC at any time upon written notice to the other Party. Each representative of each Party shall have appropriate expertise in the pharmaceutical business or drug discovery and development. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. Each Party may, in its reasonable discretion, invite non-member representatives of such Party to attend meetings of the JSC as a non-voting participant, subject to the confidentiality obligations described in Article 12 below. The Parties shall designate a chairperson (each, a “Chairperson”) to oversee the operation of the JSC, each such Chairperson to serve a [***]. The right to name the Chairperson shall alternate between the Parties, with CRISPR designating the first such Chairperson. The JSC’s responsibilities will include (a) reviewing and overseeing the overall global Development, Manufacture and Commercialization of the Products in the Field, (b) overseeing the joint development committee (the “JDC”) and a joint commercialization committee (the “JCC”) and any other committees and working groups established with respect to the Product and resolving matters on which the JDC, JCC or such committees and working groups are unable to reach consensus and (c) performing such other functions as may be established in the Joint Development & Commercialization Agreement. |
2.2. |
Decision-Making. The JSC, JDC, JCC and all other committees and working groups will use reasonable efforts to reach agreement on any and all matters that such committee has the authority to decide and endeavor to reach consensus on all such matters, taking into consideration the views of each Party. JDCA Disputes arising out of the JDC, JCC or any other committee or working group will be escalated to the JSC for resolution. If the JSC is unable to reach consensus (with the CRISPR JSC members collectively having one vote and the ViaCyte JSC members collectively having one vote) with respect to any such matter within ten (10) Business Days, the matter will be referred to the dispute resolution procedures set forth in Schedule 2.2. In resolving any matter that the JSC has authority to decide, the JSC will not (and the Expert resolving any dispute regarding a JSC decision will not) have the right to: (a) amend, modify or waive compliance with any term or condition of this Agreement; (b) make any decision that is expressly stated to require the mutual agreement of the Parties; (c) resolve any claim or dispute regarding whether or in what amount a payment is owed under this Agreement; (d) exercise its final decision-making authority in a manner that would (i) require the other Party to perform any act that such other Party reasonably believes would constitute a violation of an Applicable Law or (ii) require such other Party to expend funding on activities in excess of its budget if such other Party does not have reasonable access to alternative funding for such activities; or (e) make a determination that a Party is in material breach of any obligation under this Agreement. |
Exhibit C-9
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
2.4. |
Minutes. The Parties will alternate in preparing written minutes of such meeting, and the preparing Party will circulate such minutes no later than 15 days after such meeting setting forth a description, in reasonable detail, of the discussions at the meeting and a list of any actions, decisions or determinations approved by the JSC and a list of any issues to be resolved pursuant to Section 2.2. Such minutes shall be effective only after approved by both Parties. The Parties will agree on the minutes of each meeting promptly, but in no event later than the next meeting of the JSC. If at any time during the preparation and finalization of the JSC minutes, the Parties do not agree on any issue with respect to the minutes, such issue shall be resolved by the process provided in Section 2.2. The decision resulting from the process shall be recorded in amended finalized minutes for said meeting. |
2.5. |
Limits on JSC Authority. Each Party will retain the rights, powers and discretion granted to it under this Agreement and no such rights, powers, or discretion will be delegated to or vested in the JSC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. |
2.6. |
Withdrawal. A Party’s representation on the JSC, JDC, JCC and all other committees and working groups shall be at its sole discretion, as a matter of right and not obligation, for the sole purpose of participation in governance, decision-making, and information exchange with respect to activities within the authority of any such committee. A Party shall have the right to withdraw, at any time, from participation on any or all of such committees upon 30 days’ prior written notice to the other Party, which notice shall be effective upon the expiration of such 30-day period. Following the issuance of such notice: (a) the withdrawing Party’s participation on the applicable committees shall be suspended and (b) each Party shall have the obligation to provide and the right to continue to receive the information it would otherwise be required to provide and entitled to receive under the Agreement and to participate directly with the other Party in discussions, reviews and approvals currently allocated to the relevant committees pursuant to the Joint Development & Commercialization Agreement. If, at any time, following issuance of such a notice, the withdrawing Party wishes to resume participation in the relevant committee, the withdrawing Party shall notify the other Party in writing and, thereafter, the withdrawing Party’s representatives to the relevant committee shall be entitled to attend any subsequent meeting of such committee and to participate in the activities of, and decision-making by, such committee as provided in this Agreement as if such notice had not been issued by the withdrawing Party. If a committee is disbanded, then any data and information of the nature intended to be shared within such committee shall be provided by each Party directly to the other Party. |
Exhibit C-10
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
3.1. |
Global Development Plan. The JDC will establish the required form and contents of the global development plan (as may be amended, the “Global Development Plan”) and will oversee the Development of Products by the Parties in the Field in the Territory. Each Product will be Developed in accordance with the Global Development Plan. The Global Development Plan will include a plan for the Development of a Product in the Field in the Territory through Regulatory Approval, including a regulatory strategy, high-level study design criteria, an allocation of responsibilities between the Parties, timelines and a budget for activities conducted under the Global Development Plan (the “Development Budget”). The Parties shall cooperate to prepare the initial Development Budget, which shall be reviewed and approved by the JDC as part of the Global Development Plan. The JDC will update the Global Development Plan on an annual basis (or more frequently as needed) and submit it to the JSC for approval. The Parties will establish a project team (the “Project Team”) to oversee and coordinate activities under the Global Development Plan. The Project Team will be formed with an experienced team leader selected by mutual agreement of the Parties (“Project Leader”), and the composition of the Project Team will be determined by the Project Leader based on available personnel from each Party across functions. The Project Team will conduct its responsibilities under the Global Development Plan in good faith and with reasonable care and diligence. The Project Team will provide the JDC with periodic updates regarding the progress of activities pursuant to the Global Development Plan. |
3.2. |
Development Activities. |
Exhibit C-11
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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with Regulatory Authorities pertaining to Development of the Products in the Field or Regulatory Approval of the Products in the Field. |
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3.2.2. |
Clinical Trials. The JDC will allocate responsibility between the Parties for the conduct of Clinical Trials and the various other Development activities addressed in the Global Development Plan. The JDC will have final decision-making authority with respect to the protocol for any Clinical Trial conducted under the Global Development Plan and the statistical analysis plan for any such Clinical Trial. The Party that has responsibility for conducting the Clinical Trial will have the responsibility for the packaging and labeling of clinical drug supplies, unless otherwise agreed by the Parties. |
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3.2.3. |
Independent Activities. The Joint Development & Commercialization Agreement will include a mechanism for each Party to propose additional Clinical Trials for inclusion in the Global Development Plan. If the other Party does not agree to include such additional Clinical Trial in the Global Development Plan, the requesting Party may conduct such Clinical Trial at its sole expense (i.e. such expenses will not be included as Development Costs); provided that neither Party may conduct any Clinical Trial that the other Party in good faith reasonably believes will have a material adverse effect on the Development and Commercialization of the Product in the Field in the Territory. The non-requesting Party will have the right to elect by written notice to use the Clinical Trial data, provided the non-requesting Party will not have the right to use the data resulting from such Clinical Trial in a substantive manner as the basis for obtaining new or expanded Regulatory Approval for a Product in the Field or for commercial purposes for a Product in the Field unless and until such Party reimburses the requesting Party for 75% of the Development Costs. |
3.3. |
Diligence. Each Party will use Commercially Reasonable Efforts to execute and to perform, or cause to be performed, the activities assigned to it in the Global Development Plan, and to cooperate with the other Party in carrying out the Global Development Plan in accordance with the timelines therein. Each Party and its Affiliates will conduct its Development activities in good scientific manner and in compliance with Applicable Law. Notwithstanding anything to the contrary contained herein, a Party or its Affiliates will not be obligated to undertake or continue any Development activities with respect to the Products if such Party (or any of its Affiliates) reasonably determines that performance of such Development activity would violate Applicable Law or infringe or misappropriate a Third Party’s intellectual property. |
Article 4
MEDICAL AFFAIRS ACTIVITIES.
The Parties, acting through the JSC, will develop and agree upon a global medical affairs plan for the Product in the Field that describes the Medical Affairs Activities to be conducted in the Territory, key tactics and strategies for implementing those activities, the relative responsibilities of the Parties and the associated budget for such activities (such plan, the “Medical Affairs Plan” and such budget, the “Medical Affairs Budget”). The Regulatory Lead will lead and manage Medical Affairs Activities in accordance with the Medical Affairs Plan. The number of MSLs to be deployed in each jurisdiction will be determined by the JSC at least 18 months prior to potential launch.
Exhibit C-12
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
5.1. |
Commercialization Plan. The JCC will oversee the Commercialization of Products in the Field in the Territory. A designated Party or its relevant Affiliate shall be the lead Commercializing Party for Products in the Field in the Territory (the “Lead Commercialization Party”)2. The Lead Commercialization Party shall be agreed to by the Parties after holding good faith discussions regarding which Party is best positioned to serve in the function during the negotiation of the Joint Development & Commercialization Agreement as set forth in Section 4.1.1 of the Research Collaboration Agreement. No later than twelve months prior to the anticipated first commercial launch of a Product in the first country in the Territory, the JCC, will develop and submit to the JSC for approval, a Commercialization plan (as may be amended, the “Commercialization Plan”) that sets forth the Commercialization activities to be undertaken by the Parties with respect to the Commercialization of such Product in the Field in the Territory. In allocating responsibilities between the Parties, the JCC will take into consideration each Party’s expertise, capabilities, staffing and available resources to take on such activities. The Commercialization Plan may include activities on a region-by-region or country-by-country basis, as determined by the JCC. The JCC will update the Commercialization Plan on an annual basis (or more frequently as needed) and submit it to the JSC for approval. The Commercialization Plan will include (a) the Global Branding Strategy, (b) a marketing strategy, (c) a communications strategy that includes plans for public relations, conferences and exhibitions and other external meetings, internal meetings and communications, publications and symposia, internet activities and core brand package, (d) a high level operating plan for the implementation of such strategies on an annual basis, including information related to Product positioning, core messages to be communicated and pricing strategies, (e) a detailing strategy, (f) a pricing strategy, (g) all other material activities to be conducted in connection with the Commercialization of the Product in the Field in the Territory and (h) a budget for activities conducted under the Commercialization Plan (the “Commercialization Budget”). |
5.2.Commercialization Activities.
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5.1.1. |
Training. The Lead Commercialization Party will prepare training programs and materials for employees and sales representatives with respect to the Product in the Field, with the goal of ensuring compliance with all Applicable Laws and such Party’s compliance policies. |
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5.1.2. |
Global Branding Strategy. The JCC will develop a global branding strategy for the Products in the Field in the Territory, including, with respect to each Product, a life cycle plan, brand vision, positioning, key messaging, concept and imagery, Trademarks (including name and logos), brand public relations and supporting market research (the “Global Branding Strategy”) and submit such strategy to the JSC for approval. |
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2 |
Note to draft: The commercialization strategy in various countries in the Territory (including whether one Party or both Parties would commercialize in given countries or commercialization would occur through out-license or distributorship model in given countries) to be addressed later in connection with negotiation and execution of the Joint Development & Commercialization Agreement. |
Exhibit C-13
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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5.1.4. |
Marketing. The JCC will agree upon a marketing strategy for the Product, including Product positioning, messaging, appearance and launch sequencing, consistent with the Global Branding Strategy. Marketing activities and responsibilities will be determined for each Party by the Lead Commercialization Party. |
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5.1.5. |
Managed Markets and Market Access. The JCC will agree upon a strategy for the managed markets and market access for the Product, including payer strategy and account management. Such activities and responsibilities will be determined by the Lead Commercialization Party. |
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5.1.6. |
Pricing. The JCC will establish a global pricing strategy for each Product (including list price, targeted net pricing, sales-weighted average discounts and rebates, the approach to pricing with different types of accounts and plans, types of discounts and rebates) in the Territory. The responsibility for implementation of such global pricing strategy, including negotiating pricing and reimbursement with governments and private payers will be determined by the Lead Commercialization Party. |
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5.1.7. |
Field Sales. The promotion each Product in the Field (including performing sales calls) in the Territory will be determined by the Lead Commercialization Party in accordance with the Commercialization Plan. |
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5.1.8. |
Distribution and Patient Services. The Lead Commercialization Party will be responsible for distribution and patient services for the Product in the Field in the Territory, including contracting with applicable service providers, such activities to be determined by the JCC one (1) year prior to launch of such Product. |
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5.1.9. |
Booking Sales; Distribution. The Lead Commercialization Party will invoice, sell and book all sales of Products in the Territory, and the Lead Commercialization Party will be responsible for warehousing and distributing such Products in the Territory. |
5.2. |
Diligence. Each Party will use Commercially Reasonable Efforts to execute and to perform, or cause to be performed, the activities assigned to it under the Commercialization Plan, including reasonable adherence to any budget(s) and timeframe(s) set for them therein. Each Party and its Affiliates will conduct its Commercialization activities in compliance with Applicable Law. Notwithstanding anything to the contrary contained herein, a Party or its Affiliates will not be obligated to undertake or continue any Commercialization activities with respect to the Products under the Commercialization Plan if such Party (or any of its Affiliates) reasonably determines that performance of such Commercialization activity would violate Applicable Law or infringe or misappropriate a Third Party’s intellectual property. Each Party shall be responsible for day-to-day implementation of the Development, Manufacturing and Commercialization activities for which it (or its Affiliate) has or otherwise is assigned responsibility under this Agreement or the applicable Development Plan or Commercialization Plan and shall keep the other Party reasonably informed as to the progress of such activities, as determined by the JDC and JCC. |
Exhibit C-14
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
6.1. |
Quality Agreement. The Parties will negotiate in good faith and agree on quality analysis and control criteria for the Manufacture of a Product no later than 90 days after the effective date of the Joint Development & Commercialization Agreement. The agreed upon criteria will be set forth in a quality agreement containing mutually agreed terms and conditions that are customary for agreements of this type. |
6.2. |
Working Group. The Parties will establish a manufacturing working group (the “Manufacturing Working Group”) to oversee matters relating to the Manufacture of the Product. The Manufacturing Working Group will report to the JDC for Development-related Manufacturing matters and will report to the JCC for Commercialization-related Manufacturing matters. The Manufacturing Working Group’s responsibilities will include: (a) developing plans to transfer Manufacturing-related Know-How between the Parties as needed to facilitate the Manufacture of the Product; (b) establishing standards applicable to each Party’s Manufacturing activities and reviewing each Party’s performance against such standards; conducting technical reviews, and (c) sharing planning and budgeting information with the JDC and JCC. |
6.3. |
Responsibility. A designated Party or its relevant Affiliate will be responsible for (a) Manufacturing clinical supplies of a Product as determined by the Manufacturing Working Group and (b) Manufacturing commercial supplies of a Product. The designated Party shall be ViaCyte or its relevant Affiliate unless otherwise agreed to by the Parties after holding good faith discussions regarding which Party is best positioned to serve in the function during the negotiation of the Joint Development & Commercialization Agreement as set forth in Section 4.1.1 of the Research Collaboration Agreement. |
Article 7
ALLOCATION OF NET SALES AND PROGRAM EXPENSES.
7.1. |
Allocation.3 Each Party will be entitled to 50% of the Net Sales during the term of the Joint Development & Commercialization Agreement. If either Party elects to Opt-Out (as defined below), the other Party shall pay royalties in accordance with Section 11.3. Subject to either Party’s election to Opt-Out, Program Expenses with respect to each Product shall be allocated as follows: (i) from the effective date of the Joint Development & Commercialization Agreement through the date of the first commercial sale of such Product, CRISPR shall be allocated 60% of such Program Expenses and ViaCyte will be allocated 40% of such Program Expenses; and (ii) after the date of the first commercial sale of such Product, each Party will be allocated 50% of such Program Expenses. |
7.2. |
Calculation. Net Sales and Program Expenses will be calculated for each Calendar Quarter. |
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3 |
Note to draft: Other possible scenarios, including sharing of proceeds from out-licensing or distribution arrangements in various countries, to be addressed later in connection with negotiation and execution of the Joint Development & Commercialization Agreement. |
Exhibit C-15
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
7.3. |
Payment of Expenses; Summary Statements. Subject to reconciliation as provided in Section 7.4, the Party initially incurring Program Expenses will be responsible for and pay for all such Program Expenses so incurred. Each Party will maintain the books and records referred to in Section 7.6 and will accrue all Program Expenses and Net Sales) in accordance with the terms and conditions hereof and in accordance with GAAP. No later than five Business Days after the end of each calendar month, each Party will submit to the other a non-binding, good faith estimate of the Program Expenses accrued and Net Sales during the just-ended calendar month. No later than 30 days after the end of each Calendar Quarter, each Party will submit to the other a written report reflecting the accrual of Program Expenses and Net Sales during the just-ended Calendar Quarter, except that each Party’s submission for the last month of such Calendar Quarter will be a good faith estimate and not actual amounts (each, a “Summary Statement”). Each Summary Statement (after the initial Summary Statement) will reflect an adjustment for the actual amount of the previous Calendar Quarter as needed. Any reporting and reconciliation of variances between estimated and actual costs and expenses may be delayed by a Calendar Quarter as reasonably necessary in light of a Party’s internal reporting procedures. The Parties’ respective Summary Statements will serve as the basis of the Reconciliation Reports prepared by the Parties pursuant to Section 7.4. Upon the request of either Party from time to time, the Parties’ respective finance departments, coordinated by the JDC, or JCC, as appropriate, will discuss any questions or issues arising from the Summary Statements, including the basis for the accrual of specific Program Expenses. |
7.4. |
Reconciliation. The Lead Commercialization Party will prepare a reconciliation report, as soon as practicable after the receipt of the other Party’s Summary Statement, but in any event no later than 60 days after the end of each Calendar Quarter, accompanied by reasonable supporting documents and calculations sufficient to support each Party’s financial reporting obligations, independent auditor requirements and obligations under the Sarbanes-Oxley Act, which reconciles the amounts accrued and reported in each Party’s Summary Statement during such Calendar Quarter and the share of the Net Sales and Program Expenses to be allocated to each of the Parties for such Calendar Quarter in accordance with Section 7.1 (such report, the “Reconciliation Report”). Payment to reconcile Net Sales and Program Expenses shall be made by the owing Party to the other Party no later than 30 days after such Reconciliation Report is complete. |
7.5. |
Cost Overruns. If a Party’s aggregate Development Costs, Medical Affairs Costs or Commercialization Costs in any Calendar Year are likely to exceed or exceed those set forth in the Development Budget, Medical Affairs Budget or Commercialization Budget, as applicable, for all of its activities under the Development Plan, Medical Affairs Plan or Commercialization Plan, as applicable, in such Calendar Year by up to 10% of the aggregate amount set forth in the Development Budget, Medical Affairs Budget or Commercialization Budget, as applicable, such Party will provide the other Party with a detailed, itemized explanation for such excess costs and expenses, and such excess costs and expenses will be included in the Development Costs, Medical Affairs Cost or Commercialization Costs, as applicable, and shared by the Parties as provided herein. To the extent a Party’s aggregate Development Costs, Medical Affairs Costs or Commercialization Costs, as applicable, exceed those set forth in the Development Budget, Medical Affairs Budget or Commercialization Budget, as applicable, by more than 10%, unless otherwise agreed by the Parties, such Expenses will not be shared by the Parties and the Party incurring such Expenses will be solely responsible for such Expenses. |
Exhibit C-16
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
7.6. |
Books and Records. Each Party will keep and maintain accurate and complete records regarding Program Expenses and Net Sales, during the three preceding Calendar Years. Upon 15 days prior written notice from the other Party (the “Auditing Party”), the Party required to maintain such records (as applicable, the “Audited Party”) will permit an independent certified public accounting firm of internationally recognized standing, selected by the Auditing Party and reasonably acceptable to the Audited Party, to examine the relevant books and records of the Audited Party and its Affiliates, as may be reasonably necessary to verify the Summary Statements and Reconciliation Reports. An examination by the Auditing Party under this Section 7.6 will occur not more than once in any Calendar Year and will be limited to the pertinent books and records for any Calendar Year ending not more than 36 months before the date of the request. The accounting firm will be provided access to such books and records at the Audited Party’s facility or facilities where such books and records are normally kept and such examination will be conducted during the Audited Party’s normal business hours. The Audited Party may require the accounting firm to sign a customary non-disclosure agreement before providing the accounting firm access to its facilities or records. Upon completion of the audit, the accounting firm will provide both the Auditing Party and the Audited Party a written report disclosing whether the applicable Summary Statements and Reconciliation Reports are correct or incorrect and the specific details concerning any discrepancies. No other information will be provided to the Auditing Party. If the report or information submitted by the Audited Party results in an underpayment or overpayment, the Party owing underpaid or overpaid amount will promptly pay such amount to the other Party, and, if, as a result of such inaccurate report or information, such amount is more than five percent of the amount that was owed the Audited Party will reimburse the Auditing Party for the reasonable expense incurred by the Auditing Party in connection with the audit. |
Article 8
ADVERSE EVENTS.
8.1. |
Pharmacovigilance Agreement. The Parties will negotiate in good faith and agree on processes and procedures for sharing safety information no later than 90 days after the effective date of the Joint Development & Commercialization Agreement. The agreed upon processes and procedures will be set forth in a pharmacovigilance agreement (the “Pharmacovigilance Agreement”) containing mutually agreed terms and conditions that are customary for agreements of this type. The Pharmacovigilance Agreement will include provisions establishing a joint safety oversight working group to oversee the conduct of the Parties’ activities under the Pharmacovigilance Agreement and to coordinate the Parties’ interactions with respect to pharmacovigilance activities. |
8.2. |
Global Safety Database. The JCC will establish pharmacovigilance and safety strategy for a Product. Pursuant to such strategy, the Lead Commercialization Party will establish the global safety database for such Product. The Lead Commercialization Party will maintain a global database of safety information including, but not limited to, adverse events and pregnancy reports for such Product, which will be used for regulatory reporting and responses to safety queries from Regulatory Authorities by both Parties. The other Party will, and will cause its Affiliates to, transfer all adverse events information in its or their possession or control to the global safety database within a mutually agreed period of time that provides the Lead Commercialization Party with sufficient time to enter all of the data and to obtain validation of the database. |
8.3. |
Risk Management and Signal Detection Activities. The Lead Commercialization Party shall be primarily responsible for all signal detection and risk management activities for Products. These signal detection activities shall include, but are not limited to, proactive review and evaluation of all safety information from the Global Safety Database (including by way of example, Individual Case Safety Reports, aggregate safety information, literature reports, and non-clinical data). |
Exhibit C-17
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Each Party may subcontract the performance of any activities undertaken by such Party in accordance with the Global Development Plan, Medical Affairs Plan or Commercialization Plan to one or more Third Parties (each such Third Party, a “Subcontractor”) pursuant to a written agreement (a “Subcontract”). Notwithstanding the foregoing, if either Party desires to subcontract any such activities, it will first discuss the matter with the other Party and reasonably consider using the other Party for such subcontracted activities, taking into account the capabilities of the other Party and potential impact on costs, as a potential alternative to subcontracting such activities to a Third Party. If, following such discussion a Party still desires to subcontract the performance of any such activity to one or more Third Parties, it may proceed to do so; provided, that prior to entering into any Subcontract which the subcontracting Party reasonably anticipates will entail payments to the Subcontractor in excess of $250,000 with respect to subcontracted activities under the Joint Development & Commercialization Agreement, the subcontracting Party will obtain the JSC’s approval, not to be unreasonably withheld, of use of the proposed Subcontractor to conduct the activities proposed to be subcontracted prior to execution of the applicable Subcontract.
Article 10
LICENSES; IP; EXCLUSIVITY4
10.1. |
[License Grants.]5 |
10.2. |
[Sublicensing.] |
10.3. |
New In-Licenses. |
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10.3.1. |
The Parties shall be free to in-license or otherwise acquire rights to intellectual property that, if so acquired by CRISPR would constitute part of the CRISPR JDCA Background Technology, or that, if so acquired by ViaCyte, would constitute part of the ViaCyte JDCA Background Technology, and that may, in either case, become subject to the licenses granted under the Joint Development & Commercialization Agreement (each such agreement as is entered into by CRISPR is a “New CRISPR In-License” and each such agreement as is entered into by ViaCyte is a “New ViaCyte In-License”). |
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4 |
Note to draft: The Joint Development & Commercialization Agreement shall include the following: (i) with respect to ownership of intellectual property, the terms described relating thereto in the Research Collaboration Agreement shall govern the Joint Development and Collaboration Agreement; and (ii) with respect to exclusivity obligations, the matters described in Section 2.10 of the Research Collaboration Agreement shall apply with proper adjustment to reflect the transactions contemplated by the Joint Development & Commercialization Agreement. |
5 |
Note to draft: License and sublicense provisions to be addressed later in negotiation of the Joint Development & Commercialization Agreement when commercialization strategy in various countries of the Territory is determined. It is expected that such licensing provisions shall be primarily on an exclusive basis but may be non-exclusive in certain circumstances where appropriate. |
Exhibit C-18
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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10.3.3. |
CRISPR will provide notice to ViaCyte of any intellectual property rights that are available for acquisition or in-license and that relate primarily to Stem Cell Technology (but, for avoidance of doubt, excluding intellectual property rights that pertain to Gene Editing Systems). CRISPR will provide ViaCyte with such available information as CRISPR possesses regarding such intellectual property rights. If ViaCyte notifies CRISPR that ViaCyte will pursue an acquisition or in-license of such intellectual property rights then: (i) ViaCyte will negotiate in good faith towards such an acquisition or in-license on terms that result in ViaCyte Controlling such intellectual property rights for purposes of the licenses granted by ViaCyte hereunder and (ii) during such negotiation or the term of any such acquisition or in-license agreement, CRISPR will not pursue, directly or indirectly, an acquisition or in-license of such intellectual property rights without ViaCyte’s prior written consent, not to be unreasonably withheld, delayed or conditioned. Nothing will prevent CRISPR from acquiring or in-licensing such intellectual property rights, at its sole discretion, for any use other than the Development and Commercialization of Products in the Field. |
10.4. |
No Implied Licenses. All rights in and to CRISPR JDCA Background Technology, CRISPR Program Technology and CRISPR’s interest in any Joint Technology not expressly licensed or assigned to ViaCyte under this Agreement are hereby retained by CRISPR or its Affiliates, and ViaCyte agrees not to practice or use such technology except as expressly permitted by this Agreement or any other written agreement between the Parties. All rights in and to any ViaCyte JDCA Background Technology, ViaCyte Program Technology and ViaCyte’s interest in any Joint Technology not expressly licensed to CRISPR under this Agreement, are hereby retained by ViaCyte or its Affiliates, and CRISPR agrees not to practice or use such technology except as expressly permitted by this Agreement or any other written agreement between the Parties. Except as expressly provided in this Agreement, no Party will be deemed by estoppel or implication to have granted the other Party any licenses or other right with respect to any intellectual property. |
10.5. |
Prosecution and Maintenance of Patents. |
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10.5.1. |
CRISPR JDCA Patents. As between the Parties, CRISPR will control and be responsible for all aspects of the Prosecution and Maintenance of CRISPR JDCA Patents (excluding Joint Patents). |
Exhibit C-19
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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10.5.2. |
ViaCyte JDCA Patents. As between the Parties, ViaCyte will control and be responsible for all aspects of the Prosecution and Maintenance of all ViaCyte JDCA Patents (excluding Joint Patents). |
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10.5.3. |
[Joint Patents.6 |
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(a) |
CRISPR will have the first right, but not the obligation, to control and be responsible for all aspects of the Prosecution and Maintenance of all Joint Patents, at its own expense and using a patent counsel selected by CRISPR and reasonably acceptable to ViaCyte. CRISPR will keep ViaCyte informed and consult with ViaCyte through their respective Patent Coordinators (as defined below) as to material developments with respect to the Prosecution and Maintenance of the Joint Patents, including by providing copies of any office actions or office action responses or other correspondence that CRISPR provides to or receives from any patent office, including notice of all interferences, reissues, re-examinations, or oppositions, and all patent-related filings, and by providing ViaCyte the timely opportunity to have reasonable input into the strategic aspects of such Prosecution and Maintenance. |
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(b) |
If, during the term of the Joint Development and Commercialization Agreement, CRISPR intends to abandon any Joint Patent, CRISPR will notify ViaCyte of such intention at least 60 days before such Joint Patent will become abandoned, and ViaCyte will have the right, but not the obligation, to assume responsibility for the Prosecution and Maintenance thereof at its own expense with counsel of its own choice. |
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(c) |
Neither Party will make any Patent submission (including the filing of patent applications) with respect to any Joint Patent, to the extent that it could reasonably be expected to prejudice or adversely affect the potential patentability of any claimed subject matter of a CRISPR JDCA Background Patent (in the case of ViaCyte) or ViaCyte JDCA Background Patent (in the case of CRISPR), except with the other Party’s prior written consent (such consent not to be unreasonably withheld and such consent to be negotiated in good faith with all due consideration to any deadlines).] |
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10.5.4. |
Patent Coordinators. Each Party will appoint a patent coordinator reasonably acceptable to the other Party (each, a “Patent Coordinator”) to serve as such Party’s primary liaison with the other Party on matters relating to the Prosecution and Maintenance and enforcement of Licensed Patents and Joint Patents. The Patent Coordinators will meet in person or by means of telephone or video conference at least once each Calendar Quarter during the term of the Joint Development and Commercialization Agreement. Each Party may replace its Patent Coordinator at any time by providing notice in writing to the other Party. The initial Patent Coordinators will be: |
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6 |
Note to draft: May be revised later in negotiation of the Joint Development & Commercialization Agreement depending on the development and commercialization strategy agreed upon by the Parties. |
Exhibit C-20
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
For CRISPR: Shelby Walker
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10.5.5. |
Defense of Claims Brought by Third Parties. If a Third Party initiates a Proceeding against either Party claiming a Patent owned by or licensed to such Third Party is infringed by the Development, Manufacture or Commercialization of a Product in the Field, each Party that is named as a defendant in such Proceeding will have the right to defend itself in such Proceeding. The other Party will reasonably assist the defending Party in defending such Proceeding and cooperate in any such litigation at the request and expense of the defending Party. The defending Party will provide the other Party with prompt written notice of the commencement of any such Proceeding and will keep the other Party apprised of the progress of such Proceeding and will promptly furnish the other Party with a copy of each communication relating to the alleged infringement that is received by such Party. If both Parties are named as defendants in any Proceeding, both Parties may defend such Proceeding and the Parties will reasonably cooperate with respect to such defense. |
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10.5.6. |
[Enforcement of Joint Patents.7 |
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(a) |
Duty to Notify. If either Party learns of an infringement, unauthorized use, misappropriation or threatened infringement by a Third Party with respect to any Joint Patents, such Party will promptly notify the other Party in writing and will provide such other Party with available information regarding such infringement. |
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(b) |
Enforcement. |
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(i) |
CRISPR will have the first right, but not the obligation, to institute, prosecute, and control a Proceeding with respect to enforcement of the Joint Patents in the Field. ViaCyte will have the right to engage counsel of its own choice in connection with such Proceeding at its own expense. CRISPR will provide ViaCyte with prompt written notice of the commencement of any such Proceeding, and CRISPR will keep ViaCyte apprised of the progress of such Proceeding. |
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(ii) |
If CRISPR fails to cause the termination of an infringement of the Joint Patents in the Field and fails to initiate a Proceeding with respect thereto no later than 90 days after receipt of notice thereof, ViaCyte will have the right, but not the obligation, to institute, prosecute, and control a Proceeding with respect to enforcement of the relevant Joint Patents in the Field. CRISPR will have the right to engage counsel of its own choice in connection with such Proceeding at its own expense. ViaCyte will provide CRISPR with prompt written notice of the commencement of any such Proceeding, and ViaCyte will keep CRISPR apprised of the progress of such Proceeding.] |
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7 |
Note to draft: May be revised later in negotiation of the Joint Development & Commercialization Agreement depending on the development and commercialization strategy agreed upon by the Parties. |
Exhibit C-21
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
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10.5.8. |
Patents Solely Owned by CRISPR. CRISPR will retain all rights to pursue an infringement of any Patent solely owned by CRISPR and CRISPR will retain all recoveries with respect thereto, except that in any Proceedings regarding enforcement of any such Patent solely owned by CRISPR in which Patent Costs are shared by the Parties as Program Expenses, any recoveries from such Proceedings, after such recoveries are first applied to the Parties’ reasonable Out-of-Pocket Costs incurred in connection with such proceeding, will be treated as Net Sales and shared in accordance with Article 7. |
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10.5.9. |
Patents Solely Owned by ViaCyte. ViaCyte will retain all rights to pursue an infringement of any Patent solely owned by ViaCyte and ViaCyte will retain all recoveries with respect thereto, except that in any Proceedings regarding enforcement of any such Patent solely owned by ViaCyte in which Patent Costs are shared by the Parties as Program Expenses, any recoveries from such Proceedings, after such recoveries are first applied to the Parties’ reasonable Out-of-Pocket Costs incurred in connection with such proceeding, will be treated as Net Sales and shared in accordance with Article 7. |
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10.5.10. |
CREATE Act. Notwithstanding anything to the contrary in this Section 10.5.3, neither Party will have the right to make an election under the CREATE Act when exercising its rights under this Section 10.5.3 without the prior written consent of the other Party, which will not be unreasonably withheld, conditioned or delayed. With respect to any such permitted election, the Parties will use reasonable efforts to cooperate and coordinate their activities with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that the Joint Development & Commercialization Agreement is a “joint research agreement” as defined in the CREATE Act. |
Exhibit C-22
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Costs are shared by the Parties as Program Expenses, any recoveries from such Proceedings will be treated as Net Sales and shared in accordance with Article 7. |
Article 11
TERM; TERMINATION.
11.1. |
Term. The term of the Joint Development & Commercialization Agreement will commence on the execution of the Joint Development & Commercialization Agreement and continue in full force and effect until there is no longer a Global Development Plan or Commercialization Plan contemplating Development or Commercialization of a Product in the Field in the Territory or the Parties mutually agree in writing to end the Joint Development & Commercialization Agreement, unless earlier terminated as provided below. |
11.2. |
Termination Generally. The provisions of Sections 9.2.2, 9.2.3, 9.3.1, 9.3.2 (excluding reference to termination for convenience provisions and Sections 9.3.2(d) and 9.3.2(e)) of the Research Collaboration Agreement will apply to the Joint Development & Commercialization Agreement, mutatis mutandis. |
11.3. |
Opt-Out. [***], either Party may opt out of the Joint Development & Commercialization Agreement for such Products upon 60 days’ written notice to the other Party (“Opt-Out”). The Party that exercises the right to Opt-Out is referred to as the “Opt-Out Party” and the other Party is referred to as the “Continuing Party”. |
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11.3.1. |
Upon the Continuing Party’s receipt of such notice, [***]. |
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11.3.2. |
Opt-Out Royalties. The Continuing Party shall pay the Opt-Out Party royalties (“Opt-Out Royalties”) in accordance with this Section 11.3.2. The applicable royalty rates shall be determined in accordance with the table set forth below based on the timing of the Opt-Out notice. For the avoidance of doubt, the allocation of [***] and [***] pursuant to Article 7 shall terminate upon the Opt-Out. |
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(a) |
Royalty Term; Royalty Rates. Royalties payable under this Section 11.3.2 shall be paid by the Continuing Party to the Opt-Out Party on a Product-by- Product and country-by-country basis from the date of first commercial sale of each Product in a country with respect to which royalty payments are due, and until the latest of (a) expiration of the last Valid Claim of any Licensed Patent or Joint Patent, (b) expiration of all regulatory exclusivities for such Product in any such country or (c) the date that sales of one or more products approved by the applicable Regulatory Authority in such country as a substitutable generic for such Product for an indication in the Field result in a reduction by more than [***] in gross sales of the applicable Product by the Continuing Party and its Affiliates and sublicensees compared to sales of such Product in such country for [***] consecutive Calendar Quarters immediately prior to commercial launch of such generic product(s), as measured by reputable published marketing data for such country (e.g. by reference to sales data collected by IMS) (“Royalty Term”). |
Exhibit C-23
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Timing of Opt Out |
Net Sales (in Dollars) for such Product in the Territory |
Opt-Out Royalty Rates as a Percentage (%) of Net Sales of such Product |
Opt-Out after Establishment of hPOC and before the Initiation of the first Phase III Clinical Trial |
Portion of Calendar Year Net Sales up to and including $[***] |
[***] |
Portion of Calendar Year Net Sales that exceeds $[***] |
[***] |
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Opt-Out after Initiation of Phase III Clinical Trial |
Portion of Calendar Year Net Sales up to and including $[***] |
[***] |
Portion of Calendar Year Net Sales that exceeds $[***] |
[***] |
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(b) |
Adjustment to Royalties. On a Product-by-Product and country-by-country basis, during any portion of the Royalty Term for a Product in a given country in which there is no Valid Claim of a Patent Covering such Product, the applicable royalty payable with respect to such Product and such country shall be reduced by [***]. |
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(c) |
Third Party Payment Credit. The Continuing Party shall be responsible for all payments owed to any Third Party for any Patents or other intellectual property rights licensed or acquired after the Opt-Out date, which are necessary or useful to make, have made, use, sell, offer for sale or import any Product in the Field in the Territory. If the Continuing Party or its Affiliate, licensee or sublicensee is required or reasonably deems it necessary to obtain a license from a Third Party under any intellectual property rights of such Third Party that Cover a Product in a country, the Continuing Party shall have the right to deduct, from the royalties due to the Opt-Out Party with respect to such Product [***]% of the aggregate royalty payments or other payments based on sales made by the Continuing Party or its Affiliate, licensee or sublicensee to such Third Party(ies) in exchange for such license with respect to such Product during the applicable payment period; provided that in no event shall the deductions under this provision reduce royalties due to the Opt-Out Party in any payment period with respect to such Product to less than [***]% of the amount that would otherwise be due to the Opt-Out Party. Any amounts paid to such Third Party which is entitled to be deducted under this provision but is not deducted as a result of the foregoing proviso shall be carried over and applied against royalties payable to the Opt-Out Party in respect of such Product in such country in subsequent payment periods until the full deduction is taken. |
Exhibit C-24
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Article 12
REPRESENTATIONS; COVENANTS; INDEMNITY
The provisions of Articles 7 and 10 of the Research Collaboration Agreement will apply to the Joint Development & Commercialization Agreement, mutatis mutandis. The Joint Development & Commercialization Agreement will include commercially reasonable indemnity provisions, which will include (but not be limited to) an obligation for each Party to indemnify the other Party from, against and in respect of any and all Liability incurred or suffered by the other Party to the extent resulting from any claim by any Third Party based on: (a) any breach of, or inaccuracy in, any representation or warranty made by the indemnifying Party, or any breach or violation by the indemnifying Party of any covenant or agreement in the Joint Development & Commercialization Agreement; or (b) the negligence or intentional misconduct of, or violation of Applicable Law (including off-label promotion) by, the indemnifying Party, any of its Affiliates or sublicensees, or any of their respective directors, officers, employees and agents, in performing its obligations or exercising its rights under the Joint Development & Commercialization Agreement. The Joint Development & Commercialization Agreement will also include insurance and limitation on consequential damages provisions.
Exhibit C-25
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Establishment of hPOC
[***]
Exhibit C-26
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Arbitration Procedures
JDCA Disputes; Executive Officers. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. In the event of any dispute, controversy, claim or difference which may arise between the Parties out of or in relation to or in connection with the Joint Development & Commercialization Agreement, including any dispute arising out of the JSC, any alleged failure to perform, or breach, of the Joint Development & Commercialization Agreement, or any issue relating to the interpretation or application of the Joint Development & Commercialization Agreement (“JDCA Dispute”), then upon the request of either Party by written notice, the Parties agree to meet and discuss in good faith a possible resolution thereof, which good faith efforts shall include at least one in-person meeting between the Executive Officers of each Party. If the JDCA Dispute is not resolved within 30 days following the written request for discussions (except with regard to patent and trademark disputes), either Party may then refer such issue to arbitration by submitting a written notice of such request to the other Party.
Selection of Expert and Submission of Positions. The Parties will select and agree upon a mutually acceptable independent Third Party arbitrator who is (a) neutral, disinterested and impartial, and (b) has experience in the pharmaceutical and biotechnology industries and, in the case of a JDCA Dispute of a matter within the authority of the JSC (“JSC Dispute”), scientific expertise appropriate for understanding and resolving the applicable dispute (the “Expert”). If the Parties are unable to mutually agree upon an Expert no later than 30 days following the delivery of the request for Arbitration (or such longer period as agreed by the Parties), one individual who would qualify as an Expert selected by ViaCyte and one individual who would qualify as an Expert selected by CRISPR shall together select one individual who would qualify as an Expert, who shall be appointed as the Expert for the purpose of such JDCA Dispute. Once the Expert has been selected, each Party will no later than 10 days following selection of the Expert provide the Expert and the other Party with a written report setting forth its position with respect to the substance of the dispute and may submit a revised or updated report and position to the Expert no later than 10 days of receiving the other Party’s report. If so requested by the Expert, each Party will make oral submissions to the Expert based on such Party’s written report, and each Party will have the right to be present during any such oral submissions.
Rules for Proceedings. The proceedings will be conducted as a binding arbitration in accordance with AAA procedures, as modified by this Schedule 2.2 (including that the Expert will adopt as his or her decision the position of one Party or the other in the case of a JDCA Dispute as described in clause (a) or (b) in the following paragraph). The Expert may retain a Third Party expert to assist the Expert in analyzing the JDCA Dispute, and the expenses of any such expert will be shared by the Parties as costs of the arbitration as provided in this Schedule 2.2. All proceedings and communications shall be in English. Either Party may apply to the Expert for interim injunctive relief or may seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending resolution of the Dispute pursuant to this Schedule 2.2. The Parties shall have the right to be represented by counsel.
Exhibit C-27
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Determination by the Expert. The Expert will render his or her final decision, including any award, if applicable, with respect to the JDCA Dispute. In the case of (a) any JSC Dispute or (b) a JDCA Dispute, the Expert will select one of the Party’s positions as his or her final decision, and will not have the authority to modify either Party’s position or render any substantive decision other than to so select the position of either Party as set forth in its respective written report (as initially submitted, or as revised in accordance with this Schedule 2.2, as applicable). The decision of the Expert will be the sole, exclusive and binding remedy between the Parties regarding the JDCA Dispute submitted to such Expert, and shall be governed by the terms and conditions hereof, including the limitation on consequential damages. The Parties agree that such a judgment or award may be enforced in any court of competent jurisdiction. The statute of limitations of the Commonwealth of Massachusetts applicable to the commencement of a lawsuit shall apply to the commencement of arbitration under this Schedule 2.2.
Location; Costs. Unless otherwise mutually agreed upon by the Parties, the arbitration will be conducted in Chicago, Illinois. The Parties agree that they will share equally the costs and fees of the Expert in connection with any proceeding under this Schedule 2.2, including the cost of the arbitration filing and hearing fees, the cost of any independent expert retained by the arbitrator and the cost of the arbitrator and administrative fees of AAA if applicable. Each Party will bear its own costs and attorneys’ and witnesses’ fees and associated costs and expenses incurred in connection with any proceeding under this Schedule 2.2.
Timetable for Completion. The Parties will use, and will direct the Expert to use, commercially reasonable efforts to resolve a dispute no later than forty-five (45) days after the selection of the Expert, or if resolution no later than forty-five (45) days is not reasonably achievable, as determined by the Expert, then as soon thereafter as is reasonably practicable.
Exhibit C-28
Press Release
CRISPR Therapeutics and ViaCyte Announce Strategic Collaboration to Develop Gene-Edited Stem Cell-Derived Therapy for Diabetes
- Aims to develop an immune-evasive stem cell therapy as a potentially curative treatment for diabetes -- Parties will collaborate through commercialization and share costs and profits worldwide -
ZUG, Switzerland and CAMBRIDGE, Mass., and SAN DIEGO, September 17, 2018 -- CRISPR Therapeutics (NASDAQ: CRSP), a biopharmaceutical company focused on developing transformative gene-based medicines for serious diseases, and ViaCyte, Inc., a privately held regenerative medicine company, today announced a collaboration focused on the discovery, development, and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes.
Decades of clinical data with islet transplants indicate that beta-cell replacement approaches may offer curative benefit to patients with insulin-requiring diabetes. ViaCyte has pioneered the approach of generating pancreatic-lineage cells from stem cells and delivering them safely and efficiently to patients. PEC-Direct, ViaCyte’s lead product candidate currently being evaluated in the clinic, uses a non-immunoprotective delivery device that permits direct vascularization of the cell therapy. This approach has the potential to deliver durable benefit; however, because the patient’s immune system will identify these cells as foreign, PEC-Direct will require long-term immunosuppression to avoid rejection. As a result, PEC-Direct is being developed as a therapy for the subset of patients with type 1 diabetes at high risk for acute complications.
CRISPR gene editing offers the potential to protect the transplanted cells from the patient’s immune system by ex-vivo editing immune-modulatory genes within the stem cell line used to produce the pancreatic-lineage cells. The speed, specificity, and multiplexing efficiency of the CRISPR system make it ideally suited to this task. CRISPR Therapeutics is pursuing a similar approach for its allogeneic CAR-T programs and has established significant expertise in immune-evasive gene editing. The combination of ViaCyte’s stem cell capabilities and CRISPR’s gene editing capabilities has the potential to enable a beta-cell replacement product that may deliver durable benefit to patients without triggering an immune reaction.
“We believe the combination of regenerative medicine and gene editing has the potential to offer durable, curative therapies to patients in many different diseases, including common chronic disorders like insulin-requiring diabetes. ViaCyte is a pioneer in the regenerative medicine field, and has built a compelling clinical program, robust manufacturing capabilities, and assembled a strong intellectual property position. Partnering with ViaCyte will allow us to accelerate our efforts in regenerative medicine, an area that we believe will provide a variety of longer-term opportunities for our company,” commented Samarth Kulkarni, Ph.D., Chief Executive Officer of CRISPR Therapeutics.
Under the terms of the agreement, CRISPR and ViaCyte will jointly seek to develop an immune-evasive stem cell line as a first step on the path to an allogeneic stem-cell derived product. Upon successful completion of these studies and identification of a product candidate, the parties will jointly assume responsibility for further development and commercialization worldwide. Upon execution of the agreement ViaCyte will receive $15 million from CRISPR, which at CRISPR’s election may be paid in either cash or CRISPR stock. ViaCyte also has the option, under certain circumstances, to receive an additional $10 million from CRISPR in the form of a convertible promissory note.
“Creating an immune-evasive gene-edited version of our technology would enable us to address a larger patient population than we could with a product requiring immunosuppression. CRISPR Therapeutics is the ideal partner for this program given their leading gene editing technology and expertise and focus on immune-evasive editing. We are thrilled to have the opportunity to partner with CRISPR Therapeutics on what we believe could be a transformational therapy for patients with insulin-requiring diabetes,” commented Paul Laikind, Ph.D., Chief Executive Officer and President of ViaCyte. “We also believe that this approach may have many other applications which we and CRISPR may explore in the future.”
About CRISPR Therapeutics
CRISPR Therapeutics is a leading gene editing company focused on developing transformative gene-based medicines for serious diseases using its proprietary CRISPR/Cas9 platform. CRISPR/Cas9 is a revolutionary gene editing technology that allows for precise, directed changes to genomic DNA. CRISPR Therapeutics has established a portfolio of therapeutic programs across a broad range of disease areas including hemoglobinopathies, oncology and rare diseases. To accelerate and expand its efforts, CRISPR Therapeutics has established strategic collaborations with leading companies including Bayer AG and Vertex Pharmaceuticals. CRISPR Therapeutics AG is headquartered in Zug, Switzerland, with its wholly-owned U.S. subsidiary, CRISPR Therapeutics, Inc., and R&D operations based in Cambridge, Massachusetts, and business offices in London, United Kingdom. For more information, please visit www.crisprtx.com.
About ViaCyte
ViaCyte is a privately-held regenerative medicine company developing novel cell replacement therapies as potential long-term diabetes treatments to achieve glucose control targets and reduce the risk of hypoglycemia and diabetes-related complications. ViaCyte’s product candidates are based on the derivation of pancreatic progenitor cells from stem cells, which are then implanted in durable and retrievable cell delivery devices. Once implanted and matured, these cells are designed to secrete insulin and other pancreatic hormones in response to blood glucose levels. ViaCyte has two product candidates in clinical-stage development. The PEC-Direct™ product candidate delivers the pancreatic progenitor cells in a non-immunoprotective device and is being developed for type 1 diabetes patients who have hypoglycemia unawareness, extreme glycemic lability, and/or recurrent severe hypoglycemic episodes. The PEC-Encap™ (also known as VC-01) product candidate delivers the same pancreatic progenitor cells in an immunoprotective device and is being developed for all patients with diabetes, type 1 and type 2, who use insulin. ViaCyte is also seeking to develop immune-evasive ‘universal donor’ stem cell lines, from its proprietary CyT49 cell line, which are expected to further broaden the availability of cell therapy for diabetes and other potential indications. ViaCyte is headquartered in San Diego, California. ViaCyte is funded in part by the California Institute for Regenerative Medicine (CIRM) and JDRF. For more information, please visit www.viacyte.com.
Exhibit D-2
CRISPR Forward-Looking Statement
Certain statements set forth in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of1995, as amended, including, but not limited to, statements concerning: the timing of filing of clinical trial applications and INDs, any approvals thereof and timing of commencement of clinical trials, the intellectual property coverage and positions of CRISPR Therapeutics, its licensors and third parties, the sufficiency of CRISPR Therapeutics’ cash resources and the therapeutic value, development, and commercial potential of CRISPR/Cas9 gene editing technologies and therapies. You are cautioned that forward-looking statements are inherently uncertain. Although CRISPR Therapeutics believes that such statements are based on reasonable assumptions within the bounds of its knowledge of its business and operations, the forward-looking statements are neither promises nor guarantees and they are necessarily subject to a high degree of uncertainty and risk. Actual performance and results may differ materially from those projected or suggested in the forward-looking statements due to various risks and uncertainties. These risks and uncertainties include, among others: uncertainties regarding the intellectual property protection for our technology and intellectual property belonging to third parties; uncertainties inherent in the initiation and completion of preclinical studies for CRISPR Therapeutics’ product candidates; availability and timing of results from preclinical studies; whether results from a preclinical trial will be predictive of future results of the future trials; expectations for regulatory approvals to conduct trials or to market products; and those risks and uncertainties described under the heading “Risk Factors” in CRISPR Therapeutics’ most recent annual report on Form 10-K, and in any other subsequent filings made by CRISPR Therapeutics with the U.S. Securities and Exchange Commission (SEC), which are available on the SEC’s website at www.sec.gov. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. CRISPR Therapeutics disclaims any obligation or undertaking to update or revise any forward-looking statements contained in this press release, other than to the extent required by law.
CRISPR Media Contact:
Jennifer Paganelli
WCG on behalf of CRISPR
347-658-8290
jpaganelli@wcgworld.com
CRISPR Investor Contact:
Susan Kim
617-307-7503
susan.kim@crisprtx.com
ViaCyte Media Contact:
Jessica Yingling, Ph.D.
Little Dog Communications, Inc.
858-344-8091 jessica@litldog.com
ViaCyte Investor Contact:
Eugene Brandon, Ph.D.
858-455-3708
ebrandon@viacyte.com
Exhibit D-3
VIACYTE, INC.
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (the “Agreement”) is made on the ___th day of ____________, by and between ViaCyte, Inc., a Delaware corporation (the “Company”), and __________________ (“_____“).
THE PARTIES HEREBY AGREE AS FOLLOWS:
1.Purchase and Sale of Convertible Note
1.1Authorization and Sale of Convertible Note
(a)The Company has authorized the issuance and sale to ___________, pursuant to this Agreement, of a convertible promissory note for an aggregate principal amount of $_______________ in the form attached hereto as Exhibit A (the “Note”). Any shares of the Company’s capital stock issuable upon conversion of the Note in accordance with its terms shall be referred to herein as the “Conversion Shares”. The Conversion Shares and the Note shall be collectively referred to herein as the “Securities.” The Conversion Shares and the shares of the Company’s common stock issuable upon conversion of the Conversion Shares, if applicable, shall be collectively referred to herein as the “Underlying Stock.”
(b)Subject to the terms and conditions of this Agreement, ___________ agrees to purchase at the Closing (as defined below), and the Company agrees to sell and issue to ______________ at the Closing, the Note at a purchase price equal to the aggregate principal amount thereof.
1.2Closing. The purchase and sale of the Note shall take place at the offices of Cooley LLP (“Cooley”), 4401 Eastgate Mall, San Diego, CA 92121, on the date hereof at 10:00 a.m. (which date, time and place are designated the “Closing”). At the Closing, the Company shall deliver to _____________ the Note, against payment of the purchase price therefor by check payable to the Company, by wire transfer to the Company’s bank account, or any combination of the foregoing.
2.Representations and Warranties of the Company. The Company hereby represents and warrants to ______________ that, as of the Closing, except as set forth herein or on the Schedule of Exceptions attached hereto as Schedule A, which exceptions shall be deemed to be representations and warranties as if made hereunder:
2.1Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and each of the Subsidiaries (as defined below) are corporations duly organized, validly existing and in good standing under the laws of the states of their jurisdiction. Each of the Company and the Subsidiaries are duly qualified to transact business and are in good standing in each jurisdiction in which the failure to so qualify could reasonably have a Material Adverse Effect. Each of the Company and the Subsidiaries have all requisite corporate power and authority necessary to own and operate their respective properties, to carry on their respective business as now conducted and presently proposed to be conducted and, in the case of the Company, to carry out the transactions contemplated by this Agreement.
2.2Capitalization. The capital of the Company consists of:
(a)shares of Preferred Stock. ...
(b)Common Stock. ____________ shares of Common Stock ...
(c)Except for the Note and the transactions contemplated by this Agreement, as described in the Schedule of Exceptions and (i) the conversion privileges of the ...
(d)Other than that certain Amended and Restated Voting Agreement Dated
(e)All outstanding shares of the Company’s Common Stock and all shares of the Company’s Common Stock underlying outstanding options are subject to ...
2.3Subsidiaries. Other than ________________________ the Company does not presently own or control, directly or indirectly, or hold any rights to acquire, any interest in any other corporation, association or other business entity and the Company is not a participant in any joint venture, partnership or similar arrangement.
2.4Authorization. All corporate action on the part of the Company and its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, and for the authorization, execution and delivery of the Note and ______________ (collectively the “Transaction Agreements”) and all other agreements contemplated hereby or thereby to which the Company is a party, the performance of all obligations of the Company hereunder and thereunder, and the authorization, sale and issuance (or reservation for issuance) of the Underlying Stock has been or will be taken. The Transaction Agreements and all other agreements contemplated hereby or thereby to which the Company is a party constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
2.5Valid Issuance. The Note that is being purchased by ___________ hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be free of restrictions on transfer, other than restrictions on transfer under the Transaction Agreements and under applicable state and federal securities laws. The Conversion Shares issuable upon conversion of the Note have been duly and validly reserved for issuance and, when issued, sold and delivered in accordance with the terms of the Note, will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer, other than restrictions on transfer under the Transaction Agreements,and under applicable state and federal securities laws. The shares of Common Stock, if any, issuable upon conversion of the Conversion Shares will be duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Company’s then-current certificate of incorporation, will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer, other than restrictions on transfer under the Transaction Agreements, ________________ and under applicable state and federal securities laws.
2.6Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for such filings as may be required pursuant to applicable federal and state securities laws, which filings will be effected within the required statutory period.
Exhibit E-2
2.7Offering. Subject in part to the truth and accuracy of ________’s representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Note as contemplated by this Agreement are exempt from the registration requirements of the Act, and the qualification requirements of the California Corporate Securities Law of 1968, as amended, pursuant to Sections 25100, 25102, 25102.1 or 25105 thereof (or the regulations promulgated thereunder) or other applicable state securities laws. Neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemptions.
2.8Litigation. There is no claim, action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company or any of its Subsidiaries that questions the validity of the Transaction Agreements or the right of the Company to enter into such agreements or to consummate the transactions contemplated thereby, or that might result, either individually or in the aggregate, in any Material Adverse Effect or any change in the current equity ownership of the Company. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or, to the Company’s knowledge, threatened involving the prior employment of any of the Company’s employees or their obligations under any agreements with prior employers or any employees of any of the Subsidiaries or their obligations under any agreements with prior employers. Neither the Company nor, to the Company’s knowledge, any of its officers or directors or those of any of its Subsidiaries, is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.
2.9Proprietary Information and Inventions Agreement. Each employee and consultant of the Company and the Subsidiaries has executed a Proprietary Information and Inventions Agreement (or similar agreement) or a consulting agreement, as applicable, with the Company or one of its Subsidiaries. The Company, after reasonable investigation, is not aware, nor does it have any reason to believe, that any of its employees, officers or consultants or those of the Subsidiaries are in violation thereof.
2.10Patents and Trademarks.
(a)The Schedule of Exceptions contains a complete and accurate list of all (i) patents and registered trademarks, service marks, trade names and copyrights owned or used by the Company or the Subsidiaries, (ii) pending patent applications and applications for registrations of trademarks, service marks, trade names and copyrights filed by the Company or the Subsidiaries, (iii) unregistered trade names and corporate names owned or used by the Company and/or the Subsidiaries, and (iv) licenses and other rights granted by the Company or the Subsidiaries to any third party with respect to any of the items identified in the preceding clauses (i) through (iii).
(b)To the best of its knowledge, the Company or its Subsidiaries owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and as presently proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf or standard products.
Exhibit E-3
(c)The Company has not received any communications alleging that the Company has violated or, by conducting its business as presently proposed to be conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity.
(d)The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company’s business as proposed to be conducted. The Company does not believe it is or will be necessary to utilize any inventions of any of its employees or the employees of any Subsidiary made prior to their employment by the Company or such Subsidiary, as the case may be, except for inventions that have been assigned or licensed to the Company or such Subsidiary as of the date hereof or acquired by the Company or such Subsidiary.
2.11Compliance with Other Instruments. Neither the execution and delivery of the Transaction Agreements nor the performance by the Company of its obligations under the Transaction Agreements (including the issuance of the Note and, upon conversion, the Underlying Stock) will: (i) violate any provisions of the certificate of incorporation or the bylaws of the Company; (ii) with or without the giving of notice or the passage of time, or both, violate, or be in conflict with, or constitute a default under, or cause or permit the termination or the acceleration of the maturity of, any debt or obligation of the Company or any Subsidiary; (iii) require notice to or the consent of any party to any agreement or commitment, including, without limitation, any lease or license to which the Company or any Subsidiary is a party, or by which it or its respective properties is bound or subject; (iv) result in the creation or imposition of any security interest, lien, or other encumbrance upon any property or assets of the Company or any Subsidiary under any agreement or commitment to which it is a party, or by which it or its respective properties is bound or subject; or (v) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which the Company or any Subsidiary or its respective properties is bound or subject. The Company is not in violation of or default under any provision of its certificate of incorporation or bylaws which violations or defaults, individually or in the aggregate, would or could reasonably be likely to have a Material Adverse Effect. Neither the Company nor any of the Subsidiaries is in violation of or in default under any instrument, judgment, order, writ, decree or contract to which it or any Subsidiary is a party or by which it or any Subsidiary is bound, or, to the Company’s knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company or any Subsidiary, which violations or defaults, individually or in the aggregate, would or could reasonably be likely to have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated thereby will not result in any such violation, or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company or any assets of any of the Subsidiaries, which would or could reasonably be likely to have a Material Adverse Effect, or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company or any Subsidiary, its respective business or operations or any of its or any Subsidiary’s respective assets or properties.
2.12Agreements.
(a)Except for agreements explicitly contemplated hereby, there are no agreements, understandings or proposed transactions between the Company and/or any Subsidiary and any of its or their respective officers, directors, or affiliates.
Exhibit E-4
(b)There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company or any Subsidiary is a party or by which it is bound that (i) may involve obligations (contingent or otherwise) of, or payments to, the Company or such Subsidiary in excess of $100,000, (ii) may involve the license of any patent, copyright, trade secret or other proprietary right to or from the Company or such Subsidiary, other than licenses arising from the purchase of “off the shelf’ or other standard products, (iii) may involve indemnification by the Company or such Subsidiary with respect to infringements of proprietary rights, other than indemnification obligations arising from purchase or sale agreements entered into in the ordinary course of business, or (iv) is reasonably likely to be materially adverse to the business, property or financial condition of the Company or its Subsidiaries.
(c)Neither the Company nor any Subsidiary has (i) declared or paid any dividends or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) other than the issuance of the Note, incurred any indebtedness for money borrowed or any other liabilities individually in excess of $[***] or, in the case of indebtedness and/or liabilities individually less than $[***], in excess of $[***] in the aggregate, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of inventory in the ordinary course of business.
(d)For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.
(e)A true and correct copy of each of the written instruments, plans, contracts and agreements that are referred to on the Schedule of Exceptions pursuant to this Section 2.12, together with all amendments, waivers or other changes thereto, have been furnished or made available to ____________________.
(f)Neither the Company nor any Subsidiary is a guarantor or
indemnitor of any indebtedness of any other person or entity.
2.13Related-Party Transactions. Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements for the Company and/or the Subsidiaries approved by the Board of Directors of the Company, and (iii) the purchase of shares of the Company’s capital stock and the issuance of options to purchase shares of the Company’s Common Stock, in each instance, approved by the Board of Directors of the Company, there are no agreements, understandings or proposed transactions between the Company or any Subsidiary and any of its respective officers, directors, employees, “affiliates” or “associates” (as those terms are defined in Rule 405 of the Act). Neither the Company nor any Subsidiary is indebted, directly or indirectly, to any of the directors, officers or employees of any of the Company or the Subsidiaries or to their respective spouses or children, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses. None of the directors, officers or key employees of the Company or any of the Subsidiaries, or any members of their immediate families (i) are, directly or indirectly, indebted to the Company or any Subsidiary or, (ii) to the Company’s knowledge, have any direct or indirect ownership interest in any firm or corporation with which the Company or any Subsidiary has a business relationship, or any firm or corporation which competes with the Company or any Subsidiary except that directors, officers or key employees of the Company may own stock in (but not exceeding two percent of the outstanding capital stock of) publicly traded companies that may compete with the Company or any Subsidiary. To the Company’s knowledge, none of the Company’s directors, officers, employees, affiliates or associates or any members of their immediate families nor those of any Subsidiary are, directly or indirectly, interested in any material contract with the Company.
Exhibit E-5
2.14Tax Returns. The Company and each Subsidiary has timely filed all tax returns (federal, state and local) required to be filed by it and all Taxes (as defined below), assessments and other government charges imposed upon such entity, or upon any of the assets, income or franchises of such entity, have been timely paid or, if not yet payable, are adequately accrued on such entity’s books and records. There are no actual or proposed Tax deficiencies, assessments or adjustments with respect to the Company or any Subsidiary thereof or any assets or operations of any of such entities, and there are no ongoing or pending Tax audits by any taxing authority against any of such entities. “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall, profits, environmental, customs, capital stock, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative or add-on minimum or other similar tax, governmental fee, governmental assessment or governmental charge of any kind whatsoever, including any interest, penalties or additions to Tax or additional amounts with respect to the foregoing.
2.15Changes. With respect to the Company and each Subsidiary, since _______________, there has not been:
(a)any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries from that reflected in the Financial Statements (as hereinafter defined);
(b)any damage, destruction or loss, whether or not covered by insurance that would have a Material Adverse Effect;
(c)any waiver or material compromise by the Company or any Subsidiary of a valuable right or of a debt owed to it;
(d)any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or any Subsidiary, except in the ordinary course of business (as such business is presently conducted or proposed to be conducted) and that would not have a Material Adverse Effect;
(e)any material change or amendment to a contract or arrangement by which the Company or any Subsidiary or any of its respective assets or properties is bound or subject;
(f)any sale, assignment or transfer of any intellectual property rights, or the disclosure of any proprietary confidential information to any person not under a duty to keep such information confidential;
(g)any resignation or termination of employment of any key officer, or director of the Company or any Subsidiary; and the Company is not aware of the impending resignation or termination of employment of any such officer or director;
(h)any material change in any compensation arrangement or agreement with any employee of the Company;
(i)any mortgage, pledge, transfer of a security interest in, or lien, created by the Company or any Subsidiary, with respect to any of its material properties outside the ordinary course of business;
Exhibit E-6
(j)any loans or guarantees made by the Company or any Subsidiary to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
(k)any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;
(l)to the Company’s knowledge, any other event or condition of any character that would have a Material Adverse Effect; or
(m)any agreement or commitment by the Company or any Subsidiary to do any of the things described in this Section 2.15.
2.16Permits. The Company and each of the Subsidiaries has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which would have a Material Adverse Effect, and the Company believes it or such Subsidiary can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. Neither the Company nor any Subsidiary is in default in any material respect under any of such franchises, permits, licenses or other similar authority.
2.17Environmental and Safety Laws. The Company, each of the Subsidiaries and the operation of its respective business and any real property that the Company or such Subsidiary owns or has owned, leases or has leased or otherwise occupies or uses or has occupied or used (the “Premises”) are, to the best of the Company’s knowledge, in compliance with all applicable Environmental Laws (as defined below) and orders or directives of any governmental authorities having jurisdiction under such Environmental Laws. Neither the Company nor any Subsidiary has received any, written citation, directive, letter or other communication, written or oral, or any notice of any proceeding, claim or lawsuit, from any person arising out of the Company’s or such Subsidiary’s ownership or occupation of any of the Premises, or the conduct of its respective operations. For purposes of this Agreement, the term “Environmental Laws” shall mean any federal, state, local or foreign law, ordinance, rule, regulation, permit and authorization pertaining to the protection of human health or the environment. The Company has made available to _____________ true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies, and environmental studies or assessments
2.18Disclosure. The Company has provided _____________ with all the information reasonably available to the Company that __________ has requested for deciding whether to purchase the Note. Neither this Agreement (including all the exhibits and schedules hereto) nor any certificates delivered in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances under which they were made.
2.19Registration Rights. Except as set forth in ____________, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.
2.20Corporate Documents; Minute Books. The certificate of incorporation and bylaws of each of the Company and its Subsidiaries are in the form previously provided to or made available to _______________.
Exhibit E-7
2.21Title to Property and Assets. The property and assets the Company owns and the property and assets each Subsidiary owns are owned by the Company or such Subsidiary, as the case may be, free and clear of all mortgages, liens, loans and encumbrances, except (i) as reflected in the Financial Statements, (ii) for statutory liens for the payment of current taxes that are not yet delinquent and other statutory liens, encumbrances or security interests that arise in the ordinary course of business which individually or in the aggregate would not have a material adverse effect on the Company or its business, and (iii) for minor defects in title, none of which, individually or in the aggregate, materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company, or each Subsidiary, as the case may be, is in compliance with such leases in all material respects and, to the best of the Company’s knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances, subject to clauses (i), (ii) and (iii) above.
2.22Labor Agreements and Actions. Neither the Company nor any Subsidiary has any collective bargaining agreements with any of its employees. There is no labor union organizing activity pending, or to the Company’s knowledge, threatened with respect to the Company or any Subsidiary. The Company is not aware that any officer or key employee, or that any group of employees, of the Company or any Subsidiary, intends to terminate their employment with the Company or such Subsidiary, nor does the Company or any Subsidiary have a present intention to terminate the employment of any of the foregoing. The employment of each officer and employee of the Company and each Subsidiary is terminable at the will of the Company or such Subsidiary. Neither the Company nor any Subsidiary is a party to or bound by any currently effective employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation agreement. To the best of the Company’s knowledge, the Company and each Subsidiary has complied in all material respects with all applicable state and federal equal employment opportunity and other laws related to employment (including without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes), and the Company is not aware that it or any Subsidiary has any labor relations problems (including without limitation, any union organization activities, threatened or actual strikes or work stoppages or material grievances). Neither the Company nor any Subsidiary is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union. Neither the Company nor any Subsidiary has made any representations regarding equity incentives to any officer, employees, director or consultant that are inconsistent with the share amounts and terms set forth in the Company’s or such Subsidiary’s board minutes.
2.23Qualified Small Business Stock. The Company is a “qualified small business” as defined in Section 1202(d) of the Internal Revenue Code, and, to the best of the Company’s knowledge, after consultation with its tax advisors, if issued at the Closing upon conversion of the Note, the Conversion Shares, if such shares are shares of Series C-1 Preferred Stock, would meet the requirements for qualification as “qualified small business stock” as defined in Section 1202(c) of the Internal Revenue Code.
Exhibit E-8
2.24Financial Statements. The Company has made available to __________ a copy of the unaudited consolidated balance sheet of ViaCyte, Inc. as of __________ and the related unaudited statement of cash flow for the three month period ended ____________ (collectively, the “Financial Statements”). The Financial Statements have been prepared in a manner consistent with generally accepted accounting principles applied on a consistent basis by the Company throughout the periods indicated, except that the unaudited Financial Statements do not contain all footnotes required by generally accepted accounting principles and are subject to normal quarter-end adjustments. The Financial Statements fairly and accurately present the financial condition and operating results of the applicable entity as of ___________, subject to normal quarter-end audit adjustments. Except as set forth in the Financial Statements or otherwise disclosed pursuant to this Agreement, the Company has no material liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the date of its balance sheet made available to ____________ as described in the first sentence hereof and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, individually or in the aggregate are not material to the financial condition or operating results of the Company, taken as a whole.
2.25Employee Benefit Plans. Neither the Company nor any of the Subsidiaries has any Employee Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.26Insurance. The Company and each of the Subsidiaries has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed and such other insurance in such amounts as are customary within the Company’s industry.
2.27FIRPTA. The Company hereby represents that neither it nor any Subsidiary is now or ever has been a “United States real property holding corporation,” as defined in §897(c)(2) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation § 1.897-2(b).
2.28Additional Liability. Neither the Company nor any Subsidiary has received any written notice that it has been sued in any suit, action or proceeding which involves a claim related to the products developed or currently being developed by the Company or to stem cell research.
3.Representations and Warranties of _______________. ____________ hereby represents, warrants and covenants to the Company that:
3.1Authorization. __________ has full power and authority to enter into this Agreement, and this Agreement constitutes its valid and legally binding obligation, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
Exhibit E-9
3.2Purchase Entirely for Own Account. __________ understands that the Note is not, and any Underlying Stock issued on conversion, at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is predicated, in part, on ___________‘s representations set forth herein. By ___________‘s execution of this Agreement _____________ hereby confirms, that the Note to be received by ___________, and the Underlying Stock issuable upon conversion, will be acquired for investment for _________‘s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that __________ has no present intention of selling, granting any participation in or otherwise distributing the same. By executing this Agreement, ___________ further represents that ___________ does not have any intention, contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the foregoing securities.
3.3Disclosure of Information. ____________ represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Note and the business, properties, prospects and condition (financial or otherwise) of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of ___________ to rely thereon.
3.4Investment Experience. __________ is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Note and the Underlying Stock. ___________ also represents it has not been organized for the purpose of acquiring the Securities or the Underlying Stock.
3.5Accredited Investor. __________ is an “accredited investor” within the meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in effect.
3.6Restricted Securities. ____________understands that the Note it is purchasing, and, upon conversion, the Underlying Stock, are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities, and, upon conversion, the Underlying Stock, may be resold without registration under the Act only in certain limited circumstances. In the absence of an effective registration statement covering the Note or the Underlying Stock or an available exemption from registration under the Act, the Note and the Underlying Stock must be held indefinitely.
3.7Further Limitations on Disposition. Without in any way limiting the representations set forth above, __________ further agrees not to make any disposition of all or any portion of the Note, and, upon conversion, the Underlying Stock, unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 3 and, to the extent such disposed securities are shares of the Company’s Series C-1 Preferred Stock, ___________, and:
(a)There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
Exhibit E-10
(b)(i) shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if requested by the Company, __________ shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.
(c)Notwithstanding the provisions of subsections (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by ________ to an affiliate of __________, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if the transferee were __________ hereunder.
3.8Legends. It is understood that the certificates evidencing the Note and any Underlying Stock may bear one or all of the following legends:
(a)The following legend under the Securities Act:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
(b)Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations and Sections 417 and 418 of the California Corporations Code.
3.9______________Counsel. __________ acknowledges that it has had the opportunity to review this Agreement, the exhibits and the schedules attached hereto and the transactions contemplated by this Agreement with _________’s own legal counsel. ___________ is relying solely on _________’s legal counsel and not on any statements or representations of the Company (other than those set forth in Section 2 herein) or any of the Company’s agents, including the Company’s counsel, Cooley, for legal advice, with respect to this investment or the transactions contemplated by this Agreement. The foregoing, however, shall in no way be deemed to limit the representations and warranties of the Company set forth in Section 2 hereof or the ability of _________ to rely thereupon.
4.California Commissioner of Corporations
4.1Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE.
Exhibit E-11
5.Conditions of __________’s Obligations at Closing. The obligations of __________ under subsection 1.2 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions:
5.1Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct on and as of the Closing.
5.2Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement or in ancillary documents incident to the transaction contemplated by this Agreement that are required to be performed or complied with by it on or before the Closing.
5.3Closing Documents. The Company shall have delivered, on or before the Closing, to __________ all of the following documents:
(a)A Compliance Certificate, dated as of the Closing, stating that the conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating that there shall have been no adverse change in the business, affairs, operations, properties, assets or condition (financial or otherwise) of the Company since the date of this Agreement.
(b)A Secretary’s Certificate, certifying copies of the resolutions duly adopted by the Board of Directors of the Company and stockholders authorizing the execution, delivery and performance of the Transaction Agreements and each of the other agreements contemplated hereby, the issuance and sale of the Note and the consummation of all other transactions contemplated by this Agreement.
(c)Certified copy of the Company’s certificate of incorporation, as in effect at the Closing.
(d)Certificates of good standing issued by the secretary of state for each state where the Company is authorized to do business.
5.4Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state or foreign jurisdiction that are required in connection with the lawful issuance and sale of the Note pursuant to this Agreement shall be duly obtained and effective as of the Closing.
5.5Redacted
6.Conditions of the Company’s Obligations at Closing. The obligations of the Company to __________ under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by __________:
6.1Representations and Warranties. The representations and warranties of __________ contained in Section 3 shall be true on and as of the Closing.
6.2Payment of Purchase Price. __________ shall have delivered at the Closing the purchase price specified in Section 1.2.
Exhibit E-12
6.3Performance. ____________ shall have performed and complied with all covenants, agreements, obligations, and conditions contained in this Agreement that are required to be performed and complied with on or before the Closing.
6.4Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state or foreign jurisdiction that are required in connection with the lawful issuance and sale of the Note pursuant to this Agreement shall be duly obtained and effective as of the Closing.
7.Miscellaneous.
7.1Survival. The warranties, representations and covenants of the Company and ___________ contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of ___________ or the Company.
7.2Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties and shall inure to the benefit of and be binding upon each person who shall be a holder of the Note and/or Underlying Stock from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of the Note or any Underlying Stock specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of the Note or Underlying Stock in its records as the absolute owner and holder of the Note or Underlying Stock for all purposes. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
7.3Governing Law. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.
7.4Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
7.5Notices. Unless otherwise provided, any notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex, electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the address as set forth on the signature page hereof or at such other address as such party may designate by ten days advance written notice to the other parties hereto.
7.6Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. _________ agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which __________ or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless ________ from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
Exhibit E-13
7.7Fees and Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of the Agreement; provided that the Company shall reimburse ___________ up to $25,000 for its reasonable out-of- pocket legal fees and other transaction expenses incurred in connection with the negotiation and execution of the Transaction Agreements.
7.8Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and ____________. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities and the Company.
7.9Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
7.10Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.
7.11Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7.12Knowledge; Material Adverse Effect. For purposes of the representations and warranties set forth in Section 2 hereof, the phrase “to the Company’s knowledge” or “to the best of the Company’s knowledge” shall mean the actual knowledge after reasonable investigation of the officers of the Company and its Subsidiaries and “Material Adverse Effect” shall mean a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property or results of operations of the Company and the Subsidiaries, taken as a whole.
[Remainder of Page Intentionally Left Blank]
Exhibit E-14
IN WITNESS WHEREOF, the parties have executed this Convertible Note Purchase Agreement as of the date first above written.
COMPANY: |
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VIACYTE, INC., |
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a Delaware corporation |
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By: |
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Paul K. Laikind, Ph.D. |
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President and Chief Executive Officer |
Schedule of Exceptions
Form of Convertible Promissory Note
Exhibit A-17
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THIS CONVERTIBLE PROMISSORY NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF AUGUST 6, 2014, BY AND AMONG HOLDER, THE COMPANY AND SQUARE 1 BANK, AS IT MAY BE AMENDED FROM TIME TO TIME.
CONVERTIBLE PROMISSORY NOTE
$___________________________San Diego, California
For value received ViaCyte, Inc., a Delaware corporation (“Payor” or the “Company”) promises to pay to _________________ or its assigns (“Holder”) the principal sum of $_________ with simple interest on the outstanding principal amount at the rate of 8% per annum. Interest shall commence with the date hereof and shall continue on the outstanding principal until paid in full or converted. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed.
1.This note (the “Note”) is issued pursuant to the terms of that certain Convertible Note Purchase Agreement (the “Agreement”) dated as of _____________ to the Holder.
2.All payments of interest and principal shall be in lawful money of the United States of America. All payments shall be applied first to accrued interest, and thereafter to principal.
3.In the event that, prior to the Maturity Date (as defined below) and prior to an IPO (as defined below), Payor issues and sells shares of its Equity Securities to investors (the “Investors”) in a bona fide equity financing led by one or more venture capital funds with total proceeds to the Payor of not less than $[***] (excluding the conversion of the Note, but including other conversions of indebtedness) (a “Qualified Financing”), then the then-outstanding principal balance of this Note (and any then-unpaid accrued interest) (the “Conversion Amount”) shall automatically convert in whole without any further action by the Holder into such Equity Securities (rounded down to the nearest whole share, if applicable) at a conversion price equal to the price per share paid by the Investors purchasing the Equity Securities on the same terms and conditions as given to the Investors. For purposes of this Note, the term “Equity Securities” shall mean the Payor’s Preferred Stock or any securities conferring the right to purchase the Payor’s Preferred Stock or securities convertible into, or exchangeable for (with or without additional consideration), the Payor’s Preferred Stock, in each case issued in the Qualified Financing following the date hereof, except that such defined term shall not include any security granted, issued and/or sold by the Payor to any employee, director or consultant in such capacity.
4.In the event that Payor, prior to the Maturity Date and prior to a Qualified Financing, completes an IPO, the Conversion Amount shall automatically convert in whole without any further action by the Holder into that number of fully paid and nonassessable shares of the Company’s common stock as is equal to the Conversion Amount divided by the price per share that such shares are offered and sold to the public in the IPO, rounded down to the nearest whole share. For purposes of this Note, the term “IPO” shall mean the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Company’s common stock for the account of the Company in which either (a) the gross cash proceeds to
Exhibit A-18
the Company (before underwriting discounts, commissions and fees) are at least $[***] or (b) all outstanding shares of preferred stock of the Company are converted to common stock of the Company.
5.In the event that there has not been a Qualified Financing or an IPO prior to ___________ (the “Maturity Date”), the Conversion Amount shall automatically convert in whole without any further action by the Holder into that number of fully paid and nonassessable shares of the Company’s Series C-1 Preferred Stock as is equal to the Conversion Amount divided by $1.00 (as adjusted for any stock splits, combinations or the like with respect to the Company’s Series C-1 Preferred Stock or its common stock), rounded down to the nearest whole share.
6.Unless this Note has been converted in accordance with the terms of Sections 3, 4 or 5 above, the entire outstanding principal balance and all unpaid accrued interest under this Note shall become fully due and payable upon the closing of an Acquisition or Asset Transfer (each as defined in the Company’s certificate of incorporation).
7.In the event of any default hereunder, Payor shall pay all reasonable attorneys’ fees and court costs incurred by Holder in enforcing and collecting this Note.
8.Payor may not prepay this Note prior to the Maturity Date without the consent of Holder.
9.If there shall be any Event of Default (as defined below) hereunder, at the option and upon the declaration of the Holder and upon written notice to the Payor (which election and notice shall not be required in the case of an Event of Default under Section 9(c) or 9(d)), this Note shall accelerate and all principal and unpaid accrued interest shall become due and payable. The occurrence of any one or more of the following shall constitute an “Event of Default”:
(a)Payor fails to pay timely any of the principal amount due under this Note on the date the same becomes due and payable or any accrued interest or other amounts due under this Note on the date the same becomes due and payable;
(b)Payor shall default in its performance of any covenant under the Agreement;
(c)Payor files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing; or
(d)An involuntary petition is filed against Payor (unless such petition is dismissed or discharged within sixty (60) days under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Payor.
10.Payor hereby waives demand, notice, presentment, protest and notice of dishonor.
11.This Note shall be governed by and construed under the laws of the State of California, as applied to agreements among California residents, made and to be performed entirely within the State of California, without giving effect to conflicts of laws principles.
Exhibit A-19
12.The indebtedness evidenced by this Note is subordinated in right of payment to the prior payment in full of any Senior Indebtedness in existence on the date of issuance of this Note. “Senior Indebtedness” shall mean, unless expressly subordinated to or made on a parity with the amounts due under this Note, all amounts due in connection with (a) indebtedness of Payor to banks or other lending institutions regularly engaged in the business of lending money (excluding venture capital, investment banking or similar institutions and their affiliates, which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), and (b) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor.
13.Any term of this Note may be amended or waived only with the written consent of Payor and Holder.
14.This Note may be transferred only upon its surrender to the Company for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new Note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of the Company’s obligation to pay such interest and principal.
ViaCyte, Inc. |
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By: |
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Name: |
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Title: |
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Exhibit A-20
Consideration
Subject to the terms and conditions hereof and except as otherwise provided herein, CRISPR shall issue such number of its common shares, CHF 0.03 per share (the “Shares”), and such amount of cash, to ViaCyte on the dates and amounts set forth below. Within five (5) Business Days from each issuance date set forth below (each an “Issue Date”), (i) CRISPR shall cause its transfer agent to credit the account of ViaCyte with the applicable number of Shares as calculated pursuant to the terms of this Schedule A by electronic delivery at ViaCyte’s designated balance account at the Depository Trust Company and (ii) initiate a wire for the applicable cash amount set forth below, in immediately available funds denominated in U.S. Dollars, to an account designated by ViaCyte. Such account information shall be provided by ViaCyte in writing at least three (3) business days in advance of the first Issue Date and three (3) business days in advance of any Issue Date in which ViaCyte desires to change the account information. All Shares shall be issued by CRISPR pursuant to an effective registration statement under the Securities Act of 1933, as amended, and be issuable without restrictive legends. The value attributed to each Share for purposes of calculating the value of the Shares to be issued shall be the closing price of CRISPR’s common shares as quoted on the Nasdaq Global Market on each applicable Issue Date.
Issue Date |
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Value of Shares To Be Issued ($) |
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Amount of Cash Payment ($) |
Five (5) Business Days after the Effective Date of the Agreement (the “First Issue Date”) |
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$7,500,000 (the “First Tranche Shares”) |
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$5,000 less the Nominal Payment (as calculated below) |
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The close of market on the first Business Day after CRISPR files its Quarterly Report on Form 10-Q for the three months ending September 30, 2018 (the “Second Issue Date”) |
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Second Tranche Amount (as defined below) |
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$5,000 less the Nominal Payment (as calculated below) |
For purposes hereof, the term “Second Tranche Amount” shall be a dollar amount equal to the difference between (i) $15,000,000 and (ii) the aggregate net proceeds (after deduction for any reasonable and ordinary broker fees and commissions or other reasonable customary costs, charges or expenses solely and directly incurred in connection with ordinary broker sales of common shares on the Nasdaq Global Market up to the Expense Cap (as defined below) (for clarity, any of the foregoing amounts in excess of the Expense Cap shall not be so deducted), but without deduction for any other amounts including applicable taxes (other than any applicable stamp duties imposed on ViaCyte) received by or on behalf of ViaCyte in connection with selling the First Tranche Shares (the “First Tranche Proceeds”). Notwithstanding the foregoing, the term “First Tranche Proceeds” shall be deemed to equal $7,500,000 if CRISPR elects to pay ViaCyte $7,500,000 in cash (rather than issue Shares equal in value thereto) on the First Issue Date, as provided below in this Schedule A. ViaCyte will give CRISPR written notice within two (2) Business Days after ViaCyte has sold all First Tranche Shares (the “First Tranche Sales Notice”). In connection with the Second Tranche Amount, CRISPR shall issue such number of whole common shares with a value equal to the Second Tranche Amount (rounding down to the nearest whole common share) (the “Second Tranche Shares”). Any shortfall in the amount owed shall be paid via wire transfer in immediately available funds, to an account designated by ViaCyte on the date the Second Tranche Amount is issued to ViaCyte. For purposes hereof, the term “Expense Cap” shall mean $[***].
Exhibit A-21
In connection with providing the First Tranche Sales Notice, ViaCyte will deliver an officer’s certificate to CRISPR setting forth in reasonable detail the calculation of the First Tranche Proceeds, and ViaCyte will provide to CRISPR any information and documentation reasonably requested by CRISPR relating to such calculation. The Parties acknowledge and agree that if, for whatever reason, CRISPR fails to receive the First Tranche Sales Notice on or before the 30th day following ViaCyte’s receipt of the First Tranche Shares, then, notwithstanding anything to the contrary set forth in this Agreement and this Schedule A, the First Tranche Proceeds shall be deemed to equal a dollar amount equal to the product of (x) the First Tranche Shares multiplied by (y) the highest closing price of CRISPR’s common shares as quoted on the Nasdaq Global Market during the period starting on the first business day following ViaCyte’s receipt of the First Tranche Shares and ending on the 30th day following ViaCyte’s receipt of the First Tranche Shares. The foregoing notwithstanding, the time period for ViaCyte to deliver the First Tranche Sales Notice shall be extended by a number of days equal to the number of days during the 30-day period following ViaCyte’s receipt of the First Tranche Shares, if any, that (i) trading in CRISPR’s common shares is suspended on the Nasdaq Global Market or (ii) ViaCyte determines in good faith that, based upon the advice of a nationally recognized law firm based in the United States that is expert in U.S. securities law matters, ViaCyte is unable to sell the First Tranche Shares on the Nasdaq Global Market due to its possession of material non-public information related to CRISPR and ViaCyte gives CRISPR written notice of such fact within one (1) Business Day of obtaining such written advice.
Nominal Payment
In order to facilitate the issuance of the Shares in accordance with Swiss law, CRISPR shall withhold from the cash amount to be paid on each Issue Date (i.e., $5,000) by an amount equal to (i) CHF 0.03 multiplied by (ii) the number of Shares to be issued on the Issue Date (the aggregate so calculated on each Issue Date is referred to as the “Nominal Payment”). On behalf of ViaCyte, CRISPR, or an affiliate thereof, shall wire such Nominal Payment in immediately available funds to an escrow bank account in the sense of art. 633 para 1 Swiss Code of Obligations. Pursuant to Swiss law (art. 633 para 2 Swiss Code of Obligations) any amount in such escrow account will only be released to CRISPR after the Shares have been registered in the commercial register of Zug, Switzerland.
Make-Whole Adjustment
It is the intention of the Parties that ViaCyte receive no more and no less than $15,000,000 via (i) aggregate net proceeds (after deduction for any reasonable and ordinary broker fees and commissions or other reasonable and customary costs, charges or expenses solely and directly incurred in connection with ordinary broker sales of common shares on the Nasdaq Global Market up to the Expense Cap (for clarity, any of the foregoing amounts in excess of the Expense Cap shall not be so deducted), but without deduction for any other amounts including applicable taxes (other than any applicable stamp duties imposed on ViaCyte) in connection with the sale of all Shares issued hereunder; and/or (ii) cash payments in lieu of issuing Shares as contemplated by the last section of this Schedule A; and/or (iii) any combination of clauses (i) and (ii).
Exhibit A-22
ViaCyte will give CRISPR written notice within two (2) Business Days after ViaCyte has sold all Shares (the “Final Sales Notice”). In connection with providing the Final Sales Notice, ViaCyte will deliver an officer’s certificate to CRISPR setting forth in reasonable detail the calculation of the aggregate gross proceeds (after deduction for any reasonable and ordinary broker fees and commissions or other reasonable and customary costs, charges or expenses solely and directly incurred in connection with ordinary broker sales of common shares on the Nasdaq Global Market up to the Expense Cap (for clarity, any of the foregoing amounts in excess of the Expense Cap shall not be so deducted), but without deduction for any other amounts including applicable taxes (other than any applicable stamp duties imposed on ViaCyte) received by or on behalf of ViaCyte in connection with selling all Shares (the “Final Sales Proceeds”), and ViaCyte will provide to CRISPR any information and documentation reasonably requested by CRISPR relating to such calculation. The Parties acknowledge and agree that if, for whatever reason, CRISPR fails to receive the Final Sales Notice on or before the 30th day following ViaCyte’s receipt of the Second Tranche Shares, then, notwithstanding anything to the contrary set forth in this Agreement and this Schedule A, the portion of the Final Sales Proceeds attributable to the Second Tranche Shares shall be deemed to equal a dollar amount equal to the product of (x) the total number of Second Tranche Shares multiplied by (y) the highest closing price of CRISPR’s common shares as quoted on the Nasdaq Global Market during the period starting on the first business day following ViaCyte’s receipt of the Second Tranche Shares and ending on the 30th day following ViaCyte’s receipt of the Second Tranche Shares. The foregoing notwithstanding, the time period for ViaCyte to deliver the Final Sales Notice shall be extended by a number of days equal to the number of days during the 30-day period following ViaCyte’s receipt of the Second Tranche Shares, if any, that (i) trading in CRISPR’s common shares is suspended on the Nasdaq Global Market or (ii) ViaCyte determines in good faith that, based upon the advice of a nationally recognized law firm based in the United States that is expert in U.S. securities law matters, ViaCyte is unable to sell the Second Tranche Shares on the Nasdaq Global Market due to its possession of material non-public information related to CRISPR and ViaCyte gives CRISPR written notice of such fact within one (1) Business Day of obtaining such written advice.
If the Final Sales Proceeds are less than $15,000,000, then CRISPR will owe ViaCyte an amount equal to (i) $15,000,000 less (ii) the Final Sales Proceeds (the amount so calculated is referred to as the “Deficiency Amount”). CRISPR will pay the Deficiency Amount to ViaCyte via wire transfer of immediately available funds to an account designated by ViaCyte in writing.
If the Final Sales Proceeds are more than $15,000,000, then ViaCyte will owe CRISPR an amount equal to (i) the Final Sales Proceeds less (ii) the Final Sales Proceeds (the amount so calculated is referred to as the “Surplus Amount”). ViaCyte will pay the Surplus Amount to CRISPR via wire transfer of immediately available funds to an account designated by CRISPR in writing.
The above payment will be made within five (5) Business Days after calculation thereof. The Parties intend that the payment above be made on or before December 31, 2018.
Trading Day Restriction
ViaCyte acknowledges and agrees that ViaCyte will not, directly or indirectly, sell or cause to be sold more than 50,000 of the Shares in a single trading day.
Cash Payment Election
Notwithstanding anything to the contrary set forth herein, CRISPR may, in its sole discretion, elect to pay ViaCyte the amount of dollars or value of Shares (as applicable) described under the heading “Value of Shares to Be Issued ($)” in the table above in cash instead of issuing Shares with respect to any such
Exhibit A-23
amount. CRISPR shall notify ViaCyte in writing by 6:59 pm ET on the trading day before the First Issue Date or Second Issue Date, as the case may be. If CRISPR makes such an election, then CRISPR shall not be required to pay the amount described under the heading “Amount of Cash Payment ($)” in the table above that would have been paid to ViaCyte had CRISPR issued Shares with respect to the First Issue Date and/or Second Issue Date, as the case may be. Any such cash payment under this paragraph shall paid to ViaCyte via wire transfer of immediately available funds denominated in U.S. Dollars on the First Issue Date or Second Issue Date, as the case may be, to an account designated by ViaCyte in writing.
Exhibit A-24
CRISPR In-License Agreements
Agreement Title |
Effective Date |
Licensor |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Exhibit A-25
ViaCyte In-License Agreements
Agreement Title |
Effective Date |
Licensor |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Exhibit A-26
Companies Triggering Section 2.10.4
Change of Control of CRISPR with: |
Change of Control of ViaCyte with: |
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[***] |
[***] |
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[***] |
[***] |
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[***] |
[***] |
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[***] |
[***] |
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[***] |
[***] |
Exhibit A-27
ViaCyte Schedule of Exceptions
[***]
Exhibit A-28
CRISPR Schedule of Exceptions
[***]
Exhibit A-29
Exhibit 31.1
Certifications
I, Samarth Kulkarni, certify that:
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1. I have reviewed this Quarterly Report on Form 10-Q of CRISPR Therapeutics AG; |
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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: November 7, 2018 |
By: |
/s/ Samarth Kulkarni |
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Samarth Kulkarni Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
Certifications
I, Michael Tomsicek, certify that:
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1. I have reviewed this Quarterly Report on Form 10-Q of CRISPR Therapeutics AG; |
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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: November 7, 2018 |
By: |
/s/ Michael Tomsicek |
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Michael Tomsicek Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of CRISPR Therapeutics AG (the “Company”) for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned officers of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
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/s/ Samarth Kulkarni |
Samarth Kulkarni |
Chief Executive Officer |
(Principal Executive Officer) |
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November 7, 2018 |
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/s/ Michael Tomsicek |
Michael Tomsicek |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
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November 7, 2018 |