8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 8, 2019

 

 

Neoleukin Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   001-36327   98-0542593
(State or other jurisdiction of incorporation)   (Commission File Number)  

(IRS Employer

Identification No.)

401 Terry Avenue North

Seattle, Washington 98109

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (206) 732-2133

Aquinox Pharmaceuticals, Inc.

450 – 887 Great Northern Way

Vancouver, B.C. Canada, V5T 4T5

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.000001   NLTX   The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  ☒

 

 

 


Item 1.01

Entry into a Material Definitive Agreement.

On August 8, 2019, Aquinox Pharmaceuticals, Inc. (“Aquinox”) completed its transaction with Neoleukin Therapeutics, Inc., a Delaware corporation (“Neoleukin”), and Apollo Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Aquinox (“Merger Sub”) in accordance with the terms of the Agreement and Plan of Merger, dated as of August 5, 2019 (the “Merger Agreement”). Pursuant to the Merger Agreement, the Merger Sub merged with and into Neoleukin (the “Merger”), with Neoleukin surviving the Merger as a wholly-owned subsidiary of Aquinox.

As a result of the Merger, the following agreement and arrangement effectively became the agreement and arrangement of Aquinox.

Exclusive Start-up License Agreement with the University of Washington

On July 8, 2019, Neoleukin entered into an Exclusive License Agreement with the University of Washington (“UW”), under which UW (on behalf of itself and Stanford University) granted Neoleukin an exclusive worldwide license under certain patent rights, to make, have made, use, offer to sell, sell, offer to lease or lease, import, export or otherwise offer to dispose of licensed products in all fields of use, and a nonexclusive worldwide license to use certain know-how. The foregoing licenses are sublicenseable by Neoleukin without UW’s consent, subject to certain limited conditions.

As consideration for the licensed rights, Neoleukin issued shares of common stock to UW, representing five percent of the Company’s fully-diluted capitalization on the date on which the Exclusive License Agreement was executed. In addition, Neoleukin agreed to issue additional shares of common stock to UW sufficient to ensure UW maintains its ownership percentage of Neoleukin’s fully-diluted capitalization, until Neoleukin raised a certain amount of equity capital. Pursuant to the agreement, Neoleukin also granted to UW an assignable right to participate in any future sale of equity securities by Neoleukin, subject to certain exclusions. Additionally, Neoleukin is required to pay UW: (i) an annual maintenance fee starting in January 2022 (but excluding any year in which minimum annual royalties are paid); (ii) up to $875,000 in combined development and regulatory milestone payments with respect to each distinct class of licensed product; (iii) up to $10.0 million in combined commercial milestone payments based on cumulative net sales of licensed products within each distinct class of licensed product; (iv) a low single digit royalty on net sales of licensed products sold by Neoleukin and its sublicensees, which may be subject to reductions, and subject to minimum annual royalty payments following the first commercial sale of a licensed product; (v) a certain percentage of any sublicense consideration (other than royalties) Neoleukin receives from sublicensees, ranging from 50% to low single digit percentages based on the stage of development at the time the sublicense is executed; and (vi) a certain percentage of consideration Neoleukin receives from an acquisition of Neoleukin or its assets, ranging from 50% to zero based on the stage of development at the relevant time. Neoleukin is obligated to pay royalties on a country-by-country basis until the expiration of the last valid claim within the licensed patent rights in such country.

The agreement will expire upon the expiration of the last valid claim within the licensed patent rights. Neoleukin may terminate the agreement upon prior written notice to UW. UW may terminate the agreement by a specified number of days’ notice if Neoleukin permanently ceases operations, becomes insolvent or similar, or if Neoleukin challenges the validity of the licensed patent rights. In addition, UW may terminate the agreement for material breach that is not cured within a specified number of days, which cure period is to be at least doubled if Neoleukin is proceeding diligently to cure the default.

The foregoing description of the License Agreement is not complete and is qualified in its entirety by reference to the document attached hereto as Exhibit 10.1, which is incorporated herein by reference.

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Aquinox issued to the former holders of Neoleukin capital stock (i) 4,589,787 shares of Aquinox common stock representing approximately 19.5% of Aquinox’s issued and outstanding shares of common stock (calculated prior to the issuance of those new shares of common stock) and (ii) 101,948 shares of a newly created Aquinox non-voting convertible preferred stock that, following approval of Aquinox’s stockholders, will be convertible (the “Preferred Stock Conversion”) into 10,194,838 shares of Aquinox common stock such that following such conversion, the former holders of Neoleukin capital stock will, together with the shares of common stock issued at the Effective Time, hold in aggregate approximately 38.58% of the fully diluted outstanding shares of Aquinox (taking into account currently outstanding Aquinox stock options and a portion of the currently granted Aquinox options that may be in the money at closing, but excluding equity incentive awards covering shares of Aquinox common stock that are expected to be granted to continuing employees, including members of management, of Neoleukin). Any outstanding shares of Neoleukin common stock that were unvested or subject to repurchase or forfeiture restrictions became fully vested and any repurchase or forfeiture restrictions thereon lapsed immediately prior to the Effective Time.

 

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In connection with the Merger, Aquinox will prepare and file with the U.S. Securities and Exchange Commission (“SEC”) a proxy statement, and will seek the approval of Aquinox’s stockholders with respect to certain actions, including the following (collectively, the “Aquinox Stockholder Matters”):

 

   

the approval of the Preferred Stock Conversion; and

 

   

the amendment of Aquinox’s restated certificate of incorporation to increase the number of authorized shares of common stock to an amount as determined by the board of directors of Aquinox (the “Aquinox Board”) following the closing.

The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the Merger Agreement, that was filed as Exhibit 2.1 to Aquinox’s Current Report on Form 8-K filed with the SEC on August 6, 2019.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 regarding the Merger is incorporated by reference into this Item 2.03.

Neoleukin entered into a facility use agreement, dated as of December 4, 2018, with the Institute for Systems Biology, for the sublease of Neoleukin’s office and laboratory space in Seattle, Washington (the “Sublease Agreement”). The base rent for the Sublease Agreement is currently $163,765 per month, plus additional overhead charges for office and laboratory operations and maintenance costs. On April 17, 2019, Neoleukin entered into an amendment to the Sublease Agreement, expanding the space under the sublease from 2,030 square feet to 3,500 square feet.

The foregoing description of the Sublease Agreement is not complete and is qualified in its entirety by reference to the documents attached hereto as Exhibit 10.2 and Exhibit 10.3, which are incorporated herein by reference.

 

Item 3.02

Unregistered Sales of Equity Securities.

See the descriptions set forth under Items 1.01, 2.01 and 5.03, which are incorporated into this Item 3.02 by reference. The shares were issued in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act and Rule 506 promulgated thereunder.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) Resignation of Directors; Resignation of Executive Officer

As previously disclosed, in connection with the Merger and effective as of the Effective Time, the Aquinox Board accepted the resignations of Gary Bridger, Ph.D., Daniel Levitt, M.D., Ph.D., Richard S. Levy, M.D., David J. Main, Kevin Neu, M.D., and Robert E. Pelzer from the Aquinox Board, including the resignations of Mr. Main as Chairman of the Aquinox Board and as President and Chief Executive Officer of Aquinox, Mr. Pelzer from the Audit Committee of the Aquinox Board (the “Audit Committee”), Dr. Levitt and Dr. Levy from the Compensation Committee of the Aquinox Board (“Compensation Committee”), and Dr. Bridger and Dr. Neu from the Nominating and Corporate Governance Committee of the Aquinox Board (“Governance Committee”).

(c) Appointment of Executive Officer

As previously disclosed, in connection with the Merger and effective as of the Effective Time, Dr. Drachman was appointed Chief Executive Officer of Aquinox.

(d) Election of Directors; Appointment of Committee Members

As previously disclosed, in connection with the Merger and effective as of the Effective Time, the Aquinox Board elected Ms. M. Cantey Boyd, Dr. Drachman, Dr. Sarah B. Noonberg, and Dr. Lewis T. “Rusty” Williams, to the Aquinox Board. Dr. Williams was designated as a Class I member of the Aquinox Board, to serve until the 2021 annual meeting of the stockholders of Aquinox; each of Dr. Drachman and Dr. Noonberg was designated as a Class II member of the Aquinox Board, to serve until the 2022 annual meeting of the stockholders of Aquinox; and Ms. Boyd was designated as a Class III member of the Aquinox Board, to serve until the 2020 annual meeting of the stockholders of Aquinox. Ms. Boyd, Dr. Drachman, Dr. Noonberg, and Dr. Williams will serve until his or her respective terms expire and until his or her successor is duly elected and qualified or until his or her death. Mr. Sean Nolan will remain as a Class I member of the Aquinox Board and Mr. Todd Simpson will remain as a Class III member of the Aquinox Board.

 

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In addition, to fill in the vacancies created by the departures of Dr. Bridger, Dr. Levitt, Dr. Levy, Mr. Main, Dr. Neu, and Mr. Pelzer, the Aquinox Board appointed (i) Dr. Drachman to serve as the interim Chairman of the Aquinox Board; (ii) Dr. Williams to serve as a member of the Audit Committee, with Mr. Nolan remaining as a member of the Audit Committee and Mr. Simpson remaining as Chair of the Audit Committee; (iii) Dr. Noonberg and Mr. Simpson to serve as members of the Compensation Committee, and Mr. Nolan to serve as the Chair of the Compensation Committee; and (iv) Ms. Boyd and Dr. Noonberg to serve as members of the Governance Committee, and Dr. Williams to serve as the Chair of the Governance Committee. Mr. Nolan and Mr. Simpson will both step down from the Governance Committee.

 

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

Certificate of Amendment

On the August 9, 2019, Aquinox changed its name to “Neoleukin Therapeutics, Inc.” from “Aquinox Pharmaceuticals, Inc.” (the “Name Change”) by filing a Certificate of Amendment (the “Certificate of Amendment”) to its Amended and Restated Certificate of Incorporation (the “Charter”), with Secretary of State of the State of Delaware to effect the Name Change. In accordance with the General Corporation Law of the State of Delaware, as amended, and the Charter, the Aquinox Board approved the Name Change and the Certificate of Amendment. Stockholder approval was not required.

Trading Symbol

In connection with the Name Change, the trading symbol for Aquinox’s shares of common stock on the Nasdaq Global Market changed from “AQXP” to “NLTX” effective August 12, 2019.

Certificate of Designation

On the Effective Date, Aquinox filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate of Designation”), designating 105,000 shares of Aquinox’s authorized preferred stock as Series A Preferred Stock, with the office of the Secretary of State of the State of Delaware. Certain of the material rights, preferences, privileges, and restrictions applicable to the Series A Preferred Stock are described below.

Conversion. Each share of the Series A Preferred Stock will initially be convertible into 100 shares of Aquinox’s common stock. The conversion rate of the Series A Preferred Stock is subject to proportionate adjustments for stock splits, reverse stock splits and similar events. Each issued and outstanding share of Series A Preferred Stock shall be automatically converted into 100 shares of fully paid and non-assessable shares of common stock immediately at 5:00 p.m. Pacific time on the date that the Aquinox Stockholder Matters are approved.

Dividends. Subject to certain exceptions, holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock.

Voting Rights. Except as required by applicable law, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, Aquinox shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock (including by the designation, authorization, or issuance of any shares of preferred stock of Aquinox that purports to be pari passu with, or senior in rights or preferences to, the Series A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (d) increase the number of authorized shares of Series A Preferred Stock, (e) subject to certain exceptions, pay dividends on any shares of capital stock of Aquinox or (f) enter into any agreement with respect to any of the foregoing. Holders of shares of common stock acquired upon the conversion of shares of Series A Preferred Stock shall be entitled to the same voting rights as each other holder of common stock except that such holders may not vote upon the proposal related to the Preferred Stock Conversion in accordance with Rule 5635 of the listing rules of The Nasdaq Stock Market LLC.

 

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Liquidation Rights. Upon any liquidation, dissolution or winding-up of Aquinox, whether voluntary or involuntary, or Deemed Liquidation (as defined in the Certificate of Designation) the holders of Series A Preferred Stock are entitled to receive out of the assets of Aquinox or proceeds thereof, an amount equal to the greater of (1) $1.00, plus all accrued but unpaid dividends thereon (the “Series A Preference Amount”) or (2) the amount to which such holders would be entitled to receive if such shares of Series A Preferred Stock had been converted to Aquinox’s common stock immediately prior to such liquidation or Deemed Liquidation. After the payment of the full liquidation preference of the Series A Preferred Stock, if applicable, the remaining assets of Aquinox available for distribution to its stockholders shall be distributed ratably to the holders of the shares of Aquinox’s common stock and common stock equivalents, which may include the Series A Preferred Stock.

Fundamental Transaction. If, at any time while this Series A Preferred Stock is outstanding, (i) Aquinox, directly or indirectly, in one or more related transactions effects any merger or consolidation of Aquinox with or into another person, (ii) Aquinox, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by Aquinox or another person) is completed pursuant to which holders of common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding common stock, (iv) Aquinox, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property, or (v) Aquinox, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of common stock (not including any shares of common stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then each holder of Series A Preferred Stock shall automatically receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, (x) the same consideration receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which this Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction multiplied by (y) 100.

The foregoing descriptions of the Certificate of Designation is not complete and is qualified in its entirety by reference to the document attached hereto as Exhibit 3.1, which is incorporated herein by reference.

 

Item 8.01.

Other Events.

In connection with the closing of the Merger, Aquinox is filing information for the purpose of supplementing and updating certain aspects of the description of Aquinox’s business from that described under the heading, “Item 1. Business” in Aquinox’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 12, 2019. Aquinox is also filing additional risk factors related to the Neoleukin business for the purpose of supplementing and updating the risk factor disclosure contained in Aquinox’s prior public filings, including those discussed under the heading “Item 1A. Risk Factors” in Aquinox’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 1, 2019. The updated disclosures are filed herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

 

5


Forward Looking Statements

This report, including the exhibits attached hereto, contain forward-looking statements based upon Aquinox’s and Neoleukin’s current expectations. Forward-looking statements involve risks and uncertainties, and include, but are not limited to, the future operations of the combined company; the nature, strategy and focus of the combined company; the development and commercial potential and potential benefits of any product candidates of the combined company; anticipated preclinical and clinical drug development activities and related timelines, including the expected timing for data and other clinical and preclinical results; Neoleukin having sufficient resources to advance its pipeline; and other statements that are not historical fact. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation: (i) the uncertainties associated with the clinical development and regulatory approval of product candidates; (ii) risks related to the inability of the combined company to obtain sufficient additional capital to continue to advance these product candidates and its preclinical programs; (iii) uncertainties in obtaining successful clinical results for product candidates and unexpected costs that may result therefrom; (iv) risks related to the failure to realize any value from product candidates and preclinical programs being developed and anticipated to be developed in light of inherent risks and difficulties involved in successfully bringing product candidates to market; and (v) risks associated with the possible failure to realize certain anticipated benefits of the Merger, including with respect to future financial and operating results. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. These and other risks and uncertainties are more fully described in periodic filings with the SEC, including the factors described in the section entitled “Risk Factors” in Aquinox’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed with the SEC, the “Risk Factors of Neoleukin’s Business” which is attached hereto as Exhibit 99.2, and in other filings that Aquinox makes and will make with the SEC. You should not place undue reliance on these forward-looking statements, which are made only as of the date hereof or as of the dates indicated in the forward-looking statements. Aquinox expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

 

Number

  

Description

3.1    Certificate of Designation
10.1    Exclusive Start-Up License Agreement, dated July 8, 2019, by and between the University of Washington and Neoleukin Therapeutics, Inc.
10.2    Facility Use Agreement, dated December 4, 2018, by and between Institute for Systems Biology and Neoleukin Therapeutics, Inc.
10.3    Amendment No. 1 to the Facility Use Agreement, dated April 17, 2019, by and between Institute for Systems Biology and Neoleukin Therapeutics, Inc.
99.1    Updated Neoleukin Therapeutics, Inc. business disclosure
99.2    Updated Neoleukin Therapeutics, Inc. risk factor disclosure

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Aquinox Pharmaceuticals, Inc.
By:   /s/ Kamran Alam
Name:   Kamran Alam
Title:   Interim Chief Financial Officer

Date: August 12, 2019

 

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EX-3.1

Exhibit 3.1

AQUINOX PHARMACEUTICALS, INC.

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES A CONVERTIBLE PREFERRED STOCK

PURSUANT TO SECTION 151 OF THE

DELAWARE GENERAL CORPORATION LAW

AUGUST 8, 2019

The undersigned, David J. Main and Kamran Alam, do hereby certify that:

1.    They are the President and Corporate Secretary, respectively, of Aquinox Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”).

2.    The Corporation is authorized to issue 5,000,000 shares of preferred stock, par value $0.000001 per share, of which no shares have been issued and are outstanding.

3.    The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 5,000,000 shares, $0.000001 par value per share, issuable from time to time in one or more series;

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of 105,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

TERMS OF PREFERRED STOCK

Section 1.    Definitions. For the purposes hereof, the following terms shall have the following meanings:

Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act of 1933, as amended.


Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in Seattle, Washington are authorized or required by law or other governmental action to close.

Common Stock” means the Corporation’s common stock, par value $0.000001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

Common Stock Equivalents” means any securities of the Corporation or any of its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock in accordance with the terms hereof.

Holder” means a holder of shares of Series A Preferred Stock.

Merger Agreement” means the Agreement and Plan of Merger, dated as of the date hereof, by and among the Corporation, Apollo Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Corporation (“Merger Sub”) and Neoleukin Therapeutics, Inc. (the “Target”), as may be amended from time to time.

Parties” means the Corporation, Merger Sub, the Target and each of their Affiliates, directors and officers.

Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Trading Day” means a day on which the principal Trading Market is open for business.

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

Section 2.    Designation, Amount and Par Value. The series of preferred stock shall be designated as the Corporation’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and the number of shares so designated shall be 105,000. Each share of Series A Preferred Stock shall have a par value of $0.000001 per share. The shares of Series A Preferred Stock shall initially be issued and maintained in the form of securities held in book-entry form and the Depository Trust Company or its nominee shall initially be the sole registered holder of the shares of Series A Preferred Stock.

 

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Section 3.    Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A Preferred Stock.

Section 4.    Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock (including by the designation, authorization, or issuance of any shares of preferred stock of the Corporation that purports to be pari passu with, or senior in rights or preferences to, the Series A Preferred Stock, (b) alter or amend this Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Series A Preferred Stock, (e) except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, pay dividends on any shares of capital stock of the Corporation or (f) enter into any agreement with respect to any of the foregoing. Holders of shares of Common Stock acquired upon the conversion of shares of Series A Preferred Stock shall be entitled to the same voting rights as each other holder of Common Stock except that such holders may not vote upon the proposal in accordance with Rule 5635 of the listing rules of The NASDAQ Stock Market LLC for Stockholder Approval.

Section 5.    Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

(a)    Preferential Payments to Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock or of any other series of preferred stock (“Junior Shares”), an amount per share equal to the greater of (i) $1.00, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 6 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Section 5(a), the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

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(b)    Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock and any other Junior Shares, in accordance with their respective rights and preferences as set forth in the certificate of incorporation of the Corporation and any applicable designations of any series of preferred stock of the Corporation.

(c)    Deemed Liquidation Events.

 

  (i)

Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least a majority of the outstanding shares of Series A Preferred Stock elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event:

 

  (1)

a merger or consolidation in which

 

  a.

the Corporation is a constituent party or

 

  b.

a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(2)    the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

  (ii)

Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

 

4


  (iii)

Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event, if any portion of the consideration payable by the acquirer is payable only upon satisfaction of contingencies (the “Additional Consideration”), the acquisition agreement for such transaction shall provide that (i) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 5(a) and 5(b) as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (ii) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 5(a) and 5(b) after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 5(c)(iii), consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

Section 6.    Conversion.

(a)    Conversion Ratio. Each share of Series A Preferred Stock shall be convertible without the payment of additional consideration by the Holder thereof into 100 shares of fully paid and non-assessable shares of Common Stock, subject to the terms and conditions set forth in this Section 6.

(b)    Mandatory Conversion. Each issued and outstanding share of Series A Preferred Stock shall be automatically converted without the payment of additional consideration by the Holders thereof into 100 shares of fully paid and non-assessable shares of Common Stock immediately at 5:00 p.m. Pacific time on the date that the Corporation’s stockholders approve the conversion of the Series A Preferred Stock into shares of Common Stock in accordance with the Nasdaq Stock Market Rules, as set forth in the Merger Agreement (the “Stockholder Approval”), without any further action by the Holder thereof or the Corporation (the “Stockholder Approval Conversion Date”).

(c)    Consequences of Conversion. Immediately following any conversion, the rights of the Holders of converted Series A Preferred Stock shall cease and the persons entitled to receive Common Stock upon the conversion of Series A Preferred Stock shall be treated for all purposes as having become the owners of such Common Stock. Shares of Series A Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued. In no event shall the Series A Preferred Stock convert into shares of Common Stock prior to the Stockholder Approval.

 

5


(d)    Mechanics of Conversion.

 

  (i)

Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each date on which the Series A Preferred Stock are converted (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Series A Preferred Stock, which Conversion Shares shall be free of restrictive legends and trading restrictions and (B) a bank check in the amount of accrued and unpaid dividends, if any. The Corporation shall use its best efforts to deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading Market with respect to the Common Stock as in effect on the Conversion Date.

 

  (ii)

Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series A Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other Holders of the Series A Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Series A Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

  (iii)

Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Series A Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares. The Corporation shall pay all transfer agent fees required for same-day processing and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

6


Section 7.    Certain Adjustments.

(a)    Stock Dividends and Stock Splits. If the Corporation, at any time while this Series A Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series A Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be appropriately adjusted in order to avoid enlargement or dilution of the rights of the shares of Series A Preferred Stock. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b)    Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Series A Preferred Stock (without regard to any limitations on exercise hereof) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(c)    Pro Rata Distributions. During such time as this Series A Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Series A Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Series A Preferred Stock (without regard to any limitations on conversion hereof) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution.

 

7


(d)    Fundamental Transaction. If, at any time while this Series A Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then each Holder shall automatically receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, (x) the same consideration receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction multiplied by (y) 100.

(e)    Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

Section 8.    Miscellaneous.

(a)    Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder shall be in writing and delivered personally, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Chief Executive Officer or such other address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, by email, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (ii) upon actual receipt by the party to whom such notice is required to be given.

 

8


(b)    Lost or Mutilated Preferred Stock Certificate. If a Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

(c)    Governing Law. This Certificate of Designation shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding between any of the Parties arising out of or relating to this Certificate of Designation or any of the transactions contemplated by this Certificate of designation, each of the Parties: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware; (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with clause (a) of this Section 8(c); (c) waives any objection to laying venue in any such action or proceeding in such courts; (d) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any party; (e) agrees that service of process upon such Party in any such action or proceeding shall be effective if notice is given in accordance with Section 8(a) of this Certificate of Designation; and (f) irrevocably and unconditionally waives the right to trial by jury. In any action at law or suit in equity to enforce this Certificate of Designation or the rights of any of the Parties, the prevailing party in such action or suit (as determined by a court of competent jurisdiction) shall be entitled to recover its reasonable out-of-pocket attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

(d)    Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

(e)    Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

 

9


(f)    Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(g)    Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

(h)    Status of Converted or Redeemed Preferred Stock. If any shares of Series A Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A Preferred Stock.

*********************

 

10


RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

IN WITNESS WHEREOF, the undersigned have executed this Certificate as of the date first set forth above.

 

By:  

/s/ David J. Main

    By:  

/s/ Kamran Alam

 

Name:  David J. Main

     

Name:  Kamran Alam

 

Title:   President and Chief Executive Officer

     

Title:   Corporate Secretary

 

11

EX-10.1
Table of Contents

Exhibit 10.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY

[***], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

EXCLUSIVE START-UP LICENSE AGREEMENT

BETWEEN

NEOLEUKIN THERAPEUTICS, INC.

AND

UNIVERSITY OF WASHINGTON

FOR

(I) DE NOVO DESIGN OF CYTOKINE MIMICS,

(II) [***] NEOLEUKIN-2/15 VARIANTS FOR [***] AND TARGETED IL-2 RECEPTOR BINDING,

and

(III) DE NOVO IL-2 ANTAGONIST

UW COMOTION AGREEMENT 44544A


Table of Contents

TABLE OF CONTENTS

 

BACKGROUND

     1  

1. DEFINITIONS

     1  

2. LICENSE GRANT

     5  

3. RIGHTS OF UNIVERSITY; LIMITATIONS

     8  

4. APPLICATIONS AND PATENTS.

     8  

5. COMMERCIALIZATION

     9  

6. PAYMENTS, REIMBURSEMENTS, REPORTS, AND RECORDS.

     10  

7. INFRINGEMENT

     12  

8. LICENSED RIGHTS VALIDITY

     13  

9. TERMINATION

     14  

10. RELEASE, INDEMNIFICATION, AND INSURANCE.

     16  

11. WARRANTIES

     17  

12. DAMAGES

     18  

13. GENERAL PROVISIONS

     19  

EXHIBIT A

     25  

EXHIBIT B

     31  

EXHIBIT C

     32  


Table of Contents

CONFIDENTIAL

 

EXCLUSIVE START-UP LICENSE AGREEMENT

This Exclusive License Agreement (this “Agreement”), effective as of the date of last signature (the “Effective Date”), is made and entered into between the University of Washington, a public institution of higher education and an agency of the state of Washington, (“University”), and Neoleukin Therapeutics, Inc., a corporation organized under the laws of the state of Delaware (“Company”).

BACKGROUND

A.    Certain innovations relating to the de novo design of cytokine mimics (University reference number 48337; Stanford University reference S18-238) were collaboratively made in (i) the University laboratory of Dr. David Baker (“Principal Investigator”), a University faculty member in the Department of Biochemistry and an employee of the Howard Hughes Medical Institute (“HHMI”), and (ii) in the Stanford University laboratory of Dr. Chris Garcia, a Stanford University faculty member in the Department of Molecular and Cellular Physiology (at Stanford University) and an employee of HHMI. In addition, certain innovations relating to [***] neoleukin-2/15 variants for [***] and targeted IL-2 receptor binding (University reference number 48351) and de novo IL-2 antagonist (University reference number 48465) were made in the University laboratory of Dr. David Baker.

B.    HHMI assigned its rights in such innovations (such rights via Dr. Baker) to University and its rights in such innovations (such rights via Dr. Garcia) to Stanford University, each assignment subject to the HHMI License (as defined herein). University and Stanford University thus co-own certain intellectual property rights in such innovations (University reference number 48337; Stanford University reference S18-238) , as listed in Exhibit A “Start-Up License Schedule” to this Agreement. University and Stanford University have executed an interinstitutional agreement (“IIA”), dated August 14, 2018, that authorizes University to assume sole responsibility for both the patent prosecution and licensing of co-owned patent applications. University has shared a copy of the IIA with Company under the confidentiality terms of the Option (as defined in Section 13.21). In addition, University solely owns certain intellectual property rights in innovations made in the course of University research relating to [***] neoleukin-2/15 variants for [***] and targeted IL-2 receptor binding (University reference number 48351) and de novo IL-2 antagonist (University reference number 48465), as listed in Exhibit A “Start-Up License Schedule” to this Agreement. Thus, University has the right to license to others certain rights to use and practice such intellectual property. University is willing to grant those rights so that such innovations may be developed for use in the public interest.

C.    Company desires that University grant it an exclusive license under such intellectual property rights, and University is willing to grant such a license, on the terms set forth in this Agreement.

AGREEMENT

The Parties agree as follows:

1.    DEFINITIONS

Acquisition” means (a) the sale by Company of all, or substantially all of, its assets in a transaction to a Third Party at arm’s length, (b) the sale, transfer, or exchange by the shareholders, partners, or equity owners of Company of a majority interest in Company’s outstanding stock in an arm’s length transaction to a Third Party, or (c) the merger of Company with a Third Party at arm’s length; provided, however, that in no event will any bona fide equity financing for the primary purpose of raising capital for corporate purposes be considered an Acquisition under this Agreement.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 1 of 38  


Table of Contents

CONFIDENTIAL

 

Acquisition Consideration” means all consideration received by Company for the first Acquisition to occur after the Effective Date (but does not include any consideration received for any subsequent Acquisition).

Combination Product” means a product or service sold in a form containing a Licensed Product and at least one other product, service, component, or ingredient which could be sold separate and apart from the Licensed Product and which is not required for the function of the Licensed Product (each, a “Combination Product”). For clarity, the combination of a Licensed Product and the other product, service, component or ingredient may have an additive, synergistic or enhanced effect or response (i.e. above and beyond that of each individual component, but not required for function however) and that additive, synergistic or enhanced effect or response will not be considered “required for the function” in the foregoing, such that the product or service will still be a Combination Product.

Confidential Information” means any information or materials of a Party not generally known to the public, including any information comprised of those materials and Company’s business plans or reports. Confidential Information does not include any information that: (a) is, or becomes, part of the public domain through no fault of receiving Party; (b) is known to receiving Party prior to the disclosure by the disclosing Party, as evidenced by documentation; (c) is publicly released as authorized under this Agreement by University, its employees or agents; (d) is subsequently obtained by a Party from a Third Party who is authorized to have such information; or (e) is independently developed by a Party without reliance on any portion of the Confidential Information received from the disclosing Party and without any breach of this Agreement as evidenced by documentation.

Distributor” means a distributor, reseller or OEM to which Company or any of its Sublicensees (each a “Licensed Party”) sells a Licensed Product for resale of Licensed Product by the Distributor, and where Distributor has no other rights with respect to the Licensed Rights other than to resell or otherwise distribute Licensed Products (including but not limited to integrated or bundled with other products or services), and for which resale or distribution Company and Sublicensees receive no further consideration (including but not limited to royalties and/or commissions) beyond the price for the initial sale of Licensed Product to the Distributor.

Event of Force Majeure” means an unforeseeable act that prevents or delays a Party from performing one or more of its duties under this Agreement and that is outside of the reasonable control of the affected Party. An Event of Force Majeure includes acts of war or of nature, insurrection and riot, and labor strikes. An Event of Force Majeure does not include a Party’s inability to obtain a Third Party’s consent to any act or omission, unless the inability was caused by a separate Event of Force Majeure.

Fair Market Value” means the average price at which the stock in question is publicly trading for twenty (20) days prior to the announcement of its purchase by the Sublicensee(s), or, if the stock is not publicly traded, the value of such stock as determined in good faith by the board of directors of Company or Sublicensee.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 2 of 38  


Table of Contents

CONFIDENTIAL

 

Field of Use” means all fields of use.

Fully-Diluted Shares” means the total number of Shares issued and outstanding or reserved for issuance, in each case assuming the exercise or conversion of all securities convertible into Shares.

Licensed Know-How” means University knowledge or intangible work that: (a) was developed in the laboratory of Principal Investigator, (b) exists as of the Effective Date, (c) is relevant to utilizing any of the Licensed Patents, (d) is unpublished or otherwise not publicly disclosed, (e) is not subject to patent or copyright protection, and (f) is not covered by Third Party rights that would prevent delivery to Company.

Licensed Patents” means (a) the patents and patent applications listed in Exhibit A1.1 (Licensed Patents), (b) all patent cooperation treaty (PCT), divisions, continuations, and claims in continuations-in-part that are entitled to claim priority to, or that share a common priority claim with, and are directed to subject matter specifically described in any item listed on Exhibit A1.1 “Licensed Patents”; (c) any patents that issue from patent applications in clauses (a) and (b), (d) extensions, renewals, substitutes, re-examinations and re-issues of any of the items in (a) or (b) or (c); and (e) foreign counterparts of any of the items in (a), (b), (c) or (d) wherever and whenever filed.

Licensed Product” means any method, process, composition, product, service, or component part thereof that (a) would, but for the granting of the rights set forth in this Agreement, infringe a Valid Claim contained in the Licensed Patents and/or (b) uses or incorporates the Licensed Know-How.

Licensed Rights” means all rights granted to Company under Article 2 “License Grant” of this Agreement.

Net Sales” means the gross invoiced amount (or otherwise received) by Company or Sublicensee from Distributors, customers, end users and other Third Parties for sales, leases, and other dispositions of Licensed Products, less (a) all trade, quantity, and cash discounts and refunds actually allowed, including administrative fees and inventory management fees actually paid to, or on behalf of customers with respect to Licensed Products (including those granted to managed-care entities and government agencies as well as entities that manage patient drug benefits), (b) all credits and allowances actually granted due to rejections, returns, recalls, rebates, charge backs, volume discounts, billing errors, retroactive price reductions, (c) tariffs, duties and similar governmental charges, including Health Care Reform taxes and similar payments imposed by regulatory authorities or other governmental entities, (d) excise, sale and use taxes, and equivalent taxes to the extent not reimbursable, (e) freight, transport, packing, handling, and insurance charges associated with transportation, but only if separately stated on the same invoice as for the sale, lease or other disposition of the Licensed Product, and (f) an allowance for uncollectible or bad debts determined in accordance with accepted accounting principles, standards and procedures (“GAAP”) or International Financial Reporting Standards (“IFRS”) consistently applied across all products sold by Company, provided Company shall provide documentation upon University’s request that the allowance accurately represents the level of uncollectible or bad debt. On sales of Licensed Products by made in other than an arm’s length transaction, the value of the Net Sales attributed to such transaction will be equal to the Net Sales that which would have been received in an arm’s length transaction, based on sales of like quantity and quality of Licensed Products sold on or about the time of the transaction. Net Sales does not include sale, lease, disposition or other transfer of Licensed Products among or between Company, Subsidiaries and Sublicensees for the purpose of subsequent resale to a Third Party, but does include subsequent resale to such Third Party. For avoidance of doubt Net Sales are calculated on sales by Company or Sublicensee to Distributor, and not on the subsequent sale by Distributor.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 3 of 38  


Table of Contents

CONFIDENTIAL

 

Notwithstanding the foregoing, in the event that a Licensed Product is sold as part of a Combination Product, Combination Products will be calculated by multiplying actual Net Sales of such Combination Products by the fraction A/(A+B), where “A” is the Net Sales price of the Licensed Product if sold or performed separately, and “B” is the Net Sales price of the other product, component or ingredient or service in the Combination Product if sold separately. If, on a country-by-country basis, the other product, component or ingredient or service in the Combination Product is not sold separately in said country, Net Sales for the purpose of determining running royalties of the Combination Product shall be calculated by multiplying actual Net Sales of the Combination Product by the fraction A/C where “A” is the Net Sales price of the Licensed Product, if sold separately, and “C” is the Net Sales price of the Combination Product. If, on a country-by-country basis, neither the Licensed Product, nor the other product, component or ingredient or service in the Combination Product, is sold separately in said country, Net Sales for the purpose of determining running royalties of the Combination Product shall be determined in good faith by the Parties. A Combination Product may include a Licensed Product and any separate product, component or ingredient or service developed by or in-licensed by Licensee from a third party provided it is a Combination Product as defined in this Agreement.

Parties” means University and Company and “Party” means either University or Company.

Patent Expenses” means all reasonable costs (including attorneys’ and application fees) incurred by University in accordance with this Agreement to apply for, prosecute and maintain Licensed Patents, including but not limited to the costs of interferences, oppositions, inter partes review and re-examinations. Patent Expenses include reimbursement for in-house costs provided they are for activities that would otherwise have been performed by outside counsel at an equal or greater expense.

Performance Milestone means any of the milestones described in Section A2 “Performance Milestones” of attached Exhibit A “Start-Up License Schedule”.

Performance Milestone Date” means the date by which a Performance Milestone is to be achieved as set forth in Section A2 “Performance Milestones” of attached Exhibit A “Start-Up License Schedule”, as such date may be extended pursuant to Section 5.1 “Performance Milestones” or as otherwise agreed upon by the Parties.

Permitted Sublicense means any arm’s length agreement with a Third Party manufacturer or contract researcher/developer with whom a Licensed Party contracts for manufacture, research or development of Licensed Products on Licensed Party’s behalf, and where such Third Party has no other rights with respect to the Licensed Rights other than to manufacture, research or develop on behalf of Licensed Party.

Permitted Sublicensee means a Third Party holding a Permitted Sublicense.

Qualified Financing means one or more offerings of equity securities (whether common or preferred stock, options, warrants or notes convertible into common stock) issued for cash (or cash equivalents), the aggregate proceeds of which equals or exceeds the Qualified Offering Proceeds; provided that a Qualified Financing refers solely to the first offering (or offerings) in which the Company raises the Qualified Offering Proceeds.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 4 of 38  


Table of Contents

CONFIDENTIAL

 

Qualified Offering Proceeds” means [***] US dollars ($[***]).

Sales Report” means a report in substantially the form set forth in Exhibit B “Royalty Report Form”.

Shares” means shares of the Company’s common stock.

Sublicense” means the grant by Company or a Sublicensee to a Third Party of any license, option, first right to negotiate, or other right granted under the Licensed Rights, in whole or in part. The grant of the right to resell to a Distributor and the grant of a license or other right to use a Licensed Product to an end-user, where the end user has no other rights with respect to the Licensed Rights other than to be an end user of the Licensed Product, will not be a Sublicense and will be treated under Net Sales.

Sublicensee” means a Third Party holding a Sublicense under the Licensed Rights.

Sublicense Consideration” means all consideration, but excluding royalties on Net Sales, received by Company from each Sublicensee for the grant of a Sublicense. For avoidance of doubt, consideration paid to Company by Sublicensees for the following shall not be deemed Sublicense Consideration: (a) documented bona fide performance of Licensed Product development work, research work, clinical studies and regulatory approvals performed (including such work, studies, and approvals done in a collaboration) by Company and for clarity such development work, research work, clinical studies and regulatory approvals may be done by Company independently from the applicable Sublicensee provided that it is being conducted for a Licensed Product, (b) for bona fide debt financing, other than conditional equity, warrants, and convertible debt, or bona fide loans made to Company by a Sublicensee, (c) investments in the Company at Fair Market Value, and/or (d) contractually required reimbursement of payment amounts otherwise due under this Agreement from Company to University for Patent Expenses pursuant to Section A3.8 “Patent Expense Payment”, and (e) to the extent a milestone under Section A3.4 “Financial Milestones” of this Agreement is met by the Sublicensee, any pass-through payment to Company that ultimately comes to University for such financial milestone payment.

Territory” means worldwide.

Third Party” means an individual or entity other than University and Company.

Valid Claim means (a) a claim in an issued, unexpired United States or granted foreign patent included in the Licensed Patents that: (i) has not been held invalid, unpatentable, or unenforceable by a decision of a court or other governmental agency of competent jurisdiction and not subject to appeal (ii) has not been admitted to be invalid or unenforceable through reissue, inter partes review, disclaimer, or otherwise, (iii) has not been lost through an interference, reexamination, or reissue proceeding; or (b) a pending claim of a pending patent application included in the Licensed Patents.

2.    LICENSE GRANT. Subject to the terms and conditions of this Agreement:

 

Neoleukin Therapeutics, Inc. / University of Washington

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2.1.    Patent License. University hereby grants to Company an exclusive (subject only to any rights of the government described in Section 2.5 “The United States Government’s Rights” and to rights of University described in Article 3 “Rights of University; Limitations” and to rights of HHMI described in Section 2.7 “HHMI Research Use Rights”) license under the Licensed Patents to make, have made on Company’s behalf, use, offer to sell, sell, offer to lease or lease, import, export or otherwise offer to dispose of Licensed Products in the Territory in the Field of Use. Unless otherwise terminated under Article 9 “Termination”, the term of this patent license will begin on the Effective Date and will continue until all Valid Claims expire or are held invalid or unenforceable by a court of competent jurisdiction from which no appeal can be taken.

2.2.    Know-How License. University hereby grants to Company a non-exclusive, worldwide license to use Licensed Know-How. Unless otherwise terminated under Article 9 “Termination”, the term of this license will begin on the Effective Date and will continue until all rights under Licensed Patents are terminated. Upon the expiration of this Agreement pursuant to Section 9.1 “End of Term”, but not early termination, University shall not assert (or purport to assert or grant rights to any Third Party to assert) the Licensed Know-How against Company or its successors or Sublicensees.

2.3.    Sublicense Rights. Company has the right, exercisable during the term of this Agreement, to Sublicense its exclusively Licensed Rights under this Agreement; Company may also during the term of this Agreement sublicense its rights in non-exclusively Licensed Rights, but only for the purpose of using in conjunction with exclusively Licensed Rights. Company may not grant Sublicensees the right to enforce Licensed Rights directly. Company will remain responsible for its obligations under this Agreement. Except for Permitted Sublicensees, Company will ensure that the Sublicense agreement: (a) contains terms and conditions that require Sublicensee to comply with the terms and conditions of this Agreement applicable to Sublicensees, including a release substantially similar to that provided by Company in Section 10.1 “Company’s Release”; a warranty substantially similar to that provided by Company in Section 11.1 “Authority”; University disclaimers and exclusions of warranties under Sections 11.4 and 11.5 “Disclaimer” and “Intellectual Property Disclaimers”; and limitations of remedies and damages substantially similar to those provided by Company in Sections 12.1 “Remedy Limitation” and 12.2 “Damage Cap”; (b) specifically incorporates provisions of this Agreement regarding obligations pertaining to indemnification, use of names and insurance. Each Sublicense agreement must also be subject to a written agreement that contain obligations, terms and conditions in favor of HHMI or the HHMI Indemnitees, as applicable, that are substantially similar to those undertaken by Company in favor of HHMI or the HHMI Indemnitees, as applicable, under this Agreement and intended for the protection of the HHMI Indemnitees, including, without limitation, the obligations, terms and conditions regarding indemnification, insurance and HHMI’s third party beneficiary status. Company will provide University with a copy of the executed Sublicense, excluding any Permitted Sublicense agreement, within thirty (30) days after its execution. Company will not enter into any Sublicense agreement if the terms of such agreement are inconsistent in any material respect with the material terms of this Agreement. Any Sublicense made in violation of this Section 2.3 “Sublicense Rights” will be void and will constitute an event of default that requires remedy under Section 9.2 “Termination by University”.

2.4.    Limitation of Rights. No provision of this Agreement grants to Company, by implication, estoppel or otherwise, any rights other than the rights expressly granted it in this Agreement under the Licensed Rights, including any license rights under any other University-owned or Stanford University-owned technology, copyright, know-how, patent applications, or patents, or any ownership rights in the Licensed Rights.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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2.5    The United States Governments Rights. Inventions covered in the Licensed Patents arose, in whole or in part, from federally supported research and the federal government of the United States of America has certain rights in and to such inventions as those rights are described in Chapter 18, Title 35 of the United States Code and accompanying regulations, including Part 401, Chapter 37 of the Code of Federal Regulation. The Parties’ rights and obligations under this Agreement to any government-funded inventions, including the grant of license set forth in Section 2.1 “Patent License”, are subject to the applicable terms of the aforementioned United States laws. The U.S. Government is entitled, as a right, under these Chapters: (a) to a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on the behalf of the U.S. Government any of the federally funded inventions throughout the world and (b) to exercise march in rights on the federally funded inventions. Company further agrees that, to the extent required by Title 35 Section 204 of the United States Code, it will substantially manufacture in the United States of America all products embodying or produced through the use of any such federally funded invention.

2.6    Rights to Wholly Owned Subsidiaries of Company. Company may extend rights granted to Company under this Agreement to wholly owned subsidiaries (“Subsidiaries”) of Company, provided that (a) Company is responsible for all acts of such Subsidiaries as if they were acts of the Company, (b) such Subsidiary is bound to perform all obligations to University and HHMI of this Agreement other than making payments pursuant to Article 6 “Payments, Reimbursements, Reports, and Records”, as if such Subsidiary were Company, and (c) Company reports to University pursuant to Section 13.10 “Notices” that such Subsidiary will be exercising rights under this Agreement prior to such Subsidiary exercising any such rights under this Agreement. For avoidance of doubt, Company may perform any obligation of Subsidiary on Subsidiary’s behalf.

2.7    HHMI Research Use Rights. Company acknowledges that it has been informed that the Licensed Patents and Licensed Know-How were were developed, at least in part, by employees of HHMI and that HHMI has a fully paid-up, non-exclusive, irrevocable, worldwide license to exercise any intellectual property rights with respect to the Licensed Patents and Licensed Know-How for research purposes, ,with the right to sublicense to non-profit and governmental entities, but with no other right to assign or sublicense (the “HHMI License”). This license is explicitly made subject to the HHMI License.

2.8    IIA. University represents and warrants that, to the best of UW CoMotion’s knowledge, under the IIA it has obtained all necessary rights from Stanford with respect to the Licensed Patents sufficient to grant the licenses and rights granted under this Agreement. During the term of this Agreement, University shall not (i) amend or modify the IIA which would restrict or narrow the scope of Company’s rights granted hereunder, or which would impose additional obligations upon Company hereunder, (ii) waive any of University’s rights under the IIA which would restrict or narrow the scope of Company’s rights granted hereunder, or which would impose additional obligations upon Company hereunder, or (iii) terminate the IIA in a way that would impact this Agreement; in each case without the prior express written consent of Company.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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3.    RIGHTS OF UNIVERSITY; LIMITATIONS

3.1    Universitys Rights. University reserves all rights not expressly granted to Company under this Agreement. University retains for itself, Stanford University, and other not-for-profit academic research institutions, an irrevocable, nonexclusive license to practice Licensed Rights for academic research, instructional, or any other academic or non-commercial purpose. University retains for itself an irrevocable, nonexclusive license to practice Licensed Rights for clinical purposes. Expressly included within University’s reservation of rights is to do the following in connection with academic research, instructional, or any other academic or non-commercial purposes: (a) to use the Licensed Rights in sponsored research or collaborative research with any Third Party, but not for any commercial purpose, and only to the extent that no such Third Party is granted any commercialization rights of any kind under the Licensed Rights or to commercialize Licensed Products, (b) to grant material transfer agreements to the extent that the use of such materials is restricted to academic research, teaching and or other scholarly activities, and (c) to publish any information included in the Licensed Rights or any other information that may result from University’s or Stanford University’s research. For the avoidance of doubt, nothing in this Section 3.1 or elsewhere in this Agreement is intended to or shall be construed to alter, restrict, or limit the HHMI License.

3.2    Sublicensing Opportunities. If a Third Party notifies University that it wishes to license any of the exclusively licensed Licensed Rights in any field or territory in which Company is unable or unwilling to develop and market a Licensed Product, University will notify Company of such Third Party’s wish to obtain such license, and Company will have good faith discussions with such Third Party regarding the terms and conditions under which such Sublicense could be obtained. Company will not be obligated to provide such sublicense where it interferes with Company’s (or its Sublicensee’s) business strategy; however, Company will not unreasonably withhold such Sublicense.

3.3    Reservation of Rights for Humanitarian Purposes. Consistent with 35 U.S.C. §200 et seq., University retains the right to require Company to grant Sublicenses to responsible applicants in the Field of Use under the Licensed Patents on terms that are reasonable under the circumstances; or, if Company fails to grant a license, to grant the license itself. The exercise of these rights by University will only be in exceptional circumstances and only if University determines (a) the action is necessary to meet health or safety needs that are not reasonably satisfied by Company; or (b) the action is necessary to meet requirements for public use specified by federal regulations, and such requirements are not reasonably satisfied by Company, and (c) the action will not have a significant negative effect on Company’s (or its Sublicensee’s) business strategy with respect to the Licensed Products. University will not require the granting of a sublicense, and will not grant the license itself, unless the responsible applicant has first negotiated in good faith with Company. Company shall be entitled to use the dispute resolution mechanisms of Section 13.4 “Escalation; Dispute Resolution”, including seeking an injunction from the court if mediation is unsuccessful, if Company wishes to dispute that University should be entitled to exercise its rights under this Section 3.3.

4.     APPLICATIONS AND PATENTS

4.1    Pre-Agreement Patent Filings. Company has reviewed the Licensed Patents and as of the Effective Date is not aware of any basis to challenge or dispute the inventorship, validity, or enforceability of any of the claims made in the Licensed Patents.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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4.2    Patent Prosecution Decisions. University and Company will consult on the preparation, filing and prosecution of the Licensed Patents (including, without limitation, on the selection of patent counsel). Patent counsel will be directed to deliver to Company all written and electronic communications to and from all patent offices and foreign counsel, and provide summaries of oral communications with patent offices. Provided Company is in compliance with Section A3.8 “Patent Expense Payment” of Exhibit A “Start-Up License Schedule”, Company’s directions regarding patent preparation, filing and prosecution will be followed unless detrimental to University’s intellectual property rights. University and Company will consult prior to deciding in which countries to pursue patent protection and provided Company is in compliance with Section A3.8 “Patent Expense Payment”, patents will be filed in all countries Company designates. University acknowledges the key role and value of the Licensed Patent portfolio to Company and the need for timely review and exchange of information between University and Company prior to Licensed Patent portfolio decisions. University will remain the client of record, and may at its own expense instruct patent counsel to take actions necessary to protect University’s intellectual property rights, if in University’s reasonable opinion, Company actions will result in a loss of rights; provided that for any such actions, if Company declines to reimburse University pursuant to Section A1.1 “Licensed Patents”, those applications and resultant patents will not be subject to this Agreement. In no event will Company file a patent application where all of the inventors are under University policy obligated to assign their rights in such patent application to University.

4.3    Assumption of Patent Prosecution and Maintenance. Provided Company is in compliance with Section A3.8 “Patent Expense Payment” of Exhibit A “Start-Up License Schedule”, University will take all commercially reasonable steps to cause patents and patent applications within the Licensed Patents to be diligently prosecuted and maintained. If Company is in compliance, and University, against Company’s instructions, decides to abandon or allow to lapse any patent application or any claim of any patent included in the Licensed Patents or not pursue patent protection for any foreign patent mutually agreed upon by the Parties under Section 4.2 “Patent Prosecution Decisions”, University will notify Company at least sixty (60) days before such decision would be effective, and Company will have the right to file, prosecute, and maintain, as applicable, such patent or patent application in University’s name at Company’s expense provided Company shall keep University informed of such activity. Company may thereafter abandon or allow to lapse any or all patents or patent applications for which it is responsible. Company will notify University of any abandoned or lapsed patents at least thirty (30) days prior to such abandonment or lapse.

5.    COMMERCIALIZATION

5.1    Performance Milestones. Company will, directly or through its Subsidiaries or Sublicensees, use its commercially reasonable efforts, consistent with sound and reasonable business practices and judgment, to commercialize the inventions claimed in the Licensed Rights and to make and sell Licensed Products as soon as practicable and to maximize sales thereof. Unless an extension is provided due to an Event of Force Majeure during the term of this Agreement, Company shall perform, or shall cause to happen or be performed, the Performance Milestones in accordance with the Performance Milestone Dates. Upon the occurrence of an Event of Force Majeure, the Performance Milestones and Performance Milestone Dates shall be equitably adjusted to accommodate the Event of Force Majeure.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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5.2    Renegotiation of Performance Milestones. If Company determines that it will be unable to achieve a Performance Milestone, Company will so notify University in advance of the Performance Milestone Date, Company may request a Performance Milestone Extension (as described below) or, providing Company demonstrates it is diligently pursuing development and commercialization of at least one Licensed Product, Company may request that the Parties negotiate an appropriate new Performance Milestone and/or related Performance Milestone Date in good faith. If the Parties are unable to agree on a renegotiated Performance Milestone within sixty (60) days after commencing negotiations, University may proceed with its termination rights under Section 9.2 “Termination by University”, subject to both Company and University having the right to seek mediation under Section 13.4 “Escalation; Dispute Resolution”. In addition, if for any reason Company will be unable to achieve a Performance Milestone, then upon written notice to University and payment of [***] US dollars ($[***]), the timing for the Performance Milestone will be extended for one (1) year (“Performance Milestone Extension”) (and the timing for each subsequent Performance Milestone will likewise be extended for one (1) year. Company shall have the right to three (3) Performance Milestone Extensions by providing such notice and paying such fee. In the case that Company is unable to achieve a Performance Milestone (after any extensions provided for above) and University proceeds with its termination rights under Section 9.2 “Termination by University”, University will only have the right to terminate the particular performance category (e.g. agonist protein biologic, [***] molecular entity, or antagonist protein biologic) for such failed Performance Milestone, with such termination effectively removing such performance category from the Field of Use, and the Agreement would continue with respect to the other performance categories.

5.3    Commercialization Reports. Throughout the term of this Agreement and during the Sell-Off Period, and within [***] of December 31st of each year, Company will deliver to University written reports of Company’s and Sublicensees’ efforts and plans to develop and commercialize the innovations covered by the Licensed Rights and to make and sell Licensed Products. Company will have no obligation to prepare commercialization reports in years where (a) Company delivers to University a written Sales Report with active sales, and (b) Company has fulfilled all Performance Milestones. In relation to each of the Performance Milestones each commercialization report will include sufficient information to demonstrate compliance of those Performance Milestones and will set out timeframes and plans for those Performance Milestones which have not yet been met.

5.4    Company Information. Once per year, until University no longer has Shares in Company, Company shall provide a current capitalization chart to indicate the number of Shares University owns in Company, and total number of Shares and Fully Diluted Shares. Throughout the term of this Agreement, Company shall provide the names of, and sufficient contact information to identify, any Permitted Sublicensees within [***] of University’s written request. Upon University’s inquiry, Company will provide information on funding rounds to date (type, date, and amount) and number of employees. All information provided under this Section shall be Company’s Confidential Information.

6.    PAYMENTS, REIMBURSEMENTS, REPORTS, AND RECORDS

6.1    Payments. Company will deliver to University the payments specified in Section A3 “Payments” of attached Exhibit A “Start-Up License Schedule”. Company will make such payments by check, wire transfer, or any other mutually agreed-upon and generally accepted method of payment. Payments are non-refundable. All checks to University will be made payable to “University of Washington” and will be mailed to the address specified in Section 13.10 “Notices” and will reference the University agreement number [***].

All wire or electronic fund transfers must be confirmed via email referencing the above agreement number to: [***]

 

Wire transfers:

 

Electronic Fund Transfer (ACH):

[***]

 

[***]

 

Neoleukin Therapeutics, Inc. / University of Washington

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6.2    Currency and Checks. All computations and payments made under this Agreement will be in United States dollars. The exchange rate for the currency into dollars as reported in The Wall Street Journal as the New York foreign exchange mid-range rate on the last business day of the month in which the transaction was entered into will be used for determining the dollar value of transactions conducted in non-United States dollar currencies.

6.3    Late Payments. University may charge Company a late fee for all amounts owed to University that are more than thirty (30) days overdue. The late fee will be computed as the United States prime rate plus two percent (2%), compounded monthly, as set forth by The Wall Street Journal (Western edition) on the date on which the payment is due, of the outstanding, unpaid balance. The payment of a late fee will not foreclose or limit University from exercising any other rights it may have as a consequence of the lateness of any payment.

6.4    Sales Reports. Within [***] after the last day of each calendar quarter commencing the calendar quarter after the Company effects its first commercial sale of a Licensed Product and during the term of this Agreement and the Sell-Off Period, Company will deliver to University the Sales Report setting forth the number of and Net Sales amount (expressed in U. S. dollars) of all sales, leases, or other dispositions of Licensed Products, whether made by Company or a Sublicensee, during such calendar quarter. Included in each sales report will be the name of each Distributor, and the number and type of Licensed Product sold, leased, or otherwise provided to such Distributor. Company will deliver a written Sales Report to University even if Company is not required hereunder to pay to University a royalty payment during the calendar quarter. Company shall provide the names of Permitted Sublicensees within [***] at University’s request.

6.5    Books and Records. Throughout the term of this Agreement and for [***] thereafter, Company, at its expense, will keep and maintain and shall cause each Sublicensee other than Permitted Sublicensees to keep and maintain complete and accurate records of all sales, leases, and other dispositions of Licensed Products and all other records related to this Agreement.

6.5.1    Audit Rights. Company will permit at the request of University (not to be made more than once in any given calendar year), one or more independent, certified accountants selected by University and reasonably acceptable to Company (which acceptance shall not be unreasonably withheld or delayed) (“Accountants”) to have access to Company’s records and books of account pertaining to calculation of Net Sales and payment of any other amounts owed under this Agreement. Accountants’ access will be during ordinary working hours to audit Company’s records for any payment period ending prior to such request, the correctness of any Sales Report or payment made under this Agreement, or to obtain information as to the payments due for any period in the case of failure of Company to report or make payment under the terms of this Agreement or to verify Company’s compliance with its payment obligations hereunder. Accountants will sign Company’s standard non-disclosure agreement provided it is reasonable to the industry in which Company operates. Company shall cause each Sublicensee, other than Permitted Sublicensees, that manufactures, sells, leases, or otherwise disposes of Licensed Products on behalf of Company to grant University the right to inspect and audit Sublicensee’s records.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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6.5.2    Scope of Disclosure. Accountants will not disclose to University any information relating to the business of Company except that which is necessary to inform University of: (a) the accuracy or inaccuracy of Company’s Sales Reports and payments; (b) compliance or noncompliance by Company with the terms and conditions of this Agreement; or (c) the extent of any inaccuracy or noncompliance. A copy of the Accountants’ report will be provided to Company. All information disclosed by the accountants to University shall be Company’s Confidential Information.

6.5.3    Accountant Copies. If Accountants believe there is an inaccuracy in any of Company’s payments or noncompliance by Company with any terms and conditions, Accountants will have the right to make and retain copies (including photocopies) of any pertinent portions of the records and books of account.

6.5.4    Costs of Audit. If Company’s payments calculated for any calendar quarter are under-reported by more than [***] percent ([***]%), the costs of any audit and review initiated by University will be borne by Company; otherwise, University shall bear the costs of any audit initiated by University.

7.    INFRINGEMENT

7.1    Notice of Third Partys Infringement. If a Party learns of substantial, credible evidence that a Third Party is infringing exclusively Licensed Rights, that Party will promptly deliver written notice of the possible infringement to the other Party, describing in detail all relevant information to which that Party has access or control suggesting infringement of the exclusively Licensed Rights.

7.2    Companys Right to Enforce. During the term of this Agreement, Company has the first right to respond to, defend, and prosecute in its own name, and at its own expense, actions or suits relating to the exclusive Licensed Rights. University may request in writing that Company take action against known infringer. If required by law or otherwise legally necessary for such action to proceed, Company may request that University be joined as a party plaintiff and University will consider such request in good faith, such request not to be unreasonably denied, provided that (a) Company must notify University at least ten (10) days before Company wishes to file suit, and (b) Company will reimburse University for all reasonable legal fees and costs incurred by University in connection with such action. As examples of why University may reasonably deny the request to be joined as a party plaintiff: (i) Company is no longer developing or commercializing a Licensed Product, or (ii) there is not credible evidence of actual infringement. Company will not settle any suits or actions in any manner relating to the Licensed Rights that is detrimental to the University or to the scope or validity of Licensed Rights, without obtaining the prior written consent of University, which consent shall not be unreasonably withheld or delayed.

7.3    Distributions. Out of any Sublicense fees, royalties, damages, awards, or settlement proceeds from any settlement or judgment for infringement of Licensed Rights, Company is allowed to first recover its reasonable attorney’s fees and other out-of-pocket expenses directly related to any action, suit, or settlement for infringement of the Licensed Rights. Any payment by an alleged infringer that, under the terms of the applicable settlement agreement or judgment, (a) constitutes consideration for Net Sales of infringing product (or an equivalent characterization in the nature of a product royalty) will be handled according to the payment provisions in Section A3.2 “Running Royalty Payments”, and (b) constitutes consideration for the grant of a Sublicense (or an equivalent characterization) will be handled according to Section A3.6 “Sublicense Consideration”. Any remaining proceeds will be distributed [***] percent ([***]%) to Company and [***] percent ([***]%) to University.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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7.4    Limitation on Infringement Actions. Excluded from the rights granted herein is the right to bring an infringement action against a not-for-profit entity for infringement of the Licensed Rights in carrying out not-for-profit research.

7.5    University Right to Institute Action. If Company fails, within [***] of receiving of the University’s written request to take action against an alleged infringer of exclusively Licensed Rights, to secure cessation of the infringement, institute suit against the infringer, or to provide to University satisfactory evidence that Company is engaged in bona fide negotiations for the acceptance by infringer of a Sublicense to the relevant Licensed Rights, then University may, upon written notice to Company, assume full right and responsibility to secure cessation of the infringement or institute suit against the infringer, or secure acceptance of a Sublicensee by Company from the alleged infringer in the relevant Licensed Patents provided that the scope of the Sublicense would only be the extent of the infringement at the time of University’s request for Company to take action against the infringer, and further provided that Company will not be liable for any actions or inactions of the Sublicensee. If University, in accordance with the terms and conditions of this Agreement, chooses to institute suit against an alleged infringer, University may bring such suit in its own name (or, if required by law, in its and Company’s name) and at its own expense, and Company will, but at University’s expense for Company’s direct associated expenses, fully and promptly cooperate and assist University in connection with any such suit. All license fees, royalties, damages, awards, or settlement proceeds arising from such a University-initiated action will be solely for the account of University.

7.6    No Obligation to Institute Action. Neither Company nor University is obligated under this Agreement to institute or prosecute a suit against any alleged infringer of the Licensed Rights.

8.    LICENSED RIGHTS VALIDITY

8.1    Notice and Investigation of Third Party Challenges. If any Third Party challenges the validity or enforceability of any of the Licensed Rights, the Party having such information will immediately notify the other Party.

8.2    Third Party Actions. In the event of a Third Party legal action challenging the validity or enforceability of any of the exclusively Licensed Rights, Company in its sole discretion will have the right to assume and control the sole defense of the claim at Company’s expense. Company will not settle any suits or actions in any manner relating to the Licensed Rights without obtaining the prior written consent of University, which consent shall not be unreasonably withheld or delayed; provided, however, that the Parties agree that loss of University’s intellectual property rights is a reasonable reason to withhold consent. Further, if Company is not diligently protecting University’s intellectual property rights, or if Company does not elect to assume and control the sole defense of the Third Party legal action within ninety (90) days after becoming aware of challenge, University will have the right to assume the defense of the action at its own expense. University will not settle any suits or actions in any manner relating to the Licensed Rights without considering in good faith any comments from Company.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

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8.3    Enforceability of Licensed Rights. Notwithstanding challenge by any Third Party, any Licensed Right will be enforceable under this Agreement until such Licensed Right is determined to be invalid.

9.    TERMINATION

9.1    End of Term. This Agreement will expire, unless terminated earlier as provided in this Article 9 “Termination”, without further action by the Parties, when all Licensed Patents have terminated pursuant to Article 2 “License Grant”, and all obligations due to University based on the exercise of such Licensed Rights have been fulfilled.

9.2    Termination by University. If Company materially breaches or fails to perform one or more of its material duties under this Agreement, University may deliver to Company a written notice of default, which notice will (a) state that it is a notice of default, (b) state that University intends to terminate this Agreement if the default is not cured in [***] days, and (c) identify the material duty or duties to which such default relates. Subject to Section 13.4 “Escalation; Dispute Resolution”, University may terminate this Agreement by delivering to Company a written notice of termination if the default has not been cured within [***] days of the delivery to Company of the notice of default; provided, however, if Company can reasonably demonstrate to University that it is proceeding diligently and in good faith to cure such default but cannot do so within such [***] day period, University will extend such cure period for another [***] day period, or such longer period approved by University.

9.3    Events of Default. University may terminate this Agreement by delivering to Company a written notice of termination at least [***] days prior to the date of termination if Company (i) permanently ceases operations; (ii) voluntarily files or has filed against it a petition under applicable bankruptcy or insolvency laws that Company fails to have released within [***] days after filing; (iii) proposes any dissolution, composition, or financial reorganization with creditors or if a receiver, trustee, custodian, or similar agent is appointed; (iv) makes a general assignment for the benefit of creditors; or (v) if Company challenges the validity of the Licensed Patents.

9.4    Disputing Events of Default. Notwithstanding the foregoing, if Company disputes that a default has occurred as contemplated above or that a default has not been cured, Company may use the dispute resolution mechanism outlined in Section 13.4 “Escalation; Dispute Resolution”.

9.5    Termination by Company. Company may terminate this Agreement at any time by delivering to University a written notice of termination at least [***] days prior to the effective date of termination. In addition, Company may propose to terminate certain of its Licensed Rights hereunder by delivering to University a written notice of termination at least [***] days prior to the effective date of termination of such Licensed Rights.

9.6    Effect of Termination. Upon termination of this Agreement, the Licensed Rights granted (including any and all rights granted under the Licensed Rights to Sublicensees including Permitted Sublicensees) will terminate. However, no end-user rights shall terminate as a result of termination of this Agreement. Company’s obligations that have accrued prior to the effective date of termination or expiration of this Agreement (including but not limited to the obligations under Article 6 “Payments, Reimbursements, Reports, and Records” will survive termination of this Agreement. Sublicenses will terminate unless converted into a direct license with University pursuant to Section 9.8 “Sublicenses After Termination”. Notwithstanding any such termination of this Agreement, subject to being in compliance with Article 6 “Payments, Reimbursements, Reports, and Records” of this Agreement at the time of termination, and subject to ongoing compliance with obligations under Article 6 “Payments, Reimbursements, Reports, and Records”, Company and any Sublicensees and Distributors may sell or otherwise dispose of existing inventory of Licensed Products for a period of [***] after the effective date of termination of this Agreement (“Sell-Off Period”). Company will provide notification if Company, or any Sublicensees or Distributors, will be exercising their rights to continue selling inventory pursuant to the Sell-Off Period. Company, Sublicensees, and Distributors will destroy any existing Licensed Know-How in their possession, and provide written notification of said destruction to University within [***] of either the effective date of termination or the end of the Sell-Off Period if University has been notified pursuant to the preceding sentence.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 14 of 38  


Table of Contents

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9.7    Final Report to University. Within [***] after the end of the calendar quarter following either the expiration or termination of either this Agreement or the Sell-Off Period, whichever is later, Company will submit a final Sales Report to University. Any payment obligations accrued prior to such termination or expiration, including those incurred but not yet paid, will become due and payable at the same time as this final Sales Report is due to University.

9.8    Sublicenses After Termination. At any time within [***] following termination of this Agreement, a Sublicensee may notify University that it wishes to enter into a direct license with University in order to retain its rights to the Licensed Rights granted to it under its Sublicense (such [***] following termination, the “Initial Notice Period”). Following receipt of such notice, University and Sublicensee will enter into a license agreement the terms of which will be substantially similar to the terms of this Agreement. The scope of the direct license, the licensed territory, and the duration of the license grant will be comparable to the corresponding terms granted by Company to such Sublicensee, provided that such Sublicensee will be granted at least the same scope of rights as it obtained from Company under its Sublicense. For the sake of clarity, the financial terms, including without limitation, the running royalty rate and milestone payments, will be identical to the corresponding financial terms set forth in this Agreement, provided University shall consider in good faith reducing the non-running royalty financial payments where there are multiple direct licensees or such direct licensee has a reduced scope compared with this Agreement. Notwithstanding the foregoing, each Sublicensee’s right to enter into such direct license will be conditioned upon:

9.8.1    Written Notification to University. Such Sublicensee informing University in writing, pursuant to Section 13.10 “Notices”, that it wishes to enter into such direct license with University, within the Initial Notice Period;

9.8.2    Sublicensee in Good Standing. Such Sublicensee being in good standing with Company under its Sublicense, and such Sublicense not being the subject of a dispute between Sublicensee and Company, or between Company and University under this Agreement;

9.8.3    Valid Sublicense. Such Sublicense having been validly entered into by Company and Sublicensee pursuant to the terms of Section 2.3 “Sublicense Rights”;

9.8.4    Sublicensee Certification that Conditions are Satisfied. Such Sublicensee using reasonable efforts to certify or otherwise demonstrate that the conditions set forth in Subsections 9.8.1 “Written Notification to University”, 9.8.2 “Sublicensee Good Standing”, and 9.8.3 “Valid Sublicense” have been met within thirty (30) days of expiration of the Initial Notice Period (or within such longer period of time as University agrees is reasonable under the circumstances, based on the nature and extent of any documentation reasonably requested by University); and

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 15 of 38  


Table of Contents

CONFIDENTIAL

 

9.8.5    Time Limitations. Unless mutually agreed by the Parties in writing, such negotiations for a direct license are not to exceed [***] from the end of the Initial Notice Period.

Except as set forth in Subsection 9.8.5 “Time Limitations”, University may, at its sole discretion, waive any of these requirements. If all of the conditions set forth in this Section 9.8 are met, then Sublicensee will be granted such direct license by University. If any condition set forth in this Section 9.8 is not met, then after expiration of any time period granted to Sublicensee with respect to meeting such condition (for example and to the extent applicable, the Initial Notice Period and/or the periods described in Subsections 9.8.4 “Sublicensee Certification that Conditions are Satisfied” and 9.8.5 “Time Limitations”), Sublicensee will not practice Licensed Rights except as provided for in Section 9.6 “Effect of Termination” and University will be free to license or not license Licensed Rights to such Sublicensee according to University’s sole discretion.

10.    RELEASE, INDEMNIFICATION, AND INSURANCE

10.1.    Companys Release. Company hereby releases University, Stanford University and their regents, employees, and agents forever from any and all suits, actions, claims, liabilities, demands, damages, losses, or expenses (including reasonable attorneys’ and investigative expenses) relating to or arising out of (a) the manufacture, use, lease, sale, or other disposition of a Licensed Product by Company, Sublicensee(s), Distributor(s), or any other party authorized by Company to practice the License Rights; or (b) the assigning or sublicensing of Company’s rights under this Agreement.

10.2.    Indemnification. Company will indemnify, defend, and hold harmless University, Stanford University, and their regents, employees, and agents (each, an “Indemnitee”) from all Third Party suits, actions, claims, liabilities, demands, damages, losses, or expenses (including reasonable attorneys’ and investigative expenses), arising out of Company’s or Sublicensees’ exercise of any rights with respect to Licensed Products, including, without limitation, personal injury, property damage, breach of contract and warranty and products-liability claims relating to a Licensed Product and claims brought by a Sublicensee (each, a “Claim”), provided that the Company will not have obligations to the extent resulting from the University’s or Stanford University’s gross negligence or willful misconduct. In the event of a Claim, the Indemnitee against whom a Claim is brought will: (a) give Company written notice of the Claim within a reasonable period of time after such Indemnitee receives notice thereof along with sufficient information for Company to identify the Claim; and (b) cooperate and provide such assistance (including, without limitation, testimony and access to documentation within the possession or control of such Indemnitee) as Company may reasonably request in connection with Company’s defense, settlement and satisfaction of the Claim. Company will pay or reimburse all costs and expenses reasonably incurred by such Indemnitee to provide any such cooperation and assistance. Any settlement that would admit liability on the part of University or Stanford University or that would involve any relief other than the payment of monetary damages will be subject to the approval of University and/or Stanford University, such approval not to be unreasonably withheld. HHMI, and its trustees, officers, employees, and agents (collectively, “HHMI Indemnitees”), will be indemnified, defended by counsel acceptable to HHMI, and held harmless by Company from and against any claim, liability, cost, expense, damage, deficiency, loss, or obligation, of any kind or nature (including, without limitation, reasonable attorneys’ fees and other costs and expenses of defense) (collectively, “HHMI Claims”), based upon, arising out of, or otherwise relating to this Agreement or any Sublicense or Permitted Sublicense, including without limitation any cause of action relating to product liability. The previous sentence will not apply to any HHMI Claim that is determined with finality by a court of competent jurisdiction to result solely from the gross negligence or willful misconduct of an HHMI Indemnitee. Notwithstanding any other provision of this Agreement, Company and Sublicensee’s obligations to defend, indemnify and hold harmless the HHMI Indemnitees under this paragraph will not be subject to any limitation or exclusion of liability or damages or otherwise limited in any way.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 16 of 38  


Table of Contents

CONFIDENTIAL

 

10.3    Companys Insurance.

10.3.1    General Insurance Requirement. Throughout the term of this Agreement, or during such period as the Parties will agree in writing, Company will maintain full force and effect commercial general liability (CGL) insurance and product liability insurance, with single claim limits at an amount customary to Company’s business for activities and/or products of a similar nature. Such insurance policy will include coverage for claims that may be asserted by University or HHMI against Company under Section 10.2 “Indemnification”. Such insurance policy will name the Board of Regents of the University of Washington, Stanford University, and HHMI as an additional insured and will require the insurer to deliver written notice to University at the address set forth in Section 13.10 “Notices”, at least thirty (30) days prior to the termination of the policy. Company will deliver to University a copy of the certificate of insurance for such policy.

10.3.2    Clinical Trial Liability Insurance. Within thirty (30) days prior to the initiation of human clinical trials with respect to Licensed Product(s), Company will provide to University certificates evidencing the existence and amount of clinical trials liability insurance. Company will issue irrevocable instructions to its insurance agent and to the issuing insurance company to notify University of any discontinuance or lapse of such insurance not less than thirty (30) days prior to the time that any such discontinuance is due to become effective. Company will provide University a copy of such instructions upon their transmittal to the insurance agent and issuing insurance company. Company will further provide University, at least annually, proof of continued coverage.

11.    WARRANTIES

11.1.    Authority. Each Party represents and warrants to the other Party that it has full power and authority to execute, deliver, and perform this Agreement, and that no other proceedings by such Party are necessary to authorize the Party’s execution or delivery of this Agreement.

11.2    Documents. University represents and warrants that: all University personnel, including employees, students, consultants and contractors, who University is aware as of Effective Date have contributed to the Licensed Patents as of Effective Date have either (a) been party to a for-hire relationship with University that affords University sufficient ownership of all Licensed Patents to provide this license to Company, or (b) executed assignment documents in favor of University as prescribed by University policies or by agreement with HHMI to provide University sufficient ownership of the Licensed Patents to provide this license to Company. Furthermore, in the IIA, Stanford represents that its inventors are either (i) obligated to assign to Stanford all of the inventors’ rights in the Licensed Patents or (ii) obligated to assign his/her inventor’s rights in the Licensed Patents to HHMI, and that HHMI has or will assign its rights in such Licensed Patents to Stanford University pursuant to the collaborative arrangements between them; and that Stanford will use diligent efforts to cause its inventors to sign any additional papers as may be necessary to evidence such assignment.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 17 of 38  


Table of Contents

CONFIDENTIAL

 

11.3     No Known Infringement. As of the Effective Date, to the best of University’s CoMotion office’s knowledge, (a) no claim has been made or is threatened charging University or Stanford University with infringement of, or claiming that the Licensed Rights infringe any Third Party rights; and (b) no proceedings have been instituted, or are pending or threatened, which challenge the University’s or Stanford University’s rights in respect to the Licensed Patents or other Licensed Rights.

11.4    Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 2.8 IIA, 11.1 AUTHORITY, 11.2 DOCUMENTS, AND 11.3 NO KNOWN INFRINGEMENT UNIVERSITY (FOR ITSELF AND ON BEHALF OF STANFORD UNIVERSITY) AND HHMI DISCLAIM AND EXCLUDE ALL WARRANTIES, EXPRESS AND IMPLIED, CONCERNING EACH LICENSED RIGHT AND EACH LICENSED PRODUCT, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF NON-INFRINGEMENT AND THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. University/Stanford University innovation has been developed as part of research conducted at University and Stanford University. University/Stanford University innovation is experimental in nature and is made available “AS IS,” without obligation by University or Stanford University to provide accompanying services or support except as specified in this Agreement. The entire risk as to the quality and performance of University/Stanford University innovation is with Company.

11.5    Intellectual Property Disclaimers. University (for itself and on behalf of Stanford University) expressly disclaims any warranties concerning and makes no representations: (a) that the Licensed Patent(s) will be approved or will issue; (b) concerning the validity or scope of any Licensed Right; or (c) that the practice of Licensed Rights, or the manufacture, use, sale, lease or other disposition of a Licensed Product will not infringe or violate a Third Party’s patent, copyright, or other intellectual property right.

12.    DAMAGES

12.1.    Remedy Limitation. EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, (A) IN NO EVENT WILL UNIVERSITY OR STANFORD UNIVERSITY BE LIABLE FOR PERSONAL INJURY OR PROPERTY DAMAGES ARISING IN CONNECTION WITH THE ACTIVITIES CONTEMPLATED IN THIS AGREEMENT AND (B) IN NO EVENT WILL EITHER PARTY OR STANFORD UNIVERSITY BE LIABLE FOR LOST PROFITS, LOST BUSINESS OPPORTUNITY, INVENTORY LOSS, WORK STOPPAGE, LOST DATA OR ANY OTHER RELIANCE OR EXPECTANCY, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, OF ANY KIND.

12.2    Damage Cap. IN NO EVENT WILL UNIVERSITYS TOTAL LIABILITY FOR THE BREACH OR NONPERFORMANCE OF THIS AGREEMENT EXCEED THE AMOUNT OF PAYMENTS PAID AND SHARES ISSUED TO UNIVERSITY UNDER ARTICLE 6 PAYMENTS, REIMBURSEMENTS, REPORTS, AND RECORDS. THIS LIMITATION WILL APPLY TO CONTRACT, TORT, AND ANY OTHER CLAIM OF WHATEVER NATURE.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 18 of 38  


Table of Contents

CONFIDENTIAL

 

13.    GENERAL PROVISIONS

13.1.    Amendment and Waiver. This Agreement may be amended from time to time only by a written instrument signed by the Parties. No term or provision of this Agreement will be waived, and no breach excused, unless such waiver or consent is in writing and signed by the Party claimed to have waived or consented. No waiver of a breach will be deemed to be a waiver of a different or subsequent breach.

13.2.    Assignment. The rights and licenses granted by University in this Agreement are personal to Company and Company will not assign its interest or delegate its duties under this Agreement without the written consent of University, which consent will not to be unreasonably withheld or delayed; any such assignment or delegation made without written consent of University will not release Company from its obligations under this Agreement. Notwithstanding the foregoing, Company, without the prior approval of University, may assign all, but no less than all, of its rights and delegate all, but no less than all, of its duties under this Agreement to a Third Party provided that: (a) the assignment is made to such Third Party as a part of and in connection with an Acquisition, (b) Company obtains from such Third Party written agreement to honor all obligations under this Agreement accrued by Company before Acquisition and all obligations under this Agreement to accrue by such Third Party assignee after Acquisition, and (c) Company provides written notice to University of the Acquisition, together with a substitution of parties document or copy of the assignment confirming compliance with (b) above, no later than thirty (30) days after the close of the Acquisition. Any assignment made in violation of this Section 13.2 “Assignment” is void and will constitute an act of breach that requires remedy under Section 9.2 “Termination by University”. This Agreement will inure to the benefit of Company and University and their respective permitted assignees and trustees.

13.3.    Confidentiality.

13.3.1    Form of Transfer. Confidential Information may be conveyed in tangible or intangible form. Disclosing Party must clearly mark its Confidential Information “confidential.” If disclosing Party communicates Confidential Information in non-written form, it will reduce such communications to writing, clearly mark it “confidential,” and provide a copy to receiving Party within thirty (30) days of original communication at the address in Section 13.10 “Notices”. Any business information delivered by Company as required under this Agreement shall be deemed marked “confidential,” whether or not such confidential marking appears.

13.3.2    No Unauthorized Disclosure of Confidential Information. Beginning on the Effective Date and continuing throughout the term of this Agreement and thereafter for a period of five (5) years, receiving Party will not disclose or otherwise make known or available to any Third Party any disclosing Party Confidential Information, without the express prior written consent of disclosing Party. Notwithstanding the foregoing, receiving Party will be permitted to disclose Confidential Information of disclosing Party to (i) actual or potential investors, lenders, consultants, advisors, collaborators, Sublicensees, or development partners, which disclosure will be made under conditions of confidentiality and limited use and (ii) its attorney or agent as reasonably required and (iii) to employees and trustees of HHMI who have a need to know. In no event will receiving Party incorporate or otherwise use disclosing Party’s Confidential Information in connection with any patent application filed by or on behalf of receiving Party. Receiving Party will restrict the use of disclosing Party’s Confidential Information to uses exclusively in accordance with the terms of this Agreement. Receiving Party will use reasonable procedures to safeguard disclosing Party’s Confidential Information. In the case where Company is the receiving Party, Company’s confidentiality obligations will also apply equally to Sublicensees.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 19 of 38  


Table of Contents

CONFIDENTIAL

 

13.3.3    Access to University Information. University is an agency of the state of Washington and is subject to the Washington Public Records Act, RCW 42.56 et seq., (“Act”), and no obligation assumed by University under this Agreement will be deemed to be inconsistent with University’s obligations as defined under the Act and as interpreted by University in its sole discretion. If University receives a request for public records under the Act for documents containing Company Confidential Information, and if University concludes that the documents are not otherwise exempt from public disclosure, University will provide Company notice of the request before releasing such documents. Such notice will be provided in a timely manner to afford Company sufficient time to review such documents and/or seek a protective order, at Company’s expense utilizing the procedures described in RCW 42.56.540. University will have no other obligation to protect Company Confidential Information from disclosure in response to a request for public records.

13.3.4    Disclosure as Required by Law. Either Party will have the right to disclose the other Party’s Confidential Information as required by law or valid court order, provided that such Party will inform the Party who owns such Confidential Information prior to such disclosure, will cooperate with the owner Party’s efforts to limit or avoid disclosure, and will limit the scope and recipient of disclosure to that required by such law or court order.

13.4.    Escalation; Dispute Resolution. If (a) Company disputes that (i) a default has occurred as contemplated in Section 9.2 “Termination by University”, or that a default has not been cured, or (ii) Company wishes to dispute termination of this Agreement resulting from a failed negotiation of a new Performance Milestone as contemplated under Section 5.2 “Renegotiation of Performance Milestones”, then Company may provide University with a written dispute notice (“Dispute Notice”) prior to expiration of the [***]-day cure period referenced in Section 9.2, stating the basis of Company’s disagreement with respect to such default or cure, or (b) if there is a dispute as provided under Sections 3.3 or 7.2, then either Party may provide the other with a Dispute Notice. If Company disputes that a default has occurred as contemplated in Section 9.3 “Events of Default”, then Company may provide University with a Dispute Notice within [***] days of University sending the notice of termination referenced in Section 9.3. Upon receipt of a Dispute Notice, University’s right to terminate this Agreement will be suspended and all rights under this Agreement will continue unaffected provided the dispute resolution process in this Section 13.4 “Escalation; Dispute Resolution” is being exercised. Any dispute will first be escalated to Company’s Chief Executive Officer or to a representative from Company’s Board of Directors, and to University’s Vice President for Innovation Strategy, representatives of which will be instructed to work in good faith to attempt to reach a mutually acceptable resolution of the dispute that would avoid termination of this Agreement. If the representatives are unable to reach such resolution of the dispute within [***] days of delivery of the Dispute Notice, an independent, neutral mediator acceptable to both Parties (acting reasonably) will be appointed. The Parties will submit their dispute to mediation according to such parameters as they may mutually agree in writing. The Parties agree to discuss their differences in good faith and to attempt in good faith, with facilitation by the mediator, to reach an amicable resolution of the dispute within [***] days after the mediator’s appointment. If the Parties are not able to agree on resolution of the dispute within such period, or within [***] days of the Dispute Notice, whichever is earlier, including agreeing on a new Performance Milestone pursuant to Section 5.2 “Renegotiation of Performance Milestones” if that is the subject of the dispute, then the dispute resolution process of this Section 13.4 “Escalation; Dispute Resolution” will be complete and either Party may pursue any other action that is legally available to it. Notwithstanding the foregoing, no dispute affecting the rights or property of HHMI shall be subject to arbitration.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 20 of 38  


Table of Contents

CONFIDENTIAL

 

13.5    Consent and Approvals. Except as otherwise expressly provided in this Agreement, all consents or approvals required under the terms of this Agreement must be in writing and will not be unreasonably withheld or delayed.

13.6    Construction. The headings preceding and labeling the sections of this Agreement are for the purpose of identification only and will not in any event be employed or used for the purpose of construction or interpretation of any portion of this Agreement. As used herein and where necessary, the singular includes the plural and vice versa, and masculine, feminine, and neuter expressions are interchangeable, and the word “including” shall mean “including, without limitation.”

13.7    Enforceability. If a court of competent jurisdiction adjudges a provision of this Agreement unenforceable, invalid, or void, such determination will not impair the enforceability of any of the remaining provisions hereof and the provisions will remain in full force and effect.

13.8    No Third-Party Beneficiaries. Except as identified in Section 13.22 “Third Party Beneficiary” or other parts of this Agreement referencing Stanford University, no provision of this Agreement, express or implied, confers upon any person other than the Parties to this Agreement any rights, remedies, obligations, or liabilities hereunder. No Sublicensee will have a right to enforce or seek damages under this Agreement

13.9    Language. Unless otherwise expressly provided in this Agreement, all notices, reports, and other documents and instruments that a Party elects or is required by the terms of this Agreement to deliver to the other Party will be in English.

13.10    Notices. All notices, requests, and other communications that a Party is required or elects to deliver will be in writing and will be delivered personally, or by facsimile or electronic mail (provided such delivery is confirmed), or by a recognized overnight courier service or by United States mail, first-class, certified or registered, postage prepaid, return receipt requested, to the other Party at its address set forth below or to another address as a Party may designate by notice given under this Section 13.10:

 

If to University:

    

UW CoMotion

Attn: [***]

4545 Roosevelt Way NE, Suite 400

Seattle, WA 98105

Facsimile No.: [***]

Email: [***]

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 21 of 38  


Table of Contents

CONFIDENTIAL

 

If to Company:

    

Neoleukin Therapeutics, Inc.

Attn: Jonathan Drachman, CEO

218 Dorffel Drive East

Seattle, WA 98112

Email: [***]

13.11    Proprietary Markings. To the extent commercially feasible, Company will mark all material forms of Licensed Products or packaging pertaining thereto made and sold by Company in the United States with patent marking conforming to 35 U.S.C. §287(a), as amended from time to time. All Licensed Product(s) shipped to or sold in other countries will be marked in such a manner as to provide notice to potential infringers pursuant to the patent law and practice of the country of manufacture or sale.

13.12    Use of Universitys Name and Trademarks or the Names of University Faculty, Staff, or Students. No provision of this Agreement grants Company or Sublicensee any right or license to use the name or trademarks of University or Stanford University, or the names or identities of any member of the faculty, staff, or student body of University or Stanford University. Except as provided herein, Company will not use, and will not permit a Sublicensee to use, any such trademarks, names, or identities without University’s, Stanford University’s, and, as the case may be, such member’s prior written approval. Notwithstanding the foregoing, Company may provide factual information regarding the existence of this Agreement. Company acknowledges that under HHMI policy, Company may not use the name of HHMI or of any HHMI employee (including Principal Investigator) in a manner that reasonably could constitute an endorsement of a commercial product or service; but that use for other purposes, even if commercially motivated, is permitted provided that (1) the use is limited to accurately reporting factual events or occurrences, and (2) any reference to the name of HHMI or any HHMI employees in press releases or similar materials intended for public release is approved by HHMI in advance.

13.13    Publicity. University will have the right to report in its customary publications and presentations that University and Company have entered into a license agreement for the technology covered by the Licensed Rights and University may use Company logos in such publications and presentations provided that University does not modify Company’s logos and does not through such use imply any endorsement by Company of University. The Parties will cooperate with one another to review and respond to any press release or similar communication proposed by the other Party regarding the non-confidential subject matter of this Agreement. The specific content and timing of such press releases or similar communication is subject to mutual agreement by the Parties, which will not be unreasonably withheld. Further, University and Company will issue a joint press release regarding this Agreement, subject to both Party’s, and HHMI’s, review and written approval of the specific content thereof, and such press release will include specific mention of the contributions of University personnel, in accordance with Section 13.12, and University in developing the technology in a prominent portion of the press release. Company will provide University with appropriate quotes for such press release. University may post the press release in digital and print publications as well as on University’s own website.

13.14    Relationship of Parties. In entering into, and performing their duties under, this Agreement, the Parties are acting as independent contractors and independent employers. No provision of this Agreement will create or be construed as creating a partnership, joint venture, or agency relationship between the Parties. No Party will have the authority to act for or bind the other Party in any respect.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 22 of 38  


Table of Contents

CONFIDENTIAL

 

13.15    Relationship with Principal Investigator(s). Company acknowledges that Principal Investigator(s) is employed by HHMI and has certain pre-existing obligations to HHMI and University, including obligations with respect to disclosure and ownership of intellectual property and obligations arising from sponsored research agreements between University and Third Parties. Accordingly, Company agrees that to the extent that any consulting agreement between Company and Principal Investigator(s) is inconsistent with any of Principal Investigator(s)’s obligations to HHMI or University, including the reporting of all inventions developed while employed by HHMI (regardless of where arising) and including contractual obligations arising under any sponsored research agreements between University and Third Parties, then Principal Investigator(s)’s obligations to HHMI and University will prevail and to such extent any inconsistent provisions of such consulting agreement will be deemed inapplicable and unenforceable.

13.16    Security Interest. In no event will Company grant, or permit any person to assert or perfect, a security interest in the Licensed Rights; however, Company may grant or permit a security interest in the Company’s rights under this Agreement.

13.17    Survival. The obligations specified in Article 6 “Payments, Reimbursements, Reports, and Records” will survive termination of this Agreement with respect to obligations that accrued prior to thermination, including Net Sales during the Sell-Off Period as authorized under Seciton 9.6, and further provided that Reports will not be required for any period in which there are no Net Sales other than the final report due under Section 9.7 “Final Report to University”. The obligation specified in Section 2.2 “Know-How License” will survive the expiration of this Agreement. The obligations and rights set forth in Section 2.7 “HHMI Research Use Rights”; Articles 9 “Termination”, 10 “Release, Indemnification, and Insurance”, 11 “Warranties”, 12 “Damages”; Sections 13.3 “Confidentiality”, 13.17 “Survival”, 13.19 “Applicable Law”, Section 13.20 “Forum Selection”, Section 13.21 “Entire Agreement”, and Section 13.22 “Third-Party Beneficiary” will survive the termination or expiration of this Agreement.

13.18    Collection Costs and Attorneys Fees. If a Party fails to perform an obligation or otherwise breaches one or more of the terms of this Agreement, the other Party may recover from the non-performing breaching Party all its costs (including actual attorneys’ and investigative fees) to enforce the terms of this Agreement.

13.19    Applicable Law. The internal laws of the state of Washington will govern the validity, construction, and enforceability of this Agreement, without giving effect to the conflict of laws principles thereof.

13.20    Forum Selection. Any suit, claim, or other action to enforce the terms of this Agreement will be brought exclusively in the state and federal courts of King County, Washington. Company hereby submits to the jurisdiction of that court and waives any objections it may have to that court asserting jurisdiction over Company or its assets and property.

13.21    Entire Agreement. Company has evaluated the innovations and Licensed Patents under a Confidentiality Agreement (“CDA”) with University (UW reference number 43597A), dated September 14, 2018. In addition, Company and University executed an exclusive option agreement (“Option”) for certain Licensed Patents, with University reference UW reference number 43729A, dated November 29, 2018. This Agreement (including all attachments, exhibits, and amendments) is the final and complete understanding between the Parties concerning licensing the Licensed Rights. This Agreement supersedes any and all prior or contemporaneous negotiations, representations, and agreements, whether written or oral, concerning the Licensed Rights. However, the obligations of nonuse and nondisclosure for Confidential Information disclosed under the CDA and Option will survive according to the terms of those agreements. Confidential Information disclosed under this Agreement will be governed by the terms of this Agreement. This Agreement may not be modified in any manner, except by written agreement signed by an authorized representative of both Parties.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 23 of 38  


Table of Contents

CONFIDENTIAL

 

13.22    Third Party Beneficiary.

13.22.1    HHMI is not a party to this Agreement and has no liability to any licensee, sublicensee, or user of anything covered by this Agreement, but HHMI is an intended third-party beneficiary of this Agreement and certain of its provisions are for the benefit of HHMI and are enforceable by HHMI in its own name.

13.22.2    Notwithstanding anything to the contrary in this Agreement, each Sublicensee is an intended third party beneficiary of this Agreement, but solely for purposes of enforcing Section 9.8 in its own name.

13.23    Counterparts. This Agreement may be executed in counterparts, each of which (including signature pages) will be deemed an original, but all of which together will constitute one and the same instrument. A facsimile, scanned, or photocopied signature (and any signature duplicated in another similar manner) identical to the original will be considered an original signature.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized representatives.

 

University of Washington

   

Neoleukin Therapeutics, Inc.

By:

 

/s/ Dennis Hanson

   

By:

 

/s/ Jonathan Drachman

Name:

 

Dennis Hanson

   

Name:

 

Jonathan Drachman

Title:

 

Associate Director, Innovation Development

   

Title:

 

CEO

Date:

 

7/8/2019

   

Date:

 

7/8/2019

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 24 of 38  


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CONFIDENTIAL

 

Exhibit A

Start-Up License Schedule

A1.    Licensed Rights:

 

  A1.1

Licensed Patents:

[***]

A2.    Performance Milestones (Section 5.1 “Performance Milestones”): Company or Sublicensee will meet the following Performance Milestones:

 

A2.1

  

[***]

A2.1.1

Performance Milestone 1

  

[***]

A2.1.2

Performance Milestone 2

  

[***]

A2.1.3

Performance Milestone 3

  

[***]

A2.1.4

Performance Milestone 4

  

[***]

A2.1.5

Performance Milestone 5

  

[***]

A2.1.6

Performance Milestone 6

  

[***]

 

A2.2

  

[***]

A2.2.1

Performance Milestone 1

  

[***]

A2.2.2

Performance Milestone 2

  

[***]

A2.2.3

Performance Milestone 3

  

[***]

A2.2.4

Performance Milestone 4

  

[***]

A2.2.5

Performance Milestone 5

  

[***]

A2.2.6

Performance Milestone 6

  

[***]

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 25 of 38  


Table of Contents

CONFIDENTIAL

 

A2.3

 

Performance Milestone for Licensed Product that is an antagonist
protein biologic

A2.3.1

Performance Milestone 1

 

[***]

A2.3.2

Performance Milestone 2

 

[***]

A2.3.3

Performance Milestone 3

 

[***]

A2.3.4

Performance Milestone 4

 

[***]

A2.3.5

Performance Milestone 5

 

[***]

A2.3.6

Performance Milestone 6

 

[***]

A3.    Payments (Section 6.1):

A3.1    Annual Maintenance Fee. Company will pay to University annual, non-creditable, maintenance fees of: [***] US dollars ($[***]) due on January 31st following the second anniversary of the Effective Date, [***] ($[***]) due on January 31st following the third anniversary of the Effective Date, and [***] ($[***]) due on January 31st following the fourth anniversary of the Effective Date and all subsequent January 31st thereafter; provided that no annual maintenance fee will be due in any year Company pays minimum annual royalties.

A3.2    Running Royalty Payments. Company will pay to University within [***] days after the last day of each calendar quarter during the term of this Agreement an amount equal to [***]% of Net Sales during such quarter as a running royalty payment. On a country-by-country basis, and a Licensed Product-by-Licensed Product basis, if in a country there is no Valid Claim that covers the Licensed Product, then the foregoing royalty rate shall be reduced by [***] percent ([***]%) with respect to Net Sales of such Licensed Product in such country.

A3.2.1    Third Party Royalties. If Company or its Sublicensees are required to pay royalties to a Third Party based on Company’s or such Sublicensee’s manufacture, use, offer for sale, sale or import of Licensed Product subject to one or more patents of such Third Party that create a total royalty burden for the Licensed Product of greater than [***] percent ([***]%) (such figure including the above running royalty to University), then the royalty Company pays to University may be reduced by the lesser of (i) [***] percent ([***]%) of the royalty otherwise due to the University absent of a Third Party royalty reduction, (ii) [***] percent ([***]%) of the royalty actually paid to the Third Party, or (iii) the percent Company may reduce such Third Party royalty by based on a royalty stacking provision for the same product. To qualify for this reduction the Third Party patent must be required for the manufacture, use, offer for sale, sale or import of the Licensed Product

A3.3    Minimum Annual Royalties. Company will pay minimum annual royalties for the term of this Agreement, to be creditable against running royalty payments for the preceding calendar year on a non-cumulative basis and to be due in full and payable on January 31st of each year beginning on January 31st of the year following the first commercial sale of a Licensed Product and continuing during the term of this Agreement according to the following schedule:

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 26 of 38  


Table of Contents

CONFIDENTIAL

 

Calendar Year

   Minimum
Annual Royalty
 

Year 1

   $ [***]  

Year 2

   $ [***]  

Year 3 and each year after

   $ [***]  

A3.3.1    If this Agreement is terminated prior to the payment of a minimum annual royalty in any given year the amount due for that minimum annual royalty payment will be prorated on the basis of the number of full quarters that have elapsed prior to termination since the last payment of a minimum annual royalty.

A3.4    Financial Milestones. Company will pay to University the following non-cumulative, non-creditable, and non-refundable milestone achievement payments within thirty (30) days of achieving the corresponding milestone, whether achieved by Company or a Sublicensee, for each distinct class of Licensed Product, i.e., first agonist, first antagonist, first [***] molecule:

 

    

Milestone

$[***]

  

Performance Milestone 3 in A2.1.3, A2.2.3, or A2.3.3

$[***]

  

Performance Milestone 4 in A2.1.4, A2.2.4, or A2.3.4

$[***]

  

Performance Milestone 5 in A2.1.5, A2.2.5, or A2.3.5

$[***]

  

Cumulative Net Sales of $[***]

$[***]

  

Cumulative Net Sales of $[***]

A3.5    Equity. In consideration for the rights granted to Company hereunder, within [***] days after the Effective Date, Company will issue to University a number of Shares equal to [***] percent ([***]%) of Company’s Fully-Diluted Shares as of the Effective Date, such Shares to be issued pursuant to the Stock Subscription Agreement attached hereto as Exhibit C; provided, however, that solely for purposes of this initial issuance of Shares, Company’s Fully-Diluted Shares shall exclude all then-outstanding convertible promissory notes issued by the Company. In addition, Company agrees to issue additional Shares to University sufficient to cause the University to own in aggregate [***] percent ([***]%) of Company’s Fully-Diluted Shares through such time as the Company has raised Qualified Financing; provided, however, that if Company closes an equity financing that would result in its cumulative equity capital raised being in excess of the Qualified Offering Proceeds, any such excess capital (and resulting dilution) will be ignored and the number of additional Shares to be issued to University will be calculated assuming Company had raised only such amount of equity capital as would result in its cumulative equity capital raised since incorporation being equal to the Qualified Offering Proceeds. Any such additional Shares will be issued as of or immediately after such closing.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 27 of 38  


Table of Contents

CONFIDENTIAL

 

A3.5.1    Participation Rights. If the Company proposes to sell any equity securities or securities that are convertible into equity securities of the Company (collectively, “Equity Securities”), then the University and/or its Assignee (as defined below) will have the right to purchase up to [***] percent ([***]%) of the securities issued in each offering on the same terms and conditions as are offered to the other purchasers in each such financing. Company shall provide ten business days advanced written notice of each such financing, including reasonable detail regarding the terms and purchasers in the financing. If all Equity Securities that the University and/or its Assignee are entitled to purchase pursuant to this Subsection A3.5.1 are not elected to be purchased by the University and/or its Assignee during such ten business day period, the Company may offer the remaining unsubscribed portion of such Equity Securities to any person or persons at a price not less than that, and upon terms no more favorable to the offeree than those, specified in such written notice. The term “Assignee” means (a) any entity to which the University’s participation rights under this section have been assigned either by the University or another entity, or (b) any entity that is controlled by the University. Notwithstanding the foregoing, the foregoing participation rights shall not apply to the following: (i) the issuance or sale of Shares or options therefor, to employees, directors, consultants and other service providers for the primary purpose of soliciting or retaining their services pursuant to plans or agreements approved by the Company’s Board of Directors (the “Board”); (ii) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities that are outstanding as of the date hereof; (iii) the issuance of securities in connection with a bona fide business acquisition by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, approved by the Board; (iv) the issuance of stock, warrants or other securities or rights pursuant to any equipment leasing arrangement or debt financing arrangement, which arrangement is approved by the Board and is primarily for non-equity financing purposes; (v) the issuance of stock, warrants or other securities or rights to persons or entities with which the Company has business relationships, provided such issuances are approved by the Board and are primarily for non-equity financing purposes; (vi) the issuance of Equity Securities that are specifically deemed (in a written instrument) not to be subject to the participation rights set forth in this Subsection A3.5.1 by the University and/or its Assignee; or (vii) the issuance of any other Equity Securities that are excluded from any right of first offer or participation right granted by the Company to any of its investors and set forth in an “Investors’ Rights Agreement” or any similar agreement at any time then-outstanding. In addition to the foregoing, this participation right shall not be applicable with respect to any Assignee in any subsequent offering of Equity Securities if (x) at the time of such offering, Assignee is not an “accredited investor,” as that term is then defined in Rule 501(a) of the Securities Act of 1933, as amended, and (y) such offering of Equity Securities is otherwise being offered only to accredited investors. This paragraph shall survive the termination of this Agreement.

A3.6    Sublicense Consideration. Within [***] days of the end of each calendar quarter during the term of this Agreement, Company will pay to University [***] percent ([***]%) of any Sublicense Consideration received by Company during such calendar quarter unless reduced by achievement of milestones by Company or its Sublicensees prior to execution of the particular Sublicense in accordance with the schedule below; provided that if the nature of the sublicense is a co-development agreement where Company remains involved in the funding and/or conduct of the development, then the percentage of Sublicense Consideration will be based on status of the molecular entity (agonist in A2.1, [***] molecule in A2.2, or antagonist in A2.3) at the time the Sublicense Consideration payment is received by Company. Determination of the relevant Performance Milestone having been achieved for the purposes of determining the Sublicense Consideration percentage shall be based on the milestones achieved by the most advanced molecular entity under development by Company that is the same type of molecular entity as the Licensed Product then in development for which Sublicense Consideration was received. A reduction of the percentage of Sublicense Consideration payable to University under this Agreement will be negotiated in good faith between the Parties where, in addition to the Sublicense of any rights granted to Company hereunder, Company or its Sublicensee also grants a Sublicensee a license under a Third Party’s intellectual property rights that are infringed by Licensed Product(s), and only to the extent that the total aggregate consideration for such combined license is treated as Sublicense Consideration.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 28 of 38  


Table of Contents

CONFIDENTIAL

 

   

Milestone Has Been Achieved at the Date of Execution of the Sublicense

   Sublicense
Consideration
Percentage

A3.6.1

  Production methods of GLP material established for Licensed Product (e.g. technology transfer documents)    [***]%

A3.6.2

  Performance Milestone 1    [***]%

A3.6.3

  Performance Milestone 2    [***]%

A3.6.4

  Performance Milestone 3    [***]%

A3.6.5

  Performance Milestone 4    [***]%

A3.6.6

  Performance Milestone 5 or initiation of a registrational Phase 2 study    [***]%

A3.6.7

  Performance Milestone 6    [***]%

A3.7    Acquisition Fee. University will be paid within [***] days of such Acquisition a fee (the “Acquisition Fee”) equal to (a) [***] percent ([***]%) of the Acquisition Consideration if [***] Performance Milestones have been achieved by Company or its Sublicensees, (b) [***] percent ([***]%) of the Acquisition Consideration if [***]Performance Milestone has been achieved by Company or its Sublicensees, (c) [***] percent ([***]%) of the Acquisition Consideration if [***] Performance Milestones have been achieved by Company or its Sublicensees, or (d) [***] percent ([***]%) of the Acquisition if (i) [***] or more Performance Milestones have been achieved by Company or its Sublicensees, or (ii) Company has raised Qualified Financing (for clarity, Qualified Financing may have occurred prior to the Effective Date) regardless of whether any Performance Milestones have been met. The Acquisition Fee otherwise due under this Section A3.7 will be reduced and offset by the amount of consideration attributable to University’s Shares under Section A3.5 “Equity” above. For this purpose, the consideration attributable to the Shares will be deemed to include all amounts paid at closing, placed in escrow, subject to earnout payments, or otherwise contemplated by the agreement relating to such Acquisition, to the extent such amounts are actually received by University. The Company will act in good faith and will not intentionally seek to avoid payment of or reduce the Acquisition Fee by raising capital or achieving other Performance Milestones specifically for that purpose.

A3.8    Patent Expense Payment. Company will pay, or reimburse University for paying, all Patent Expenses incurred prior to, on or after the Effective Date, within [***] days of its receipt of University’s invoice for such Patent Expenses. University reserves the right to request advance payments for certain Patent Expenses, at University’s discretion.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 29 of 38  


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CONFIDENTIAL

 

A3.8.1    Notwithstanding Sections 4.2 and 4.3 of this Agreement, if at any time Company fails to provide advance payment when requested, University shall make patent filing, prosecution, and maintenance decisions, including choosing which countries to prosecute patents, in its sole discretion and Company shall have no rights to provide instruction or to take over patent prosecution. University shall reasonably consider input provided by Company, but have no obligation to act on such input.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 30 of 38  


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CONFIDENTIAL

 

Exhibit B

Royalty Report Form

[Date]

[Company Name & Address]

 

License Number:

  

 

    

Reporting Period:

       

Report Due Date:

 

This report must be submitted regardless of whether royalties are owed.

Please do not leave any column blank. State all information requested below.

 

Product Description

   Royalty Rate      Quantity/Net Sales      Royalty Due  
        

Report Completed by: ____________________________________    Total Royalties Due: _____________________________________

Telephone Number: ______________________________________

If you have questions, please contact: ___________________________________

Please make check payable to: University of Washington

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 31 of 37  


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CONFIDENTIAL

 

Exhibit C

STOCK SUBSCRIPTION AGREEMENT

STOCK SUBSCRIPTION AGREEMENT, dated the date indicated below on the signature page hereof, by and between the Company and the University. If and when accepted by the Company, this Stock Subscription Agreement, when executed below, shall constitute a subscription for that number of shares of the Securities indicated on the attached Appendix A. All capitalized terms are defined on Appendix A.

INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual representations, warranties, covenants and agreements contained herein, Company and University hereby agree as follows:

1.    Representations and Warranties of the University. The University hereby represents and warrants to the Company as of the date of this Agreement as follows:

1.1    The University: (a) is an Accredited Investor as that term is defined in 17 CFR § 230.501(a); (b) has been furnished with all information deemed necessary by the University to evaluate the merits and risks of the Securities; (c) has had the opportunity to ask questions and receive answers concerning the Company and the Securities; and (d) has been given the opportunity to obtain any additional information necessary to verify the accuracy of any information obtained concerning the Company.

1.2    Ability to Bear Risk. The University is in a financial position to hold the Securities and is able to bear the economic risk and withstand a complete loss of the investment in the Securities.

1.3    Risk Factors. The University recognizes that the Securities as an investment involve an extremely high degree of risk. There can be no assurance that the Company will be able to meet its projected goals and the Company may need significant additional capital to be successful, which capital may not be readily available or available upon terms that are not substantially dilutive to the University. If provided, the University has reviewed the risk factors description provided by the Company.

1.4.    Sophistication. The University is a sophisticated investor, is able to fend for itself in the transactions contemplated by this Agreement, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment in the Securities.

1.5.    Suitability. The investment in the Securities is suitable for the University based upon its investment objectives and financial needs, and the University has adequate net worth and means for providing for its current financial needs and contingencies and has no need for liquidity of investment with respect to the Securities.

1.6.    Overall Commitment to Illiquid Investments. The University’s overall commitment to investments which are illiquid or not readily marketable is not disproportionate to its net worth, and investment in the Securities will not cause such overall commitment to become excessive.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 32 of 37  


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CONFIDENTIAL

 

1.7.    Restricted Securities. The University realizes that (i) none of the Securities have been registered under the Securities Act of 1933, as amended (the “Act”), (ii) the Securities are characterized under the Act as “restricted securities” and, therefore, cannot be sold or transferred unless they are subsequently registered under the Act or an exemption from such registration is available and (iii) there is presently no public market for the Securities and the University may not be able to liquidate his investment in the event of an emergency or pledge the Securities as collateral security for loans. In this connection, the University represents that it is familiar with Rule 144 promulgated under the Act, and understands the resale limitations imposed thereby and by the Act.

1.8.    Exemption Reliance. The University has been advised that the Securities are not being registered under the Act or the applicable state securities laws but are being offered and sold pursuant to exemptions from such laws. The University understands that the Company’s reliance on such exemptions is predicated in part upon the truth and accuracy of the University’s representations in this Agreement. The University represents and warrants that the Securities are being acquired for its own account, in fulfillment of its statutory mandate for the commercialization of research and economic development under RCW 28B.10.630, and without the intention of reselling, redistributing or transferring the same, that it has made no agreement with others regarding any of such Securities and that its financial condition is such that it is not likely that it will be necessary to dispose of any of such Securities in the foreseeable future.

2.    Covenants. The University agrees that:

2.1.    Transfer Restriction. The Securities for which the University hereby subscribes shall be assigned or transferred only in accordance with all applicable laws.

2.2.    Disposition of Securities. The University shall in no event make any disposition of all or any portion of the Securities which it is purchasing unless and until:

a.    There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

b.    (i) It shall have furnished the Company with an opinion of its own counsel to the effect that such disposition will not require registration of such shares under the Act, and (ii) such opinion of its counsel shall have been concurred in by counsel for the Company, such concurrence not to be unreasonably withheld or delayed, and the Company shall have advised the University of such concurrence; or

c.    The transfer shall comply with the applicable requirements of Rule 144 as promulgated under the Securities Act of 1933, as amended, or is otherwise exempt from the registration requirements of such act.

2.3.    No Revocation. The University may not cancel, terminate or revoke this subscription, and this subscription shall be binding upon its successors and assigns.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 33 of 37  


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CONFIDENTIAL

 

2.4    Execution of Related Documents. The University agrees to execute other customary, investment-related agreements as proposed by Company and executed by other investors in Company that contain solely one or more of the following provisions:

 

   

General prohibition on transfer of the Securities

 

   

Right of first refusal on proposed transfer

 

   

Right of co-sale on proposed transfer

 

   

“Tag along, drag along” rights (both must be included)

 

   

Market “standoff” agreements up to one hundred eighty (180) days following an initial public offering

provided, however, that such agreements do not discriminate against the University and do not contain any of the following provisions:

 

   

Rights to repurchase Securities owned by the University

 

   

Vesting requirements applicable to Securities owned by the University

 

   

Indemnification obligations by the University

 

   

Requirement to vote Securities owned by the University

 

   

Penalties on the University, or limitations on the University’s rights, as a result of the University’s failure to make follow-on investments

 

   

Any provision that would apply solely to the University (and not to all other persons who hold the same type and class of Securities as the University)

 

   

Confidentiality restrictions or limitations that purport to prevent the University from complying with applicable open records requirements.

3.    Issuance of Stock Certificate. Company agrees to issue and deliver to the University at the Treasury Office address provided in Appendix A a duly-executed stock certificate promptly (and in any case within 30 days) following the execution of this Agreement.

4.    Governing Law; Successors. The University agrees that this Subscription Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of Washington, that the rights, powers and duties set forth herein shall be binding upon the University, its successors and assigns, and shall inure to the benefit of its successors and assigns.

THE UNIVERSITY HAS BEEN ADVISED, PRIOR TO ITS PURCHASE OF THE SECURITIES, THAT NEITHER THE OFFERING OF THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY ADMINISTRATOR UNDER THE ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE “ACTS”) AND THAT NONE OF THE SECURITIES HAVE BEEN REGISTERED UNDER ANY OF THE ACTS AND THEREFORE CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER THE ACTS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 34 of 37  


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CONFIDENTIAL

 

SIGNATURE PAGE

The University has completed this Agreement as of the date indicated below and understands that this subscription is subject to acceptance by the Company.

 

UNIVERSITY OF WASHINGTON    

    NEOLEUKIN THERAPEUTICS, INC.

By:         By:    
Title:         Title:    
Dated:         Dated:    

 

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page 35 of 37  


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CONFIDENTIAL

 

Appendix A

Defined Terms:

The following terms shall be defined as follows for purposes of this Agreement:

The term “Agreement” means this Subscription Agreement, when executed by the University and the Company.

The term “Notice” means, with respect to the University, the information required by an applicable section delivered personally, or by facsimile or electronic mail (provided such delivery is confirmed), or by a recognized overnight courier service or by United States mail, first-class, certified or registered, postage prepaid, return receipt requested, to the other Party at its address set forth below or to another address as a Party may designate by notice given pursuant to this article.

The term “Securities” means _________________ shares of the common stock, par value $0.00001 per share of the Company.

The term “Company” means Neoleukin Therapeutics, Inc.,a Delaware corporation.

The term “University” means University of Washington, a public institution of higher education and an agency of the state of Washington, acting through UW CoMotion.

Address for Delivery of Stock Certificate:

With a copy to:

 

Neoleukin Therapeutics, Inc. / University of Washington

Exclusive License Agreement

UW CoMotion Ref. 44544A

     Page36 of 37  
EX-10.2

Exhibit 10.2

FACILITY USE AGREEMENT

This Facility Use Agreement (the “Agreement”) is entered into as of December 4,2018 (the “Effective Date”), by and between the Institute for Systems Biology (“ISB”), a non-profit Washington corporation, and Neoleukin a Delaware corporation (the “User”) (both collectively referred to as the “Parties” and individually as a “Party”).

RECITALS

 

A.

ISB is the Tenant and KR 401 Terry, LLC (as of March 13, 2014 ownership of the building transferred from Lake Union II LLC), a Delaware limited liability company, is the Landlord under that certain Master Lease (the “Lease”) dated July 29, 2010 for approximately 140,605 square feet of rentable area in the building located at 401 Terry Avenue North, Seattle, WA 98109 (the “Building”). A copy of the Lease is referenced in Exhibit A and will be provided as a separate document but nonetheless is herein incorporated by reference.

 

B.

ISB is a non-profit research institute that operates a facility within the Building (the “Facility”).    ISB desires to make space available and provide access to certain laboratory, office and common area space (the “ISB Resources”) within the ISB leased space in the Building to third parties on terms and conditions identified in this Agreement.

 

C.

ISB desires to provide access to User for a period of twelve (12) months and then on a month-to-month basis and User desires to obtain access to certain ISB Resources for User’s research and administrative purpose (the “Purpose”) pursuant to the following terms and conditions in this Agreement. The User’s Purpose is more specifically described in Exhibit B, attached and incorporated herein by reference.

Now, therefore, in consideration of the covenants and promises contained in this Agreement, the Parties agree as follows:

1. Specification of ISB Facilities Subject to this Agreement. ISB operates the Facility that User desires to use for User’s Purpose and ISB grants to User the right to use the following ISB Resources in “as is” condition pursuant to the terms and conditions contained in this Agreement:

 

  a)

Office and Laboratory Space shall mean approximately two thousand thirty (2,030) square feet of the laboratory and office space (collectively “Space”) in the in the Facility as identified in Exhibit C.

 

  b)

Special Use shall mean use of the Tissue Culture (TC) facilities on the 3rd floor. The Tissue TC facilities at the Institute for Systems Biology (ISB) are classified as a shared Biosafety Level 2 (BL2) aseptic environment. Special training and facility orientations are required for all users. As a shared facility, special care must be taken to ensure that any individual involvement inside the facility does not compromise the work of other researcher sharing the space. To help facilitate this end, individual biosafety cabinets, biosafety cabinet types, or incubators may be assigned priority for particular scopes of work. All projects must have an approved biological use protocol in place prior to work so that the individual needs of all users can be met. Use of the TC facilities use must be reserved in advance using ISB’s reservation system and ISB researchers will be given precedence during standard business hours.


  c)

Common Areas shall mean use of the common and public areas, including but not limited to restrooms, kitchens, entrances, exits and other common areas of the building comprising the facilities as they may from time to time exist;

 

  d)

Parking shall mean any provision of parking space for vehicles including but not exclusive to cars, trucks and bicycles, as to be determined in the sole discretion of ISB but mutually agreed upon by and between the Parties. Any Fees that may be involved in and agreement involving Parking may be included in Exhibit D or another agreement or an amendment to this Agreement; and

 

  e)

Conference Rooms shall mean rooms in which personnel designated by User may congregate for meetings to facilitate the Purpose and the location and availability of Conference Rooms shall be determined in the sole discretion of ISB.

2. ISB Approval for User’s Use of Facility. ISB grants to User the right to use the Facility pursuant to the following terms and conditions.

3. Term. The term (the “Term”) of this Agreement shall commence on January 5th, 2019 (the “Commencement Date”) and shall continue in effect until December 31st, 2019 (“Termination Date”) unless earlier terminated in accordance with Section 15 below. Following the Termination Date, the Agreement will continue in effect on a month-to-month basis.

4. Fee. User will pay for its use of the Facilities based upon the base rent (the “Base Rent”), overhead charge (the “Overhead Charge”), and other applicable charges specified in Exhibit D (the “Fee”), Exhibit D being attached hereto and incorporated by reference herein. The Overhead Charge expressed in Exhibit D is subject to change upon fifteen (15) days’ prior written notice to User. User shall pay the Fee due to ISB within seven (7) days of User’s receipt of an invoice, which ISB shall not submit more frequently than monthly. When making payment, User will (a) remit by check payable to “Institute for Systems Biology”; (b) reference this Agreement and the applicable invoice number being paid; and (c) mail to:

ATTN Accounts Payable

Institute for Systems Biology

401 Terry Avenue North

Seattle, WA 98109-5234

5. Security Deposit. User shall provide ISB with a Security Deposit, as defined below, in the amount of ten thousand and five hundred dollars ($10,500.00). The Security Deposit shall be held by ISB as a refundable security deposit for User’s performance of all the terms, covenants, and conditions of this Agreement (the “Security Deposit”). If User fails to make any payment due under this Agreement or if fails to perform any obligation hereunder, ISB may (but shall not be required to) use, or apply or retain all or any part of the Security Deposit for the payment of any sums due under this Agreement, or for the payment of any amount which ISB may spend or become obligated to spend by reason of User’s default, or to compensate ISB for any other loss, damage, cost or expense (including attorney’s fees) which ISB may suffer or incur by reason of User’s default. If any portion of the Security Deposit is so used or applied, User shall, within five (5) days after written demand, deposit cash or a certified cashier’s check with ISB in an amount sufficient to restore the Security Deposit to its original amount. ISB shall not be required to keep the Security Deposit separate from its general funds and User shall not be entitled to interest on the Security Deposit. If User is not then in default under this Agreement, ISB shall return the Security Deposit, or any balance thereof, to User within thirty (30) days after the later of (a) the termination or expiration of the Term of the Agreement, and (b) the date on which User vacates the Facility.

 

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6. User’s Use of Facilities.

6.1 Authorization of User Employees. Only those employees and contractors of User reasonably approved by ISB shall be authorized to use the Facilities for User Purposes. The following employees are authorized employees (“Authorized Employees”) as of the Effective Date:

 

  1.

Jonathan Drachman

 

  2.

Umut Ulge

6.2 Addition of a User Employee. User may increase the number of Authorized Employees within the Space at the Facility subject to ISB’s approval, which will not be unreasonably withheld, upon the terms and conditions outlined in Exhibit D.

6.3 Removal of a User Employee. Without limiting any other rights of ISB, ISB reserves the right to revoke, at any time, the on-site privileges of any Authorized Employee if ISB determines that the Authorizes Employee’s conduct is improper or may jeopardize the operation or safety of the ISB Facility, employees, interns, contractors, faculty or any activities conducted at the Facility.

6.4 Involvement of ISB Employees under this Agreement. Unless otherwise agreed by amendment to this Agreement, no ISB employees or interns may provide consulting services or perform work for User, or otherwise participate in research, development or testing activities using the Facility for User; provided however, that ISB employees or interns may perform activities on ISB’s behalf, such as scheduling a conference room or providing safety training to Authorized Employees.

7. Common Areas. User and its Authorized Employees shall comply with all reasonable rules and regulations adopted by ISB regarding the use of Common Areas and public areas, including but not limited to restrooms, entrances, exits and other areas of the building comprising the Facilities, as they from time to time may exist.

8. Supervision and Conduct. User shall be responsible for the supervision and control of its Authorized Employees and their activities on the ISB premises. In no event shall ISB or its employees or agents be liable for any use by User or by User’s Authorized Employees of the Facility, or for any loss, claim, damage or liability of whatsoever kind or nature that may arise in connection with this Agreement.

 

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9. User Compliance. At all times relevant to its use of the Facility, User shall comply with all applicable federal, state and local laws and rules, including those issued by the Fire Department and Board of Health, and the rules and regulations of ISB.

10. Signage and Advertisements. User shall have the right to place and maintain signage at User’s entry door throughout the Term of the Agreement.

11. Non-Solicitation. During the Term of this Agreement, and for a period of one (1) year following the termination of this Agreement, User or its Authorized Employees, consultants, agents, or contractors on their own behalf or in the services of, or on behalf of others, will not directly or indirectly solicit, induce, recruit or encourage any of ISB’s employees, officers, directors, consultants, licensees, or licensors to terminate their relationship with ISB; or attempt any of the foregoing.

12. Limitations and Restrictions on Building Use. User may only use Building electricity to operate personal computers, conventional lighting and small appliances, such as laboratory microwaves and under-counter refrigerators. All other use of Building electricity is prohibited without the written consent of ISB, Director of Facilities & Operations.

13. Environmental.

13.1 Definition. “Hazardous Material” means any substance, waste or material which is deemed hazardous, toxic, radioactive, pollutant or a contaminant, under any federal, state or local statute, law, ordinance, rule, regulation or judicial or administrative order or decision, now or hereafter in effect.

13.2 Permission. User shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Space, Facility or the Building by User, its agents, Authorized Employees, contractors, or invitees without first obtaining ISB’s consent in writing from ISB, Director of Facilities and in a manner which is in compliance with ISB’s Hazardous Materials Management Plans and in compliance with Section 20 of the Lease between ISB and Landlord.

13.3 Liability. User shall be liable to ISB for any and all clean-up costs and any and all other charges, fees, and penalties imposed by any governmental authority with respect to User’s use, disposal, release, transportation, generation, and/or sale of Hazardous Materials or other waste materials in or about the Building. User shall indemnify, defend and save ISB and/or Landlord harmless from any and all claims, losses, costs, fees, penalties and charges assessed against, incurred by or imposed upon ISB and/or the Landlord as a result of User’s use, disposal, release, transportation, generation and/or sale of Hazardous Materials or other waste materials in or about the Building.

13.4 Mandatory Safety & Hazardous Material Orientation. User’s Authorized Employees, agents, contractors or invitees shall attend any mandatory safety and hazardous material orientation required by ISB. This orientation will be scheduled with ISB, Director of Facilities & Operations and provided by a member of ISB’s Safety and Lab Operations prior to User and/or its personnel obtaining access to the Space and/or Facility.

 

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14. Indemnity. Subject to Section 13 (Mandatory Safety & Hazardous Material Orientation) above and/or Section 21 (Waiver of Subrogation) below, User will defend, indemnify and hold harmless ISB and Landlord from and against any claim, liability or suit, including attorney fees, by any third party for any injury to any person or damage to or loss of property occurring (i) in or about the Space within the Facility, except to the extent such damage is caused by any act, omission, negligence or intentional act of ISB or Landlord or their respective agents, employees, customers, contractors or invites, or (ii) on the Facility, but outside the Space to the extent such damage is caused by User’s negligence or intentional misconduct, or that of its agents, employees, customers, clients, contractors or invitees.

Subject to Section 21 (Waiver of Subrogation) below, ISB will defend, indemnify and hold harmless User from and against any claim, liability or suit, including attorney fees, by any third party for any injury to any person or damage to or loss of property occurring (i) in or about the Space within the Facility or (ii) on the Facility, but outside the Space, and, in either event, to the extent such damage is caused by ISB’s negligence or intentional misconduct, or that of its agents, employees, customers, clients, contractors or invitees, provided, however, that ISB shall have no obligations under this Section 14 (Indemnity) to the extent such damage is caused by any act, omission, negligence or intentional act of User or its agents, employees, customers, clients, contractors or invitees.

For purposes of the indemnification obligations under this Section 14 (Indemnity), neither ISB, User nor Landlord (each a “Participant to this Agreement” and collectively “Participants to this Agreement”) shall be an agent, employee, customer, client, contractor, or invitee of any other such Participant to this Agreement.

15. Termination without Cause. Either Party shall have the right to terminate this Agreement as of the last day of the sixth (6) month of the Term by providing no less than thirty (90) calendar days’ written notice to the other Party. In the event of such termination, User shall pay the applicable Fee for its use of the Space through the termination date in accordance with Section 4 (Fee) and Exhibit D.

16. Surrender the Space. User shall, on the last day of the Term of this Agreement, or upon earlier termination, remove all of its furniture, furnishings, personal property and equipment and surrender to ISB the Space and all improvements to the Space, if any, broom clean in good order, condition and state of repair (as good as when received), reasonable wear and tear, damage by fire or other casualty or condemnation that is not User’s obligation to repair excepted.

17. Defaults. If (i) User fails to pay the accrued Fee due within ten (10) days after ISB has given written notice of such default to User, or (ii) User breaches any provision of this Agreement and fails to cure the breach within thirty (30) days after ISB has given User written notice specifying the nature of the breach, then ISB may terminate this Agreement on the termination date specified in the notice. ISB may extend the cure period beyond thirty (30) days if ISB determines that the breach cannot reasonably be cured within thirty (30) days.

 

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18. Notices. All notices given under this Agreement shall be in writing and deemed given (a) when delivered in person; (b) three (3) days after having been sent by U.S. mail registered or certified mail; postage prepaid, return receipt requested; (c) one (1) day after deposit with a commercial overnight courier with confirmed verification of delivery, and addressed:

If to ISB:

ATTN Becky Johnson

Institute for Systems Biology

401 Terry Avenue North

Seattle, WA 98109

If to User:

ATTN

Either Party may provide for a different address by notifying the other Party of said change as provided for herein.

19. Disclaimers of Warranties. ISB makes no representations or warranties, express or implied, in connection with its property, the Space, Facility, or Building including, without limitation, the implied warranties of merchantability or fitness for a particular purpose. ISB specifically disclaims any warranty or guaranty related to its property, the Building or the Real Estate. To the extent ISB authorizes the Company to use any of ISB equipment or personal property under this Agreement, such equipment or personal property is provided on an “AS IS, WHERE IS BASIS” and “WITH ALL FAULTS.”

20. Insurance

Required Coverage. Company shall obtain and keep in full force and effect during the Term all types and levels of insurance required to be carried by ISB under the Lease. User may elect, at its discretion, to carry Two Million Dollars ($2,000,000) of general aggregate liability coverage in lieu of the Ten Million ($10,000,000) required by the Lease. Such insurance policies shall name ISB and Landlord under the Lease as additional insureds on its commercial general liability policy and User shall pay all premiums and charges for such insurance. If User shall fail to obtain such insurance, ISB may, but shall not be obligated to, obtain the same in which event the amount of the premium paid shall be paid by User to ISB as an Operating Charge.

21. Waiver of Subrogation. Any property insurance policy obtained by User covering the Space or the personal property, fixtures and equipment located therein or thereon, shall permit User to waive subrogation against Landlord, ISB, and Landlord’s managing agent. User hereby releases ISB, Landlord, and Landlord’s managing agent with respect to any claim (including a claim of negligence) which it might otherwise have against ISB, Landlord and Landlord’s managing agent for loss, damage, or destruction with respect to User’s property by fire or other casualty.

 

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22. Confidentiality. Any information of User in or about the Facility that is observed, overheard or obtained by ISB during the Term of this Agreement, and any information of ISB in or about the Facility that is observed, overheard, or obtained by User during the Term of this Agreement (“Confidential Information”) will be subject to the obligations of confidentiality set forth below, regardless of whether such information is marked or identified and later confirmed in writing as confidential information. This Section will survive expiration or termination of this Agreement for a period of five (5) years from the Effective Date of this Agreement.

The Party disclosing Confidential Information is herein referred to as the “Disclosing Party” and the Party receiving Confidential Information is herein referred to as the “Receiving Party.” The Receiving Party acknowledges that the Disclosing Party has invested significant time, effort, and expense in developing or obtaining the Confidential Information. The Receiving Party therefore agrees to:

 

(a)

maintain all Confidential Information in confidence and take all reasonable measures to protect Confidential Information from disclosure to others, using at least the degree of care the Receiving Party uses to protect its own Confidential Information; and

 

(b)

not disclose Confidential Information to any third party except to those employees, consultants or subcontractors to whom it is necessary to disclose the Confidential Information for the Purpose and who are under obligations of confidentiality at least as restrictive as those set forth herein.

The Parties agree that Receiving Party’s obligations under this Agreement shall not apply to any Confidential Information that Receiving Party can document:

 

  (a)

is or becomes publicly known other than through breach of this Agreement by Receiving Party;

 

  (b)

is known to Receiving Party at the time of disclosure or independently developed by Receiving Party without use of Disclosing Party’s Confidential Information as evidenced by contemporaneous written record;

 

  (c)

is disclosed to Receiving Party by a third party without restriction on its disclosure or use; or

 

  (d)

is required to be disclosed by law, provided, however, that Receiving Party shall provide prompt notice of such court order or requirement to Disclosing Party to enable Disclosing Party to seek a protective order or otherwise prevent or restrict such disclosure.

23. Facility Use Agreement and Master Lease.

23.1 Subordination. This Agreement is subject and subordinate to the Lease, to all ground and underlying leases, and to all mortgages and deeds of trust which may now or hereafter affect the Facility and/or Building, and to any and all renewals, modifications, consolidations, replacements and extensions thereof.

 

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23.2 Adherence to the Terms of the Master Lease. User agrees to be bound by and fully comply with all obligations and responsibilities of ISB under the Lease to the extent the same relate to the use of the Space under this Agreement. To the extent of any conflict or discrepancy between this Agreement and the Lease, as between ISB and User, this Agreement shall control. User shall neither do, nor permit anything to be done, that could cause a default under the Lease or that could cause the Lease to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in Landlord under the Lease. Notwithstanding anything herein seemingly to the contrary, ISB shall remain liable for all of its obligations to Landlord under the Lease.

24. General

24.1 Assignment. The User shall not assign or transfer its rights or obligations under this Agreement without the prior written consent of ISB. 

24.2 Severability. Any provision of this Agreement which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision of this Agreement.

24.3 Governing Law; Disputes. This Agreement shall be governed by and construed in accordance with the law of the State of Washington without application of any choice of law. If a claim, controversy, complaint, or dispute (a “Dispute”) arises out of or relates to this Agreement, or breach hereof, the Parties will use good faith efforts to resolve the Dispute by informal discussion before entering into formal legal proceedings.

24.4 Attorneys’ Fees and Costs. In the event legal proceedings are initiated to enforce any provision of this Agreement, the substantially prevailing party shall be entitled to recover, as an element of its cost of suit and not as damages, reasonable attorney fees and costs to be fixed by the court.

24.5 Waiver. No waiver, amendment, or modification of any provision of this Agreement will be effective unless in writing and signed by the Party against whom such waiver, amendment or modification is sought to be enforced. No waiver by either Party of any right under this Agreement shall be construed as a waiver of any other right. No failure or delay by either Party in exercising any right, power or remedy under this Agreement will operate as a waiver of any such right, power or remedy or of any other right, power or remedy under this Agreement.

24.6 Amendments. No modification, amendment, waiver or release of any provision of this Agreement, or of any right, obligation, claim or cause of action arising from this Agreement, shall be valid or binding for any purpose unless in writing and duly executed by authorized representatives of the Parties.

 

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24.7 Entire Agreement. This Agreement, including Exhibits to this Agreement and Agreements incorporated by reference in this Agreement, constitutes the full and entire understanding and agreement between the Parties with respect to the subject matter of this Agreement, and supersedes all prior understandings, negotiations and prior and contemporaneous agreements between the Parties with respect to the subject matter of this Agreement.

Each of the Parties to this Agreement warrants that it has full authority and legal right to execute and deliver, and to perform its obligations under, this Agreement.

[Signature Page follows]

 

9


INSTITUTE FOR SYSTEMS BIOLOGY (ISB)     NEOLEUKIN (USER)
Signature:   /s/ Becky Johnson     Signature:   /s/ Jonathan G. Drachman
Name:   Becky Johnson     Name:   Jonathan G. Drachman
Title:    Director of Facilities and Operations     Title:    CEO
Date:    12/5/2018     Date:    12/4/2018

 

 

10


EXHIBIT A

MASTER LEASE (redacted version)

Provided as a separate document but incorporated herein by reference.

 

11


EXHIBIT B

PURPOSE

[insert brief description of nature of research here]

 

12


EXHIBIT C

DESCRIPTION OF SPACE

Office space in the Southeast corner of the 4th floor (L4) and lab space in the South end of the 3rd floor (L3) as depicted below.

L4 Office Space

 

LOGO

L3 Lab Space

 

LOGO

 

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EXHIBIT D

FINANCIAL

1. Rate/Applicable Charges:

Commencing on the Commencement Date (as defined in Section 3 (Term) of the Agreement) or a date agreed upon in writing by the Parties, and continuing through the Term, User shall pay to ISB a monthly Fee (as defined in Section 4 (Fee) of the Agreement) of Base Rent and the Overhead Charge in the amount set forth below. User shall pay the Fee due to ISB within seven (7) days of User’s receipt of an invoice, which ISB shall not submit more frequently than monthly, without any deduction or offset whatsoever, in accordance with the following schedule:

 

Period

   Base Rent per Square Foot
in the Space

Commencement – March 31, 2019

   $45.43

April 1, 2019 – December 31, 2019

   $46.79

Base Rent for any partial month at the beginning or the end of the Term shall be prorated in proportion to the number of days in such month.

2. Overhead Charge

User shall pay the full amount a monthly overhead charge (“Overhead Charge”) relating to the Space and number of Authorized Users for each month of the Term of the Agreement. Overhead Charges shall be paid in advance on or before the first day of each month in accordance with the following schedule:

 

Description

  

Overhead Charge per month

Common Area Maintenance (CAM)

  

$5.67/SF

Operating Expense

  

$11.47/SF

Office Operations

  

$245.00/month/FTE

Lab Operations

  

$272.00/month/ FTE

Tissue Culture Suite Use

  

$294.00/month/FTE

CAM (Common Area Maintenance): Costs assigned by the landlord that include maintenance of the outside of the building envelope and property tax associated with non-exempt spaces. CAM costs are assigned by the number of square feet in the Space.

Building Operating Costs (Opex): Costs associated with maintenance and operation of the facility within the building envelope. This includes but is not limited to utility expenses, HVAC/Chiller/Boiler/Compressor/Generator maintenance and repairs, elevator maintenance, building permits, property insurance, life and safety systems, janitorial services, and various other repair and maintenance costs. CAM costs are assigned by the number of square feet in the Space.

 

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Office Operations: Costs include general office supplies and copiers, kitchen/coffee services, phones and phone related services, access to ISB wireless services and email, first aid supplies, locker room and kitchen towels and anti-fatigue mats, shipping and receiving services and supplies, and procurement services. Office Operations costs are assigned per Authorized User per month based on the schedule below.

Lab Operations: Costs are associated with general support of the lab environment. This includes lab supplies and services (lab gases and dry ice, safety PPE, lab coats), hazardous materials management, lab safety and compliance services, and shared research equipment repair and maintenance (autoclaves, centrifuges, DI water, hood certification). Lab Operations costs are assigned per Authorized User in the lab per month based on the schedule below.

Tissue Culture Suite Use: Costs are associated with equipment and general support of the tissue culture suites. Tissue Culture Suite Use is based on the number of Authorized Users with access to the Tissue Culture Suites per month.

User will be charged for each Authorized User accordingly:

 

   

On-site eight (8) hours or less per month = No Lab Operations or Business Operations charge

 

   

On-site eight (8) to twenty (20) hours per month = .5 Lab Operations and/or Business Operations employee charge

 

   

On-site twenty-one (21) or more hours per month = 1 Lab Operations and/or Business Operations employee charge

User may request additional services that are not included in the Overhead Charge above and ISB may perform additional services at ISB’s discretion at the then annual rate hourly rates for IT Services, Facilities Services, Safety Services, Procurement, and Reception/Security Services.

3. Parking

ISB shall provide and User may purchase from ISB, from time to time during the Term, up to ten (10) parking passes or access cards which shall entitle User’s Authorized Employees to park their vehicles in the Building’s underground parking garage on a non-preferential nonexclusive basis throughout the Term. User must provide ISB with sixty (60) days’ written notice for each parking pass. ISB will designate specific parking spaces for User’s use and User shall ensure that the holders of its parking passes park only in the designated spaces. User shall pay ISB the prevailing monthly rate charged by the Landlord under the Master Lease for each parking pass plus applicable taxes, which rate shall be set annually on April 1. On the Commencement Date the parking rate shall be $255.27 per space per month. User’s parking charges shall be payable on a monthly basis in advance or concurrently with the Rent. If additional parking space is requested, ISB will reassess availability and ISB may, at its sole discretion, make additional parking spaces available to User on the same basis and rate identified in this Section 3 of this Exhibit D Parking).

 

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ISB will not be responsible for, and User shall indemnify and hold ISB harmless from or against any damages arising from theft or damage to vehicles, or contents of vehicles, parked in the garage.

4. Key Cards

ISB shall provide User with a key card for each of Authorized Employees. User shall be responsible for all access cards or keys to the Space and shall return them to ISB on expiration or earlier termination of this Agreement. User shall pay for any additional or replacement cards or keys and any reprogramming necessary because of any lost or stolen access card or key. ISB may require each person who is given such access to sign a confidentiality and nondisclosure agreement and User shall be responsible for any violation thereof by its Authorized Employees.

In no event shall User or any person holding one of User’s access cards enter any part of the Building for which his or her card does not permit access unless such person has registered with ISB and is accompanied by an ISB representative. If the holder of one of User’s access or parking cards enters into an area of the Building for which his or her card is not programmed, ISB may cancel that person’s access card without notice. All access to the Building is subject to ISB’s access control and security procedures as these procedures may be adopted and revised from time to time.

It is User’s responsibility to obtain authorization from ISB for their additional personnel to obtain access to the Space prior to providing them access to the site pursuant to Section 5 (Security Deposit) of this Agreement.

It is User’s responsibility to obtain authorization from ISB for their additional personnel to obtain access to the Space prior to providing them access to the site pursuant to Section 5 of this Agreement.

5. Conference Rooms

Company may rent conference room space for $40.00 per hour when space is available. Reservations must be made in advance of use in ISB’s FRS system. Billing will occur with the next payment of the monthly Fee.

ISB may change the conference room fee at any time by written notice to Company and such change shall be effective as of the next payment of the monthly Fee due thereafter.

ISB has a preferential right to use of the conference room space and ISB’s need for such space takes precedence over Company’s.

6. IT Services

User may not connect to or use any of ISB’s technology infrastructure in the Building including communications systems without ISB’s specific written consent nor shall ISB be required to provide any IT services to User except in its discretion and at User’s cost.

 

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Any rights granted to User hereafter to use ISB’s technology infrastructure or to receive IT services from ISB shall be subject to the following terms and conditions:

 

  6.1

User shall not jeopardize the proper technical operation of ISB’s network or infrastructure as determined by ISB;

 

  6.2

User shall not use the IT services provided to User for unlawful purposes; User is fully responsible for any data or traffic originating from User’s IP connections; and User will assist ISB or its designee in investigating all uses or abuses. Abuses include but are not limited to

 

  6.2.1

ransmission of unsolicited bulk email (“SPAM”),

 

  6.2.2

Transmission from computers involved in DOS and dDOS attacks, IRC bots;,

 

  6.2.3

“Hacking” activity, and

 

  6.2.4

Any other activity which is generally defined by the global internet community as malicious; and

 

  6.3

User shall not jeopardize either ISB’s or any upstream network provider’s reputation or the ability to conduct business in the manner to which it is accustomed.

 

  6.4

User may not connect to or use any of ISB’s technology infrastructure in the Building including communications systems without ISB’s specific written consent nor shall ISB be required to provide any IT services to User except in its discretion and at User’s cost.

 

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EX-10.3

Exhibit 10.3

AMENDMENT No. 1

to the

FACILITY USE AGREEMENT

This Amendment No. 1 to the Facility Use Agreement (the “Agreement”) (hereinafter referred to as the “Amendment”) is made as of April 17, 2019 (the “Effective Date”), by and between the INSTITUTE FOR SYSTEMS BIOLOGY (“ISB”), a Washington non-profit corporation, and NEOLEUKIN (“User”), a Delaware Corporation. ISB and the Company are collectively referred to as the “Parties” and individually as a “Party”.

RECITALS

WHEREAS, The User and ISB are parties to a certain Facility Use Agreement (the “Agreement”) dated November December 4, 2018;

WHEREAS, The User and ISB desire to amend the Agreement to adjust the rentable square feet identified in the Agreement, as more particularly described in this Amendment No. 1. All other provisions of the Agreement remain in full force and effect; and

NOW, THEREFORE, the Parties hereby agree to amend the Agreement as follows:

 

  1.

In paragraph 1.a., line one, delete two thousand thirty (2,030) in its entirety and insert three thousand five hundred (3,500);

 

  2.

Delete Exhibit C “Description of Space” in its entirety and replace with Exhibit C included in this Amendment.

 

INSTITUTE FOR SYSTEMS BIOLOGY

 

By: /s/ Becky Johnson

 

Title: Director of Facilities & Operations

 

Date: April 17, 2019

   

NEOLEUKIN

 

By: /s/ Jonathan G. Drachman

 

Title: CEO, Neoleukin Therapeutics

 

Date: April 17, 2019


EXHIBIT C

DESCRIPTION OF SPACE

Office space in the Southeast corner of the 4th floor (L4) and lab space in the South end of the 3rd floor (L3) as depicted below.

L4 Office Space

 

LOGO

L3 Office Space

Note: Partial end cap, -80 strorage and space in room 389 are not depicted in this map.

 

LOGO

EX-99.1

Exhibit 99.1

DESCRIPTION OF NEOLEUKIN’S BUSINESS

Overview

Following the closing of our acquisition of Neoleukin Therapeutics, Inc. in accordance with the terms of the Agreement and Plan of Merger dated August 5, 2019 by and among us, Neoleukin Therapeutics, Inc. and Apollo Sub, Inc., or the Merger, we are a biotechnology company that uses sophisticated computational algorithms to design de novo protein therapeutics to address significant unmet medical needs in oncology, inflammation, and autoimmunity. We use our proprietary platform to design and engineer de novo proteins that demonstrate specific biological properties that provide potentially superior therapeutic benefit over existing native proteins. Existing protein engineering treatments generally involve the modification of native proteins. With our proprietary platform we design completely new protein structures from the ground up, capable of demonstrating specifically desired biological properties. Through this method we are able to produce proteins that, while resembling native proteins, can be designed around the structural issues of native proteins while delivering therapeutic benefit. We are initially focused on key cytokine mimetics, which we refer to as NeoleukinsTM. These de novo proteins have the capacity to be agonists, antagonists, or result in conditional activation of specific cytokine receptors such that they can regulate inflammation or the immune response to cancer. NeoleukinsTM can be modified to adjust affinity, thermodynamic stability, resistance to biochemical modification, pharmacokinetic characteristics, and targeting to tumor or inflamed tissues.

Our lead product candidate, NL-201, is a de novo protein designed to mimic the therapeutic activity of the cytokines interleukin-2, or IL-2, and interleukin-15, or IL-15, for the treatment of various types of cancer, including renal cell carcinoma, or RCC, and melanoma, while limiting the toxicity caused by the preferential binding of native IL-2 and IL-15 to non-target cells. In preclinical studies, a closely-related precursor to NL-201 demonstrated higher levels of activity in multiple murine solid tumor syngeneic models as compared to recombinant, native IL-2.

As of June 30, 2019, after giving effect to the Merger, including Merger related expenses, we expect to have approximately $65 million in cash and cash equivalents. Based on our current operating plan, we believe that our available cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through 2021. However, our future capital requirements and the period for which we expect our existing resources to support our operations, fund expansion, develop new or enhanced products, or otherwise respond to competitive pressures, may vary significantly from our expectation and we may need to seek additional funds sooner than planned.

De Novo Protein Design Technology

Our proprietary Neoleukin Platform is a set of advanced computational algorithms enabling the design of functional de novo proteins. A protein is generally defined as one or more chains of covalently-linked amino acids – totaling at least 50 amino acids – that assemble into a 3-dimensional structure. Human cells contain tens of thousands of different proteins; however, this is still only a small subset of all possible amino acid sequences that can be assembled to form a protein. While protein engineering to date has largely been conducted through the modification of native proteins, with our platform we are able to explore the full sequence space, guided by the physical principles that underlie protein folding and design functional proteins from the ground up. Our de novo proteins fit the above definition of a protein, but, unlike native proteins, are designed using our proprietary computational algorithms. One of our co-founders, Daniel Silva, Ph.D., developed the Neoleukin Platform and used it to design the first NeoleukinsTM while a researcher at the University of Washington’s Institute for Protein Design, a pioneering lab in de novo protein design led by David Baker, Ph.D. Successful de novo protein design is a cutting edge process that requires both the advanced computational tools of our proprietary platform and deep insight into how a sequence of amino acids will fold into a stable 3-dimensional protein.


To design a NeoleukinTM using the Neoleukin Platform, we begin with an accurate model of the biological target. This is typically a high-resolution crystal structure but may instead be a computationally-modeled structure. Then, critical points of contact between molecular interfaces are identified so that essential interactions can be maintained or strengthened, and undesirable interactions can be avoided. Next, we use a computational algorithm to build idealized 3-dimensional topologies. Finally, we use a separate computational algorithm to select amino acids for each position within the idealized 3-dimensional topologies that maximizes interactions at the desired interface and the thermodynamic stability of the resulting protein. The resulting amino acid sequences are then expressed in bacteria, tested in the laboratory, and further modified to optimize the final sequence. The resulting protein is unlike anything that exists in nature, and can be fine-tuned to improve on the desired biological activity.

While we are currently focused on the design of de novo cytokine mimetics, we believe this approach could be used broadly to widen the therapeutic window and improve drug-like characteristics of therapeutic proteins, including chemical stability, pharmacokinetic properties, or novel routes of administration. Furthermore, we believe that the Neoleukin Platform can also be used to generate de novo proteins that inhibit activation of specific receptors, a property that could be valuable for treatment of inflammatory or autoimmune conditions. Computational design of therapeutic proteins is in a very early stage. The potential is vast, and we are focused on continuing to improve the technology and realizing the tremendous potential of de novo protein design to improve human health.

Our Strategy

Our business model is focused on three primary goals:

 

   

Develop proprietary de novo protein immunotherapies for the treatment of cancer and inflammatory conditions;

 

   

Become the leader in de novo protein design for therapeutic applications by strengthening our intellectual property and know-how; and

 

   

Collaborate with leading biotechnology and pharmaceutical partners to expand the scope of our platform.

The key elements of our strategy are:

 

   

Rapidly advance NL-201 to clinical proof-of-concept. NL-201 is our lead product candidate and we believe will be the first entirely de novo therapeutic protein to be evaluated in a clinical setting. NL-201 is currently in preclinical development and manufacturing. We expect to conduct Investigational New Drug, or IND, enabling toxicology studies and anticipate submitting an IND by the end of 2020.

 

   

Generate preclinical data for additional product candidates. Our research activities are currently focused on the development of novel de novo interleukin receptor agonists and antagonists to expand our oncology pipeline. We are currently optimizing and evaluating several early research projects as potential clinical candidates. Beyond oncology targets, we also intend to develop de novo protein therapeutics to address significant unmet medical needs in inflammation and autoimmunity indications.

 

   

Expand the capabilities of the Neoleukin Platform. De novo protein design is in the earliest stages of development and has the potential to generate therapeutics to treat a wide range of human diseases. We believe that there will be a rapid evolution in the enabling technology, such that it will be feasible to design more complex and dynamic proteins in the future. We intend to devote a significant amount of resources to building our computational talent and infrastructure in order to position us as a leader in the design and development of de novo protein therapeutics.


   

Build partnerships to leverage the Neoleukin Platform. There is substantial interest in the field of de novo protein design for therapeutic applications. We intend to seek potential partners that can provide additional resources and expertise to further advance our pipeline and broaden our potential targets. We may also strategically pursue one or more collaborations to design, outlicense, or co-develop de novo proteins.

NL-201

Our lead program, NL-201, is an IL-2/IL-15 immunotherapy designed to eliminate binding to the alpha subunit of the IL-2 receptor (also known as CD25) while maintaining high-affinity binding to the beta and gamma subunits. In multiple preclinical animal models, a precursor to NL-201 demonstrated substantial anti-tumor activity with effectively no binding to CD25, as compared to native IL-2and to competitor engineered IL-2 variants in clinical development. Following these preclinical studies, we further refined our precursor to extend its half-life, resulting in our NL-201 product candidate. NL-201 is intended to be used as either a single-agent or in combination with complementary therapeutic modalities, including checkpoint inhibitors. In addition, NL-201 holds promise in combination with allogenic cell therapy to expand and maintain populations of transplanted CAR-T and natural killer, or NK, cells. NL-201 is positioned as a potential best-in-class IL-2/IL-15 immunotherapy.

IL-2 has a demonstrated mechanism of action for treating tumors, however, it has encountered issues as a therapeutic due to the biased activation of cells that contain CD25. CD25 induces conformational changes in IL-2 that enable high-affinity binding to the beta and gamma subunits of the IL-2 receptor. Preferential binding to endothelial cells expressing CD25 is believed to exacerbate vascular leak syndrome, while preferential activation of CD25-expressing regulatory T cells can inhibit anti-cancer immune responses. Due to IL-2’s potential for high toxicity and reduced efficacy over time, its use as a therapeutic has been limited.

While the problem posed by IL-2 is well understood, it has been difficult to modify native IL-2 to retain potent activation of IL-2 receptor signaling while eliminating binding to CD25. Instead of modifying native IL-2, we used the Neoleukin Platform to design a new sequence with the proper intermolecular interactions to efficiently bind the beta and gamma subunits while eliminating CD25 binding. As opposed to traditional recombinant human, or humanized, protein therapeutics, de novo proteins are entirely novel sequences with no homology to native proteins. As a result, there is a potential that patients may mount an anti-drug immune response against NL-201. However, we believe that this risk is mitigated by several factors, including the stability of the protein, resistance to proteolytic degradation, and the lack of an observed immune response in immunocompetent mice administered daily for 14 days with a closely-related precursor to NL-201.

Immunotherapy Market Overview

Over the past few decades, the potential of the immune system to control and/or eliminate cancer has been better understand and appreciated. Immunotherapies, including allogenic stem cell transplantation, checkpoint inhibitors, and cellular therapies have led to impressive improvements in patient outcomes. Immunotherapy is the fastest growing segment of the oncology market, with projected compound annual revenue growth rate of at least 14% through 2024. Immune checkpoint inhibitors are the most widely used class of cancer immunotherapy. Checkpoint inhibitors promote an anti-cancer immune response by blocking inhibitory signals between cancer cells and the immune microenvironment (i.e. ‘taking the brakes off’ the immune system). Patients with metastatic cancers, who previously had uniformly poor prognoses, now have the opportunity to achieve durable responses with checkpoint inhibitors. The initial drug in this class, ipilimumab, was approved in 2011. Since that time, at least five additional checkpoint inhibitors have been approved for over 10 tumor types. In addition to checkpoint inhibitors, other notable cancer immunotherapies expected to improve cancer outcomes over the next decade include bi-specific T-cell engagers, such as blinatumomab, and more recent CAR-T therapies, such as tisagenlecleucel and axicabtagene ciloleucel.


Limitations of Current Treatments

Despite achieving success in a subset of patients, checkpoint inhibitors often fail to control tumor growth. In addition, some patients do not tolerate checkpoint inhibitors. While checkpoint inhibitors work to block the mechanisms by which malignant cells evade immunological surveillance by anti-cancer T cells, they are less effective in patients who lack a favorable tumor microenvironment, expression of the inhibitory ligand, or sufficient tumor-specific antigens. For these patients, novel approaches to immunotherapy are needed that complement and/or enhance checkpoint inhibition. If checkpoint inhibition “takes the brakes off” the immune system, what is needed is a new class of agents that activate immune cells in the tumor microenvironment (i.e. “hit the gas”).

Stimulation of the IL-2 and IL-15 pathways is an attractive approach to generate an anti-cancer immune response, since it promotes the proliferation and activation of both CD8+ effector T cells and NK cells. Recombinant human IL-2, or aldesleukin, is a proven therapy and is approved for the treatment of adults with metastatic RCC or metastatic melanoma. However, significant toxicity has resulted in multiple black box warnings in the label, including a requirement that administration occur in the hospital under supervision of an experienced physician. As a result of these toxicities, aldesleukin is not frequently used in the clinic. In addition, aldesleukin has a relatively modest rate of durable remissions, potentially because it preferentially stimulates the proliferation of regulatory T cells, which can inhibit the antitumor response. There is a clear clinical need for an agent that stimulates an immunological response to cancer with greater selectivity and less toxicity than aldesleukin.

Initial Clinical Development Plan

We expect that NL-201 will be administered as monotherapy by intravenous injection and, during dose escalation, will be tested in patients with a variety of relapsed and refractory solid tumors. A dose and schedule will be determined by evaluation of safety, tolerability, pharmacokinetics, and pharmacodynamic measures to achieve the optimal regimen for outpatient administration. Multiple schedules may be tested during phase 1. Subsequently, we expect that expansion cohorts will be enrolled using tumor-specific inclusion/exclusion criteria to evaluate both safety and antitumor activity in uniform patient populations. If the clinical data are considered promising, additional trials will be initiated, which may include combination regimens and trials with registrational intent.

Research Programs

Beyond our initial focus on NL-201, our research team is working on further applying de novo protein design principles to develop therapeutics to address significant unmet medical needs in immuno-oncology, inflammation, and autoimmunity. Our research is powered by the Neoleukin Platform, our computational framework for developing highly selective, hyper-stable de novo immunomodulatory proteins. Beyond NL-201, we are developing targeted and conditionally-active IL-2/IL-15 mimetics, as well as cytokine mimetic programs for other oncology targets. Our research team is also actively applying the Neoleukin Platform to generate de novo receptor agonist and antagonist candidates against multiple targets of interest for inflammatory and autoimmune indications. As we validate additional candidates, they will enter our preclinical pipeline.

Intellectual Property

Our intellectual property strategy is centered around robust protection of our pipeline molecules and enabling technologies. While employees at the University of Washington, our scientific co-founders authored three provisional patents with claims covering the composition of matter of key molecule families as well as the computational algorithms that form the basis of the Neoleukin Platform. We have secured an exclusive license from the University of Washington to develop and commercialize these patents.


Also, through our research efforts, we anticipate generating intellectual property covering novel compounds and significant improvements on existing molecules. The patents that result from this new research will remain Neoleukin’s exclusive property. In addition, our research team is extending and enhancing our computational technology and capabilities. We intend to protect improvements to the Neoleukin Platform through a combination of new patent filings as well as the maintenance of trade secrets.

Competition

The biotechnology and pharmaceutical industries are characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property. While we believe that our Neoleukin Platform and our knowledge, experience and scientific resources provide us with competitive advantages going forward, we face competition from major pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, among others.

The development of next-generation IL-2 or IL-15 agonists for cancer immunotherapy is an area of intense interest within the biotechnology industry. We are aware of several IL-2 or IL-15 agonists in various stages of clinical development. Noted in the table below are engineered variants of IL-2 that each attempt to improve on aldesleukin’s narrow therapeutic window by inhibiting IL-2’s natural high-affinity interaction with CD25 using traditional protein engineering approaches including steric inhibition and mutagenesis. While these strategies partially mitigate IL-2’s interaction with CD25, to our knowledge, none have successfully eliminated CD25-binding.

 

Developer

  

Name

  

Stage

NektarTherapeutics

  

NKTR-214

  

Phase II

Altor BioScience

  

ALT-803

  

Phase II

Alkermes

  

ALKS 4230

  

Phase I

Novartis

  

NIZ985

  

Phase I

Synthorx

  

THOR-707

  

Phase I

Medicenna

  

MDNA109

  

Preclinical

Pivotal Biosciences

  

PB101

  

Preclinical

EX-99.2

Exhibit 99.2

RISK FACTORS OF NEOLEUKIN’S BUSINESS

You should carefully consider the following risk factors, in addition to other information described in the Quarterly Report on Form 10-Q of Aquinox Pharmaceuticals, Inc., or Aquinox, for the quarter ended June 30, 2019, and in other filings that Aquinox makes with the Securities and Exchange Commission, or SEC, in evaluating Aquinox and its business.

Background

On August 9, 2019, Aquinox announced the closing of its acquisition of Neoleukin Therapeutics, Inc., or Neoleukin Therapeutics, in accordance with the terms of the Agreement and Plan of Merger dated August 5, 2019 by and among Aquinox, Neoleukin Therapeutics, and Apollo Sub, Inc., or the Merger Agreement, pursuant to which Apollo Sub, Inc. merged with and into Neoleukin Therapeutics, with Neoleukin Therapeutics surviving the merger as a wholly-owned subsidiary of Aquinox, referred to herein as the Merger. Upon closing of the Merger, Aquinox issued to the former holders of Neoleukin Therapeutics capital stock of (i) shares of Aquinox common stock representing approximately 19.5% of Aquinox’s issued and outstanding shares of common stock (calculated prior to the issuance of those new shares of common stock) and (ii) shares of a newly created Aquinox non-voting convertible preferred stock that, following approval of Aquinox’s stockholders, will be convertible. into a number of additional shares of Aquinox common stock such that following such conversion, the former holders of Neoleukin capital stock will, together with the shares of common stock issued at the closing of the Merger, hold in aggregate approximately 38.58% of the fully diluted outstanding shares of Aquinox. Following the closing of the Merger, our business includes the business conducted by Neoleukin Therapeutics immediately prior to the Merger, and Neoleukin Therapeutics’ agreements and arrangements effectively became agreements and arrangements of Aquinox. Unless the context otherwise requires, all references in the following risk factors to “Aquinox,” “we,” “our,” and “us” refer to Aquinox Pharmaceuticals, Inc. and its wholly owned subsidiaries, including Neoleukin Therapeutics, after the effective time of the Merger, and all references to Neoleukin Therapeutics refer to Neoleukin Therapeutics, Inc. prior to the effective time of the Merger.

Risks Related to Our Financial Position and Capital Needs

We will require substantial additional capital to finance our operations which may not be available to us on acceptable terms, or at all. If we fail to obtain necessary financing, we may be unable to complete the development and potential commercialization of our product candidates.

The development of biopharmaceutical product candidates is capital-intensive. If our product candidates enter and advance through preclinical studies and clinical trials, we will need substantial additional funds to expand or create our development, regulatory, manufacturing, marketing, and sales capabilities. We have used substantial funds to develop our technology and product candidates and will require significant funds to conduct further research and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates and to manufacture and market products, if any, which are approved for commercial sale. In addition, upon the completion of this offering, we expect to incur additional costs associated with operating as a public company.

Preclinical studies and clinical trials for our product candidates will require substantial funds to complete. As of June 30, 2019, after giving effect to the Merger, we had approximately $65 million in cash and cash equivalents. We expect to incur substantial expenditures in the foreseeable future as we seek to advance NL-201 and any future product candidates through preclinical and clinical development, the regulatory approval process and, if approved, commercial launch activities. Based on our current operating plan, we believe that our available cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through 2021. However, our future capital requirements and the period for which we expect our existing resources to support our operations, fund expansion, develop new or enhanced products, or otherwise respond to competitive pressures, may vary significantly from what we expect and we may need to seek additional funds sooner than planned. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any marketing and commercialization activities for approved products. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

 

   

the timing, cost and progress of preclinical and clinical development activities;

 

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the number and scope of preclinical and clinical programs we decide to pursue;

 

   

the progress of the development efforts of parties with whom we have entered or may in the future enter into collaborations and/or research and development agreements;

 

   

the timing and amount of milestone and other payments we may receive or make under our collaboration agreements;

 

   

our ability to maintain our current licenses and to establish new collaboration arrangements;

 

   

the costs involved in prosecuting and enforcing patent and other intellectual property claims;

 

   

the costs of manufacturing our product candidates by third parties;

 

   

the cost of regulatory submissions and timing of regulatory approvals;

 

   

the cost of commercialization activities if our product candidates or any future product candidates are approved for sale, including marketing, sales and distribution costs; and

 

   

our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates.

If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce or terminate our research and development programs and preclinical studies or clinical trials, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuring activities. We do not expect to realize revenue from sales of commercial products or royalties from licensed products in the foreseeable future, if at all, and, in no event, before our product candidates are clinically tested, approved for commercialization and successfully marketed.

We will be required to seek additional funding in the future and currently intend to do so through additional collaborations and/or licensing agreements, public or private equity offerings or debt financings, credit or loan facilities, or a combination of one or more of these funding sources. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Our future debt financings, if available, are likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets. If we raise additional funds through licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. We also could be required to seek collaborators for product candidates at an earlier stage than otherwise would be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or commercialize ourselves. Failure to obtain capital when needed on acceptable terms may force us to delay, limit or terminate our product development and commercialization of our current or future product candidates, which could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

 

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Risks Related to Discovery, Development and Commercialization

Our product candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability. If we are unable to complete development of, or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

We are in the early stages of our development efforts. We have no products on the market and all of our product candidates, including NL-201, are still in the preclinical or drug discovery stages, and we may not ever obtain regulatory approval for any of our product candidates. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the U.S. Food and Drug Administration, or the FDA. Before obtaining regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates. We currently expect to submit an Investigational New Drug application, or IND, with respect to NL-201 by the end of 2020. However, it is possible that the FDA may deny our IND or require additional testing before allowing clinical testing in humans. Alternatively, we may obtain data while preparing for an IND that causes us to delay or even abandon clinical testing of NL-201. Additionally, we have a portfolio of targets and programs that are in earlier stages of discovery and preclinical development and may never advance to clinical-stage development. If we do not receive regulatory approvals for clinical testing and commercialization of our product candidates, we may not be able to continue our operations.

We may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate if we experience any issues that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including:

 

   

preclinical study results may show the product candidate to be less effective than desired or to have harmful or problematic side effects;

 

   

negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;

 

   

product-related side effects experienced by patients in our clinical trials or by individuals using drugs or therapeutic biologicals similar to our product candidates;

 

   

our third-party manufacturers’ inability to successfully manufacture our products or to meet regulatory specifications;

 

   

inability of any third-party contract manufacturer to scale up manufacturing of our product candidates and those of our collaborators to supply the needs of clinical trials or commercial sales;

 

   

delays in submitting INDs or comparable foreign applications or delays or failures in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;

 

   

conditions imposed by the FDA, the European Medicines Agency, or EMA, or other applicable regulatory authorities regarding the scope or design of our clinical trials;

 

   

delays in enrolling patients in our clinical trials;

 

   

high drop-out rates of our clinical trial patients;

 

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inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;

 

   

inability to obtain alternative sources of supply for which we have a single source for product candidate components or materials;

 

   

greater than anticipated costs of our clinical trials;

 

   

manufacturing costs, formulation issues, pricing or reimbursement issues or other factors that no longer make a product candidate economically feasible;

 

   

harmful side effects or inability of our product candidates to meet efficacy endpoints during clinical trials;

 

   

failure to demonstrate a benefit-risk profile acceptable to the FDA, EMA or other applicable regulatory authorities;

 

   

unfavorable inspection and review by the FDA, EMA or other applicable regulatory authorities of one or more clinical trial sites or manufacturing facilities used in the testing and manufacture of any of our product candidates;

 

   

failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;

 

   

delays and changes in regulatory requirements, policy, and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular; or

 

   

varying interpretations of our data by the FDA, EMA or other applicable regulatory authorities.

We or our future partners’ inability to complete development of, or commercialize our product candidates, or significant delays in doing so due to one or more of these factors, could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Further, cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only for advanced cancers, i.e. third-line or beyond. When cancer is detected early enough, first-line therapy, usually chemotherapy, surgery, radiation therapy, immunotherapy, hormone therapy, or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not effective. We expect our clinical trials for NL-201 will be with patients who have received one or more prior treatments. Subsequently, for those of our products that prove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of therapy. Any product candidates we develop, even if approved, may not be successfully approved for earlier lines of therapy, and, prior to any such approvals, we will likely have to conduct additional clinical trials, which are often very lengthy, expensive, and have a significant risk of failure.

 

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Our business is heavily dependent on the success of our Neoleukin Platform and of our most advanced product candidate, NL-201. Existing and future preclinical studies and clinical trials of these product candidates may not be successful, and if we are unable to commercialize these product candidates or experience significant delays in doing so, our business will be materially harmed.

Our business is heavily dependent on our ability to obtain regulatory approval of and then successfully launch and commercialize our product candidates. We have invested a significant portion of our efforts and financial resources in the development of our proprietary system of advanced computational algorithms for the design of functional de novo proteins, which we refer to as our Neoleukin Platform, with an initial focus on key cytokine mimetics, which we refer to as NeoleukinsTM. Our lead product candidate, NL-201, is a NeoleukinTM derived from our Neoleukin Platform. However, NL-201 and our other product candidates are still in the preclinical or earlier stage. Our ability to generate commercial product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our lead product candidates. Our product candidates may not be successful in clinical trials or receive regulatory approval. Even if they are successful in clinical trials, regulatory authorities may not complete their review in a timely manner, or additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials, and the review process. Regulatory authorities may approve a product candidate for targets, disease indications or patient populations that are not as broad as we intended or desired, require more limited indications than requested, or require labeling that includes distribution restrictions or safety warnings, contraindications or precautions with respect to conditions of use. Regulatory authorities may also require Risk Evaluation and Mitigation Strategies, or REMS, or the performance of costly post-marketing clinical trials. Even if we successfully obtain regulatory approvals to market our product candidates, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

We plan to seek regulatory approval to commercialize our product candidates both in the United States and in selected foreign countries. In order to market and sell our product candidates in the European Union and many other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. The approval procedure varies among countries and can involve additional testing. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may be required to expend significant resources to obtain regulatory approval, which may not be on a timely basis or successful at all, and to comply with ongoing regulations in these jurisdictions.

The success of our Neoleukin Platform, NL-201, and our other product candidates will depend on many factors, including the following:

 

   

successful completion of necessary preclinical studies to enable the initiation of clinical trials;

 

   

successful enrollment of patients in, and the completion of, our clinical trials;

 

   

obtaining adequate financing to perform the expensive clinical development programs anticipated for approval;

 

   

receiving required regulatory authorizations for the development and approvals for the commercialization of our product candidates;

 

   

establishing and maintaining arrangements with third-party manufacturers;

 

   

obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our product candidates and their components;

 

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enforcing and defending our intellectual property rights and claims;

 

   

achieving desirable therapeutic properties for our product candidates’ intended indications;

 

   

launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with third parties;

 

   

acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;

 

   

effectively competing with other therapies, including those that are currently in development; and

 

   

maintaining an acceptable safety profile of our product candidates through clinical trials and following regulatory approval.

If we do not achieve any one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

Our future clinical trials or those of any future collaborators may reveal significant adverse events not seen in our preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

If significant adverse events or other side effects are observed in any of our clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, we may be required to pause, delay, or abandon the trials or our development efforts of one or more product candidates altogether, we may be required to have more restrictive labeling, or we may experience the delay or denial of regulatory approval by the FDA, EMA or other applicable regulatory authorities. We, the FDA, EMA or other applicable regulatory authorities, or an IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies. We designed NL-201 to mimic the therapeutic activity of the cytokine interleukin-2, or IL-2, and interleukin-15, or IL-15, while limiting the toxicity caused by the preferential binding of native IL-2 and native IL-15 to non-target cells. However, it is possible NL-201 will demonstrate significant adverse events similar to, or in addition to, those associated with IL-2 and IL-15, such as vascular leak syndrome, hypotension, impaired kidney and liver function, and mental status changes. Therapies involving cytokines have been known to cause side effects such neurotoxicity and cytokine release syndrome.

Further, de novo proteins are a new class of therapeutics that have not been previously tested in humans. De novo proteins can be substantially different from all known proteins and as a result, it is unknown to what extent, if any, these de novo proteins will produce immunologic reactions in patients. Immunologic reactions could substantially limit the effectiveness of the treatment, the duration of treatment, or represent safety risks.

Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a REMS to ensure that the benefits of the product outweigh its risks, which may include, among other things, a Medication Guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners. Furthermore, if we or others later identify undesirable side effects caused by any of our products, several potentially significant negative consequences could result, including:

 

   

regulatory authorities may suspend or withdraw approvals of such product;

 

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regulatory authorities may require additional warnings on the label of such product;

 

   

we may be required to change the way such a product is administered or conduct additional clinical trials;

 

   

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

 

   

our reputation may suffer.

Any of these developments could materially harm our business, financial condition and prospects.

If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.

From time to time, we estimate the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones are and will be based on numerous assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. If we do not meet these milestones as publicly announced, or at all, the commercialization of our products may be delayed or never achieved and, as a result, our stock price may decline.

Our approach to the discovery and development of our therapeutic treatments is based on novel de novo protein design technology that are unproven and may not result in marketable products.

The success of our business depends primarily upon our ability to discover, develop, and commercialize a pipeline of product candidates using our Neoleukin Platform. Unlike traditional protein-based therapeutics that modify native proteins, our Neoleukin Platform designs new proteins from the ground up. Our platform uses advanced computational algorithms to design functional de novo proteins that are hyper-stable, modifiable, and are designed to optimize desired intermolecular interactions and eliminate undesirable interactions. While we believe this approach will enable us to develop product candidates that may offer unique therapeutic benefits, the scientific basis of our efforts to develop product candidates using our Neoleukin Platform is ongoing and may not result in viable product candidates.

While we have had favorable preclinical study results related to precursors to NL-201, we have not yet filed an IND related to NL-201 or any other product candidate from our Neoleukin Platform, and have not succeeded and may not succeed in demonstrating efficacy and safety for any product candidates in clinical trials or in obtaining marketing approval thereafter. Our approach may be unsuccessful in moving NL-201 from preclinical studies into clinical development, discovering additional product candidates, and any product candidates that we are currently developing may be shown to have harmful side effects or may have other characteristics that may necessitate additional clinical testing or make the product candidates unmarketable or unlikely to receive marketing approval. If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

To date, we have not tested any of our product candidates in any clinical trials. We may ultimately discover that our Neoleukin Platform and any product candidates resulting therefrom do not possess certain properties required for therapeutic effectiveness. Our product candidates may also be unable to remain stable in the human body for the period of time required for the drug to reach the target tissue, or they may trigger immune responses that inhibit the activity of the product candidate or that cause adverse side effects in humans. We may spend substantial funds attempting to mitigate these properties and may never succeed in doing so. In addition, product candidates based on our Neoleukin Platform may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. Our Neoleukin Platform and any product candidates resulting therefrom may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways.

 

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The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied product candidates. Because the FDA has no prior experience with de novo proteins as therapeutics, we anticipate that this may increase the complexity, uncertainty and length of the regulatory approval process for our product candidates. We or any future partners may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval. If the products resulting from our Neoleukin Platform and research programs prove to be ineffective, unsafe or commercially unviable, our Neoleukin Platform and pipeline would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Preclinical and clinical development involve a lengthy and expensive process, with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidates or any future product candidates.

All of our product candidates are in preclinical or earlier development and their risk of failure is high. It is impossible to predict when or if any of our product candidates will receive regulatory approval. To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and lengthy, complex, and expensive clinical trials that our product candidates are safe and effective in humans. Clinical testing can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing. Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or to unfavorable safety profiles, notwithstanding promising results in earlier trials. There is typically a high rate of failure of product candidates proceeding through clinical trials. Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our future clinical trials will ultimately be successful or support clinical development of our current or any of our future product candidates.

We intend to advance NL-201, our lead development candidate for our Neoleukin Platform, toward IND submissions by the end of 2020. Commencement of our future clinical trials is subject to finalizing the trial design and submitting an IND or similar submission to the FDA, EMA, or comparable foreign regulatory authorities. Even after we submit our IND or comparable submissions in other jurisdictions, the FDA, EMA, or comparable foreign regulatory authorities could disagree that we have satisfied their requirements to commence our clinical trials or disagree with our study design, which may require us to complete additional preclinical studies or amend our protocols or impose stricter conditions on the commencement of clinical trials.

We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

We or any collaborators may experience delays in initiating or completing clinical trials. We or any collaborators also may experience numerous unforeseen events during, or as a result of, any future clinical trials that we could conduct that could delay or prevent our ability to receive marketing approval or commercialize NL-201 or any future product candidates, including:

 

   

we may be unable to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to obtain regulatory authorizations to commence a clinical trial;

 

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we may experience issues in reaching a consensus with regulatory authorities on trial design;

 

   

regulators or institutional review boards, or IRBs, ethics committees, FDA, EMA or other applicable regulatory authorities, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

 

   

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

 

   

clinical trial sites deviating from trial protocol or dropping out of a trial;

 

   

clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon product development programs;

 

   

the number of subjects required for clinical trials of any product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;

 

   

our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators;

 

   

we may elect to, or regulators, IRBs, or ethics committees may require that we or our investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants in our trials are being exposed to unacceptable health risks;

 

   

the cost of clinical trials of any of our product candidates may be greater than we anticipate;

 

   

the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate to initiate or complete a given clinical trial;

 

   

our inability to obtain or manufacture sufficient quantities of our product candidates for use in clinical trials;

 

   

reports from clinical testing of other therapies may raise safety or efficacy concerns about our product candidates;

 

   

our failure to establish an appropriate safety profile for a product candidate based on clinical or preclinical data for such product candidate as well as data emerging from other molecules in the same class as our product candidate; and

 

   

the FDA, EMA, or other regulatory authorities may require us to submit additional data such as long-term toxicology studies, or impose other requirements before permitting us to initiate a clinical trial.

 

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We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA, EMA or other regulatory authorities, or if a clinical trial is recommended for suspension or termination by the Data Safety Monitoring Board, or the DSMB, for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA, EMA, or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition, and results of operations significantly.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the number and location of clinical sites we enroll, the proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the inability to obtain and maintain patient consents, the risk that enrolled participants will drop out before completion, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs or therapeutic biologics that may be approved for the indications being investigated by us. Furthermore, we expect to rely on our collaborators, CROs, and clinical trial sites to ensure the proper and timely conduct of our future clinical trials, including the patient enrollment process, and we have limited influence over their performance. Additionally, we could encounter delays if treating physicians encounter unresolved ethical issues associated with enrolling patients in future clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or might require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, slow down or halt our product candidate development and approval process and jeopardize our ability to seek and obtain the marketing approval required to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain additional financing if needed.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we or our future collaborators believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA, EMA, or other applicable regulatory authorities may disagree and may not grant marketing approval of our product candidates.

 

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In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial patients. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

Interim and preliminary or topline data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim topline or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary or topline data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between interim or preliminary or topline data and final data could significantly harm our reputation and business prospects.

We may not be successful in our efforts to use our Neoleukin Platform to expand our pipeline of product candidates and develop marketable products.

The success of our business depends in part upon our ability to discover, develop, and commercialize products based on our Neoleukin Platform, which may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. If any of these events occur, we may be forced to abandon our development efforts for a program or for multiple programs, which would materially harm our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial, and human resources.

We may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus our research and development efforts on our lead product candidate, NL-201, with initial indications in renal cell carcinoma and melanoma. As a result, we may forgo or delay pursuit of opportunities with other product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

 

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We face substantial competition, including companies developing novel treatments and technology platforms in oncology. If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

The development and commercialization of drugs is highly competitive. Our product candidates, if approved, will face significant competition and our failure to effectively compete may prevent us from achieving significant market penetration. Most of our competitors have significantly greater resources than we do and we may not be able to successfully compete. We compete with a variety of multinational biopharmaceutical companies, specialized biotechnology companies, and emerging biotechnology companies, as well as with technologies and product candidates being developed at academic institutions, governmental agencies, and other public and private research institutions. Our competitors have developed, are developing, or will develop product candidates and processes competitive with our product candidates and processes. Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments, including those based on novel technology platforms that enter the market. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we are trying, or may try, to develop product candidates. There is intense and rapidly evolving competition in the biotechnology, biopharmaceutical, and interleukin and immunoregulatory therapeutics fields. Competition from many sources exists or may arise in the future. Our competitors include larger and better funded biopharmaceutical, biotechnological, and therapeutics companies, including companies focused on oncology therapeutics, as well as numerous small companies. Moreover, we also compete with current and future therapeutics developed at universities and other research institutions. Some of these companies are well-capitalized and, in contrast to us, have significant clinical experience, and may include our future partners. In addition, these companies compete with us in recruiting scientific and managerial talent.

Our success will depend partially on our ability to develop and commercialize therapeutics that are safer and more effective than competing products. Our commercial opportunity and success will be reduced or eliminated if competing products are safer, more effective, or less expensive than the therapeutics we develop.

Our lead product candidate, NL-201, is under development for the treatment of advanced solid tumors, including melanoma and renal cell carcinoma. If approved, it would face competition from approved advanced melanoma and renal cell carcinoma treatments, including multiple checkpoint inhibitors, tyrosine kinase inhibitors, VEGF inhibitors, recombinant human IL-2, and several chemotherapy drugs or combinations. Further, we are aware of several of several IL-2 or IL-15 agonists in various stages of clinical and preclinical development. Nektar Therapeutics, Inc. and Altor BioScience Corporation have an IL-2 and IL-15 molecule, respectively, in Phase II clinical trials. Alkermes plc, Novartis International AG, and Synthorx have disclosed Phase I clinical trials using IL-2 and IL-15 molecules, and we are aware of interleukin programs in preclinical studies at Medicenna Therapeutics Corp and Pivotal BioSciences Inc. Further, several large pharmaceutical companies have disclosed preclinical investments in this field, including AstraZeneca plc, Bristol-Myers Squibb, Roche AG, and Celgene Corporation.

Many of these competitors have significantly greater financial, technical, manufacturing, marketing, sales, and supply resources or experience than we have. If we successfully obtain approval for any product candidate, we will face competition based on many different factors, including the safety and effectiveness of our products, the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage, and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive, or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

 

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We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition sooner than anticipated.

The Biologics Price Competition and Innovation Act of 2009, or the BPCIA, was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a Biologics License Application, or BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any product candidate approved in the United States as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Risks Related to Our Reliance on Third Parties

We expect to rely on third parties to conduct certain of our preclinical studies or clinical trials. If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss expected deadlines or terminate the relationship, our development program could be delayed with potentially material and adverse effects on our business, financial condition, results of operations, and prospects.

We intend to rely in the future on third-party clinical investigators, CROs, clinical data management organizations, and consultants to assist or provide the design, conduct, supervision, and monitoring of preclinical studies and clinical trials of our product candidates. Because we intend to rely on these third parties and will not have the ability to conduct all preclinical studies or clinical trials independently, we will have less control over the timing, quality, and other aspects of preclinical studies and clinical trials than we would have had we conducted them on our own. These investigators, CROs, and consultants will not be our employees, and we will have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. The third parties with which we may contract might not be diligent, careful, or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we will be responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial as well as applicable legal and regulatory requirements. The FDA generally requires preclinical studies to be conducted in accordance with Good Laboratory Practices and clinical trials to be conducted in accordance with Good Clinical Practices, including for designing, conducting, recording, and reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control will not relieve us of these responsibilities and requirements. Any adverse development or delay in our preclinical studies or clinical trials as a result of our reliance on third parties could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

 

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If any of our relationships with these third-party CROs or others terminate, we may not be able to enter into arrangements with alternative CROs or other third parties or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO begins work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines.

We rely on third-party manufacturers and suppliers to supply components of our product candidates. The loss of our third-party manufacturers or suppliers, or our or their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect our business.

We do not own or operate facilities for drug manufacturing, storage, distribution, or quality testing. We currently rely, and may continue to rely, on third-party contract manufacturers to manufacture bulk drug substances, drug products, raw materials, samples, components, or other materials and reports, and conduct fill-finish services. Reliance on third-party manufacturers may expose us to different risks than if we were to manufacture product candidates ourselves. There can be no assurance that our preclinical and clinical development product supplies will not be limited, available at acceptable prices. In particular, any replacement of our manufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.

The manufacturing process for a product candidate is subject to review by the FDA, EMA, or other applicable regulatory authorities. We, and our suppliers and manufacturers, must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards, such as current Good Manufacturing Practices, or cGMPs. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA and foreign regulatory authorities. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA or other applicable regulatory authorities, we may not be able to rely on their manufacturing facilities for the manufacture of elements of our product candidates. Moreover, we do not control the manufacturing process at our contract manufacturers, and are completely dependent on them for compliance with current regulatory requirements. If any of our manufacturers fails to comply with such requirements or to perform its obligations in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such to another third party. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to enable us, or to have another third party, manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines; and we may be required to repeat some of the development program. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. Any manufacturing facilities used to produce our products will be subject to periodic review and inspection by the FDA, EMA, or other applicable regulatory authorities, including for continued compliance with cGMP requirements, quality control, quality assurance, and corresponding maintenance of records and documents. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully. Our or a third party’s failure to execute on our manufacturing requirements, comply with cGMPs, or maintain a compliance status acceptable to the FDA, EMA, or other applicable regulatory authorities could adversely affect our business in a number of ways, including:

 

   

an inability to initiate or continue clinical trials of product candidates under development;

 

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delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates;

 

   

loss of the cooperation of future collaborators;

 

   

subjecting third-party manufacturing facilities to additional inspections by regulatory authorities;

 

   

requirements to cease distribution or to recall batches of our product candidates; and

 

   

in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.

Additionally, our contract manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our contract manufacturers were to encounter any of these difficulties, our ability to provide our product candidates to patients in preclinical and clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

Our third-party manufacturers may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials, our ability to obtain marketing approval, or our ability to provide supply of our products for patients, if approved, could be delayed or stopped.

Our product candidates are biopharmaceuticals, and the process of manufacturing biopharmaceuticals is complex, time-consuming, highly regulated, and subject to multiple risks. Our contract manufacturers must comply with legal requirements, cGMPs, and guidelines for the bulk manufacturing, fill-finish services, packaging, and storage of biopharmaceuticals used in clinical trials and, if approved, marketed products. Our contract manufacturers may have limited experience in the manufacturing of cGMP batches.

Manufacturing biopharmaceuticals is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics, and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered at our third-party manufacturers’ facilities, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business. Moreover, if the FDA determines that our third-party manufacturers’ facilities are not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may deny approval of our application until the deficiencies are corrected or we replace the manufacturer in our application with a manufacturer that is in compliance.

In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency and timely availability of raw materials. Even if our collaborators obtain regulatory approval for any of our product candidates, there is no assurance that manufacturers will be able to manufacture the approved product, or provide fill-finish services, to specifications acceptable to the FDA, EMA, or other applicable regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand. If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations, and prospects.

 

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Scaling up a biopharmaceutical manufacturing process is a difficult and uncertain task, and our third-party manufacturers may not have the necessary capabilities to complete the implementation, manufacturing, and development process. If we are unable to adequately validate or scale-up the manufacturing process at our current manufacturers’ facilities, we will need to transfer to another manufacturer and complete the manufacturing validation process, which can be lengthy. If we are able to adequately validate and scale-up the manufacturing process for our product candidates with a contract manufacturer, we will still need to negotiate with such contract manufacturer an agreement for commercial supply and it is not certain we will be able to come to agreement on terms acceptable to us.

We cannot assure you that any stability or other issues relating to the manufacture of any of our product candidates or products will not occur in the future. Our de novo protein product candidates may not demonstrate sufficient long-term stability to support an NDA filing or obtain approval, or the product shelf life may be limited by stability results. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. If our third-party manufacturers were to encounter any of these difficulties, our ability to provide any product candidates to patients in planned clinical trials and products to patients, once approved, would be jeopardized. Any delay, interruption or other issues that arise in the manufacture, fill- finish, packaging, or storage of clinical trial supplies could delay the completion of planned clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely. Any adverse development affecting clinical or commercial manufacturing of our product candidates or products may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our product candidates or products. We may also have to take inventory write-offs and incur other charges and expenses for product candidates or products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply chain could adversely affect our business and delay or impede the development and commercialization of any of our product candidates or products, if approved, and could have an adverse effect on our business, prospects, financial condition, and results of operations.

As part of our process development efforts, we also may make changes to the manufacturing processes at various points during development, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate or other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of our ongoing clinical trials or future clinical trials. In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical phases or at earlier portions of a trial to the product used in later clinical phases or later portions of the trial.

We may, in the future, seek to enter into collaborations with other third parties for the discovery, development and commercialization of our product candidates. If our collaborators cease development efforts under our collaboration agreements, or if any of those agreements are terminated, these collaborations may fail to lead to commercial products and we may never receive milestone payments or future royalties under these agreements.

We expect a significant portion of our future revenue and cash resources to be derived from collaboration agreements or other similar agreements into which we may enter in the future for research, development, and commercialization of other therapeutic technologies or product candidates. Biopharmaceutical companies are our likely future collaborators for any marketing, distribution, development, licensing, or broader collaboration arrangements. If we fail to enter into future collaborations on commercially reasonable terms, or at all, or such collaborations are not successful, we may not be able to execute our strategy to develop certain targets, product candidates, or disease areas that we believe could benefit from the resources of either larger biopharmaceutical companies or those specialized in a particular area of relevance.

 

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Revenue from research and development collaborations depends upon continuation of the collaborations, payments for research and development services, and resulting options to acquire any licenses of successful product candidates, and the achievement of milestones, contingent payments, and royalties, if any, derived from future products developed from our research. If we are unable to successfully advance the development of our product candidates or achieve milestones, revenue and cash resources from milestone payments under our collaboration agreements will be substantially less than expected.

With respect to future collaboration agreements, we expect to have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Moreover, our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

As a result of the foregoing, our current and any future collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. Any failure to successfully develop or commercialize our product candidates pursuant to our current or any future collaboration agreements could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

 

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Moreover, to the extent that any of our future collaborators were to terminate a collaboration agreement, we may be forced to independently develop these product candidates, including funding preclinical studies or clinical trials, assuming marketing and distribution costs and defending intellectual property rights, or, in certain instances, abandon product candidates altogether, any of which could result in a change to our business plan and have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may have conflicts with our collaborators that could delay or prevent the development or commercialization of our product candidates.

We may have conflicts with our collaborators, such as conflicts concerning the interpretation of preclinical or clinical data, the achievement of milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership of intellectual property developed during our collaboration. If any conflicts arise with any of our collaborators, such collaborator may act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each of which could delay or prevent the development or commercialization of our product candidates, and in turn prevent us from generating revenues: unwillingness on the part of a collaborator to pay us milestone payments or royalties we believe are due to us under a collaboration, which could require us to raise additional capital; uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations; unwillingness by the collaborator to cooperate in the development or manufacture of the product, including providing us with product data or materials; unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities; initiating of litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts by either party to terminate the agreement.

We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize product candidates, impact our cash position, increase our expenses, and present significant distractions to our management.

From time to time, we may consider strategic transactions, such as additional collaborations, acquisitions of companies, asset purchases, and out- or in-licensing of product candidates or technologies that we believe will complement or augment our existing business. In particular, we will evaluate and, if strategically attractive, seek to enter into additional collaborations, including with major biotechnology or biopharmaceutical companies. The competition for collaborators is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may not be able to maintain any new collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meet expectations or the collaborator terminates the collaboration. In addition, a significant number of recent business combinations among large pharmaceutical companies has resulted in a reduced number of potential future strategic partners. Our collaborators may consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the strategic partner’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed strategic partner’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA, or other applicable regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. Moreover, if we acquire assets with promising markets or technologies, we may not be able to realize the benefit of acquiring such assets if we are not able to successfully integrate them with our existing technologies. We may encounter numerous difficulties in developing, testing, manufacturing, and marketing any new products resulting from a strategic acquisition that delay or prevent us from realizing their expected benefits or enhancing our business.

 

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We cannot assure you that following any such collaboration, or other strategic transaction, we will achieve the expected synergies to justify the transaction. For example, such transactions may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty, and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership, and the inability to retain key employees of any acquired business.

Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and would have a material and adverse effect on our business, financial condition, results of operations, and prospects. Conversely, any failure to enter any additional collaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.

Risks Related to Our Business and Operations

We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business.

We have approximately 20 full-time employees. As our development and commercialization plans and strategies develop we expect to expand our employee base for managerial, operational, financial and other resources. In addition, we have limited experience in product development. As our product candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development and regulatory capabilities and contract with other organizations to provide manufacturing and other capabilities for us. In the future, we expect to have to manage additional relationships with collaborators or partners, suppliers, and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, reporting systems, and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Our inability to successfully manage our growth and expand our operations could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

Our success largely depends on the continued service of key management, advisors and other specialized personnel, including Jonathan Drachman, M.D., our chief executive officer, and the three co-founders of Neoleukin Therapeutics: Daniel-Adriano Silva, our Vice President of Research, Carl Walkey, our Vice President of Corporate Development, and Umut Ulge, M.D. our Vice President of Translational Medicine. We currently do not maintain key person insurance on any of these individuals. The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs and have a material and adverse effect on our business, financial condition, results of operations, and prospects. The relationships that our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel because of the highly technical nature of our product candidates and technologies related to our Neoleukin Platform, and the specialized nature of the regulatory approval process. Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty.

 

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Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We also face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. Our future success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation, and commercialization. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover and develop product candidates will be limited which could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to Intellectual Property

If we are not able to obtain, maintain, and enforce patent protection for our product candidates, our Neoleukin Platform technology, or other proprietary technologies we may develop, development and commercialization of our product candidates may be adversely affected.

Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. Under our License Agreement with the University of Washington, dated July 8, 2019, we have an exclusive license to develop and commercialize patents and patent applications with claims covering the composition of matter of key molecule families as well as the computational algorithms that form the basis of the Neoleukin Platform. However, we may not be able to apply for patents on certain aspects of our product candidates in a timely fashion or at all. Further, we may not be able to prosecute all necessary or desirable patent applications, or maintain, enforce, and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing, and prosecution of all patent applications that we license from third parties, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that any of our future issued or granted patents will not later be found to be invalid or unenforceable or that any future issued or granted patents will include claims that are sufficiently broad to cover our product candidates or to provide meaningful protection from our competitors. Moreover, the patent position of biotechnology and biopharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates are covered by valid and enforceable patents, or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely affect our position in the market.

Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

 

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The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a large number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and biopharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary products and technology. The process of obtaining patents is time consuming, expensive and sometimes unpredictable.

Once granted, for a given period after allowance or grant patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification, or derivation action in court or before patent offices or similar proceedings, during which time third parties can raise objections against such initial grant. Such proceedings may continue for a protracted period of time and an adverse determination in any such proceedings could reduce the scope of the allowed or granted claims thus attacked, or could result in our patents being invalidated in whole or in part, or being held unenforceable, which could allow third parties to commercialize our product candidates and compete directly with us without payment to us. In addition, there can be no assurance that:

 

   

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

 

   

we or our licensors, or our future collaborators are the first to make the inventions covered by each of our issued patents and pending patent applications that we own or license;

 

   

we or our licensors, or our future collaborators are the first to file patent applications covering certain aspects of our inventions;

 

   

others will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

 

   

a third party may not challenge our patents and, if challenged, a court would hold that our patents are valid, enforceable and infringed;

 

   

any issued patents that we own or have licensed or that we may license in the future will provide us with any competitive advantages, or will not be challenged by third parties;

 

   

we may develop additional proprietary technologies that are patentable;

 

   

the patents of others will not have a material or adverse effect on our business, financial condition, results of operations, and prospects; and

 

   

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

If we or our licensors or collaborators fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which could have a material and adverse effect on our business, financial condition, results of operations, and prospects. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

 

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