UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its 2021 annual meeting of shareholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of December 31, 2020. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
AVROBIO, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2020
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships and Related Transactions, and Director Independence |
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Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:
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We have incurred net losses since inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability. |
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We will need additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations. |
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Business interruptions resulting from the coronavirus disease (COVID-19) pandemic or similar public health crises have caused and may continue to cause a disruption of the development of our product candidates and adversely impact our business. |
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Our lentiviral-based gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and of subsequently obtaining regulatory approval. |
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Our product candidates and the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval. |
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Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials. |
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We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates. |
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We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities. |
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Even if we complete the necessary preclinical and clinical studies, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate and the approval may be for a narrower indication than we seek. |
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Only certain of our clinical trials, including the Phase 2 clinical trial of AVR-RD-01 for Fabry disease and the Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease type 1, utilize our commercial-scale plato® platform. |
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We face significant competition in our industry and there can be no assurance that our product candidates, if approved, will achieve acceptance in the market over existing established therapies. In addition, our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our product candidates. |
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Gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business. |
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We expect to rely on third parties to conduct some or all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily. |
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We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates. |
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Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts. |
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Our rights to develop and commercialize our product candidates are subject, in part, to the terms and conditions of licenses granted to us by others. In particular, we have in-licensed certain intellectual property rights and know-how relevant to AVR-RD-01 for our Fabry program, AVR-RD-02 for our Gaucher type 1 program and AVR-RD-05 for our Hunter program, but do not own any patents or patent applications covering these product candidates. |
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We and our independent registered public accounting firm previously identified a material weakness in our internal control over financial reporting, which has now been remediated. Nevertheless, if we experience additional material weaknesses or deficiencies in the future or otherwise fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price. |
The summary risk factors described above should be read together with the text of the full risk factors below, in the section Item1A entitled “Risk Factors” and the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission (the “SEC”). The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.
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Forward-looking Information
This Annual Report on Form 10-K contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by such forward-looking terminology as “aims,” “anticipates,” “believes,” “continue,” “could,” “designed to,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “strives,” “should,” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
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the impact of the COVID-19 pandemic on our clinical trial programs, clinical supply and business generally, as well as our plans and expectations with respect to the timing and resumption of any development activities that were or may be temporarily paused as a result of the COVID-19 pandemic; |
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the timing, progress and results of preclinical studies and clinical trials for our programs and product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs; |
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the existence or absence of side effects or other properties relating to our product candidates which could delay or prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences following any potential marketing approval; |
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the durability of effects from our product candidates; |
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the timing, scope or likelihood of regulatory filings and approvals; |
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our ability to develop and advance product candidates into, and successfully complete, clinical studies; |
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our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use; |
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the implementation of our business model and our strategic plans for our business, product candidates, technology and plato platform; |
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our commercialization, marketing and manufacturing capabilities and strategy; |
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the pricing and reimbursement of our product candidates, if approved; |
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the scalability and commercial viability of our manufacturing methods and processes, including our move to a closed, automated system; |
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the rate and degree of market acceptance and clinical utility of our product candidates, in particular, and gene therapy, in general; |
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our ability to establish or maintain collaborations or strategic relationships or obtain additional funding; |
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our competitive position; |
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the scope of protection we and/or our licensors are able to establish and maintain for intellectual property rights covering our current and future product candidates, as well as any statements as to whether we do or do not infringe, misappropriate or otherwise violate any third-party intellectual property rights; |
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our financial performance; |
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our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; |
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developments and projections relating to our competitors and our industry, including other lentiviral-based gene therapy companies; |
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our expectations related to the use of our cash reserves; |
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our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
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our ability to avoid any findings of material weaknesses or significant deficiencies in the future; |
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the impact of laws and regulations, including without limitation recently enacted tax reform legislation; |
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our expectations regarding the time during which we are an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or JOBS Act; and |
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other risks and uncertainties, including those listed under the caption “Risk Factors.” |
All of our forward-looking statements are as of the date of this Annual Report on Form 10-K only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Annual Report on Form 10-K that modify or impact any of the forward-looking statements contained in this Annual Report on Form 10-K will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.
Note Regarding Trademarks
All brand names or trademarks appearing in this report are the property of their respective holders.
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PART I
Unless the context requires otherwise, references in this Annual Report on Form 10-K to the “Company,” “AVROBIO,” “we,” “us,” and “our” refer to AVROBIO, Inc. Our “board of directors” refers to the board of directors of AVROBIO, Inc.
Item 1. Business
Overview
We are a leading clinical-stage gene therapy company with a mission to free people from a lifetime of genetic disease. Our company is focused on developing potentially curative ex vivo lentiviral-based gene therapies to treat patients with rare diseases following a single dose treatment regimen. Our gene therapies employ hematopoietic stem cells that are harvested from the patient and then modified with a lentiviral vector to insert the equivalent of a functional copy of the gene that is defective in the target disease. We believe that our approach, which is designed to transform stem cells from patients into therapeutic products, has the potential to provide curative benefit for a range of diseases. Our initial focus is on a group of rare genetic diseases referred to as lysosomal disorders, some of which today are primarily managed with enzyme replacement therapies, or ERTs. These lysosomal disorders have well-understood biologies, identified patient populations, established standards of care yet with significant unmet needs, and represent large market opportunities with approximately $4.8 billion in worldwide net sales in 2020.
Our initial pipeline is comprised of six lentiviral-based gene therapy programs: AVR-RD-01 for the treatment of Fabry disease; AVR-RD-04 for the treatment of cystinosis; AVR-RD-02 for the treatment of Gaucher disease type 1; AVR-RD-05 for the treatment of Hunter syndrome; AVR-RD-06 for the treatment of Gaucher disease type 3; and AVR-RD-03 for the treatment of Pompe disease. AVR-RD-01 is currently being evaluated for the treatment of Fabry disease in an investigator-sponsored Phase 1 clinical trial and a Company-sponsored Phase 2 clinical trial. Five patients have been dosed in the investigator-sponsored Phase 1 clinical trial of AVR-RD-01, and enrollment is complete. Five patients have been dosed in our Company-sponsored Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial, and we are actively recruiting additional potential patients for our currently active sites in Australia, Canada and the United States. AVR-RD-04 is currently being studied for the treatment of cystinosis by our collaborators at the University of California, San Diego, or UCSD, in a Phase 1/2 investigator-sponsored clinical trial, and three patients have been dosed. One patient has been dosed in our Company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for the treatment of Gaucher disease, which we refer to as the Guard1 clinical trial, and we are actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe. AVR-RD-05 is being studied for the treatment of Hunter syndrome by our collaborators at The University of Manchester, and a Phase 1/2 investigator-sponsored clinical trial is expected to commence in the first half of 2022. In November 2020, we announced a new preclinical program, AVR-RD-06 for the treatment of Gaucher disease type 3, and we expect to request a meeting with the Food and Drug Administration, or FDA, this year to discuss a potential path to the clinic. Our AVR-RD-03 program for Pompe disease is currently in preclinical development, and in 2020 we completed IND-enabling proof-of-concept preclinical studies, with toxicology studies expected to be completed in 2021.
Since its first clinical use in 2003, lentiviral-based gene therapy has been studied in several third parties’ clinical trials for rare diseases such as transfusion-dependent beta thalassemia, cerebral adrenoleukodystrophy, or CALD, metachromatic leukodystrophy, or MLD, and adenosine deaminase severe combined immunodeficiency, or ADA-SCID. Initially, the use of ex vivo lentiviral-based gene therapies was restricted primarily to the most severe diseases where the risks of the typical requirement for ablating the patients’ bone marrow had a clinically justifiable risk/benefit profile. To date, over 350 patients have been treated with lentiviral-based gene therapies in third parties’ and our rare disease clinical trials, and we believe the technology can be developed for other serious conditions based on a rigorous risk/benefit assessment. The ablation procedure, also known as the conditioning regimen, is typically an essential step in the ex vivo gene therapy treatment procedure and is administered prior to the gene therapy. The higher the level of conditioning, the greater the potential risk of more serious complications, such as veno-occlusive disease. However, we believe the risk of more serious complications can be managed through utilization of a precision busulfan dosing program, which we refer to as Target Concentration Intervention, or TCI. TCI is designed to enable careful titrating of exposure to the conditioning drug to a specific area under the curve, or AuC. The conditioning regimen utilized as part of our plato platform includes TCI to assess how rapidly the individual patient metabolizes the conditioning agent so physicians can adjust the dose as needed, with a goal of minimizing side effects while maximizing the potential of durable engraftment. We believe our approach, utilizing a single myeloablative conditioning agent, busulfan, coupled with TCI designed to titrate to a specific AuC, has the potential to extend the reach of our gene therapies to a broad range of diseases as first-line therapies. Our goal is to broaden the applicability of lentiviral-based gene therapy by initially targeting monogenic diseases with an identified gene, recognized biology and that could potentially benefit from the sustained systemic delivery of an active protein.
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Plato is our gene therapy platform designed to provide the foundation for the potential worldwide commercialization of our gene therapies, if approved. It is an ex vivo gene therapy platform incorporating multiple upgrades including a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity; a closed, automated manufacturing system designed to improve consistency and predictability of the drug product; and a personalized approach to conditioning using TCI. Two patients in our FAB-GT clinical trial of AVR-RD-01 and one patient in our Guard1 clinical trial of AVR-RD-02 have been dosed with drug product manufactured utilizing the plato platform, and we intend to utilize the plato platform with these process changes for all future patients enrolling in these two clinical trials. We believe our innovations in viral vector design, cellular manufacturing, cryopreservation, conditioning and other related processes are important steps towards advancing the field of lentiviral-based gene therapy and realizing its full potential to treat a number of diseases. We plan to continue leveraging advancements in stem cell transplantation with the goal of improving patient tolerability of our lentiviral-based gene therapies.
We are initially targeting rare lysosomal disorders in which the current standard of care provides the mechanistic proof that the enzymes or proteins produced endogenously following treatment with our gene therapies can offer benefit to patients. Typically, in lysosomal disorders, a gene mutation results in the deficiency or malfunctioning of an enzyme or other protein. This results in the inability of lysosomes to properly process cellular materials such as damaged organelles. As a result, substrates and their metabolites accumulate to toxic levels in the body’s cells and, in turn, disrupt the function of multiple tissues and organs. Fabry disease, Gaucher disease (types 1 and 3), Hunter syndrome and Pompe disease are currently primarily managed by bi-weekly (or weekly in the case of Hunter syndrome), multi-hour infusions with ERTs that seek to exogenously replace the missing functional enzyme. However, given their pharmacokinetics, most ERTs typically remain in the plasma only for a short period of time and thus are not ideal because they are only dosed weekly or every two weeks. Cystinosis is currently treated with two oral formulations of cysteamine that must be taken orally every 12 or six hours, leading to significant pill burden and compliance challenges. Further, oral cysteamine treatment has no effect on ocular cystine crystals deposits, thus requiring patients to be treated with topical cysteamine eye drops which must be applied each hour the patient is awake. These existing therapies manage, rather than cure, the underlying diseases and, as a result, patients continue to have disease progression. Further, the frequent, periodic and life-long dosing schedule required for ERTs and cysteamine results in significant costs for the healthcare system and is burdensome for the patient.
We believe our gene therapies leverage the well-understood mechanism of ERTs by transforming a patient’s own cells into a drug product that enables the patient to express functional enzyme or other protein and mirror the biology seen in an otherwise healthy individual. We believe that a single dose of our gene therapies may provide meaningful life-long benefit to these patients and potentially halt the progression of these diseases while also potentially providing significant health economic advantages.
Our programs leverage years of extensive preclinical and early clinical research by leading researchers, as well as our internal research and ongoing clinical efforts. The status of our initial lentiviral-based gene therapy programs is reflected below.
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Our lead product candidate, AVR-RD-01 for the treatment of Fabry disease, is derived from hematopoietic stem cells to which the gene encoding plasma α-galactosidase A, or AGA, is added in an ex vivo process using a lentiviral vector. In February 2021, we reported that a kidney biopsy taken at 12 months post-treatment from the fourth patient in the Phase 2 FAB-GT trial, who was the first in the trial dosed with our plato platform, showed a 100 percent reduction from baseline in the average number of globotriaosylceramide, or Gb3, inclusions per peritubular capillary, or PTC. These data followed our 2019 announcement that at 12 months post-treatment the first patient in the FAB-GT clinical trial exhibited an 87% reduction in the average number of Gb3 inclusions per PTC as compared to baseline. In addition, in February 2021 we reported data from the first four patients in the FAB-GT trial measured as of 29, 24, 18 and 12 months, respectively, indicating sustained increased leukocyte and plasma enzyme activity, suggesting that these patients are now producing an endogenous supply of AGA, as well as decreased plasma lyso-globotriaosylsphingosine, or lyso-Gb3, levels in three of four patients, a key biomarker for monitoring Fabry disease. We have opened two U.S. sites for our ongoing FAB-GT clinical trial of AVR-RD-01, and we are actively recruiting potential patients for our sites in Australia, Canada and the United States. We have submitted a briefing book to the FDA outlining our proposal for a potential accelerated approval strategy for AVR-RD-01, including a proposed randomized confirmatory clinical trial of Fabry patients who are being treated with ERT. We expect to meet with the FDA in the first quarter of 2021 to discuss our proposal.
In February 2021, we announced initial clinical data from the first three patients dosed in the investigator-sponsored Phase 1/2 trial of AVR-RD-04, our investigational gene therapy for cystinosis. As of January 20, 2021, all three patients had discontinued cysteamine pills and eye drops and remained cysteamine-independent out as far as 16 months post-treatment.
We also announced in February 2021 clinical data from the first patient dosed in our Phase 1/2 Guard1 clinical trial of AVR-RD-02 for Gaucher disease type 1. The first patient exhibited a 44% reduction in plasma glucosylsphingosine, or lyso-Gb1, levels six months post-administration of AVR-RD-02 as compared to baseline while on ERT. Lyso-Gb1 is considered a surrogate marker for disease activity and treatment response for Gaucher disease type 1. In addition, we announced that at six months post-treatment the first patient exhibited a 49% reduction in chitotriosidase levels as compared to baseline while on ERT. Chitotriosidase is a biomarker of macrophage activation that is found in high levels in Gaucher patients where the macrophages have accumulated an excess lipid burden. This clinical trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe.
We continue to seek opportunities to expand our approach to other rare and non-rare diseases. We plan to identify and develop future product candidates through our own internal research efforts as well as through collaborations with leading researchers worldwide.
Our Expertise
We are led by biopharmaceutical experts with extensive experience in gene and cellular therapy, and rare diseases. Our team has broad expertise in the clinical, regulatory and commercialization aspects of rare diseases as well as process development and manufacturing for cellular therapies. Members of our management team have held senior positions at Amgen, AstraZeneca, AveXis, Biogen, bluebird bio, GlaxoSmithKline, Lonza, Novartis, Sanofi Genzyme, Shire, Spark Therapeutics, and other companies pursuing development, manufacturing and commercialization of gene, cellular and other therapies to treat rare diseases.
Our Strategy
Our goal is to develop and commercialize lentiviral-based gene therapies that free patients from a lifetime of genetic disease. Key elements of our strategy include:
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Rapidly advance our pipeline targeting lysosomal disorders. We are initially targeting lysosomal disorders and are developing a deep pipeline of six gene therapies to treat Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, Gaucher disease type 3 and Pompe disease. We intend to continue rapidly advancing these programs in parallel and to obtain clinical data that could potentially support regulatory filings around the world. Specifically, we intend to pursue pathways for accelerated review and approval of our product candidates by the FDA and international regulatory authorities through programs such as the Regenerative Medicine Advanced Therapies, or RMAT, program in the United States. |
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Continue implementing and enhancing our industry-leading plato platform with its personalized approach to conditioning, enhanced vector technology and automated, closed manufacturing processes. Our end-to-end plato platform is designed to provide the foundation for worldwide commercialization of our gene therapies, if |
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approved. We believe our innovations in viral vector design, cellular manufacturing, cryopreservation, and other related processes are important steps towards advancing the field of lentiviral-based gene therapy and realizing its full potential to treat a number of diseases. Plato incorporates a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity. In combination with this vector, in some indications we use a number of proprietary peptide tag technologies to enhance uptake of therapeutic protein in key tissues. We have also developed a manufacturing process that we believe is both reproducible and scalable, and we believe this technology could enable us to deliver our gene therapies to patients, if approved, in quantities sufficient for global commercial supply. In addition, we believe our personalized approach to conditioning using busulfan with a precision dosing program called Target Concentration Intervention could enable us to deliver durable, ‘head-to-toe’ treatment of symptoms and early intervention in the treatment of lysosomal disorders. We will continue to leverage advancements in stem cell transplantation in order to improve patient tolerability of our lentiviral-based gene therapies. |
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Build global infrastructure to reach patients across the world. Lysosomal disorders afflict patients globally and we intend to continue building global infrastructure in order to provide treatment to patients around the world. This infrastructure includes clinical sites, specialist physicians and researchers, suppliers and contract manufacturing organizations. We are currently conducting clinical trials across multiple geographies, including the United States, Canada and Australia, with plans to potentially expand to other geographies including Europe and Israel. |
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Leverage our approach beyond our initial indications. We are initially developing gene therapies for the treatment of six different lysosomal disorders and believe that we will gain significant learnings and technical insights from these programs. We intend to leverage our technology and insights to treat a number of rare and non-rare diseases where we believe our lentiviral approach has transformative potential. |
Our Approach
We develop gene therapies utilizing our ex vivo lentiviral-based approach to transform a patient’s own stem cells into a drug product. Our investigational gene therapies employ lentiviral vectors that are designed to result in stable integration of the desired genes in the chromosomes of stem cells such that they are permanently maintained in the cell and can be reproduced as the cell divides. We focus on delivering our lentiviral-based gene therapies to patient-derived hematopoietic stem cells, which are primitive stem cells that develop into all types of blood cells, including white blood cells, red blood cells and platelets. To accomplish this, we harvest a patient’s hematopoietic stem cells and modify them ex vivo to add the equivalent of a functional copy of the gene that is defective in the target disease. We then infuse the genetically modified cells back into the patient. Our gene therapies are designed to be administered to the patient as a one-time therapy following a TCI conditioning regimen.
We are focused on employing our approach to treat and potentially cure lysosomal disorders. These disorders have well-understood biologies, identified patient populations, established standards of care that leave many patients with significant unmet medical needs, and represent large markets with approximately $4.8 billion in worldwide net sales in 2020. We believe our ex vivo lentiviral-based gene therapy approach can be industrialized into a robust, scalable and, if approved, commercially viable process that will allow us to deliver our potentially curative therapies to patients across the world.
Advantages of Ex-Vivo Lentiviral-Based Gene Therapy Approach
We believe ex-vivo lentiviral-based gene therapy provides numerous advantages, including:
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Durable benefit. We believe lentiviral vectors have the potential to provide life-long benefits with a single dose. Lentiviral vectors can integrate stably into the genome of hematopoietic stem cells and, when these cells replicate, they pass the integrated genes on to their progeny cells. Across the industry, efficacy in patients treated with lentiviral gene therapies has been demonstrated for longer than 12 years. |
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Systemic therapeutic effect. Progeny cells circulate systemically and may migrate into tissues and therefore have the ability to provide therapeutic benefit to affected tissues and organs throughout the body. In addition, we believe that our personalized busulfan conditioning regimen has the potential to allow the therapeutic benefits of our gene therapies to cross the blood-brain barrier and treat symptoms arising in the central nervous system. These often severe symptoms are typically unaddressed by the current standards-of-care for lysosomal disorders. |
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Broad patient applicability. Lentiviral-based gene therapies have been used to deliver treatments to patients of all ages, including children, and to patients who may be ineligible for other types of gene therapy due to the presence |
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of preexisting antibodies that detect viral vectors and trigger the immune system to destroy the vector and cells infected by the vector. |
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Restoration of protein function. By contrast to the standard-of-care enzyme replacement therapy, which seeks to clear toxic substrate as a key symptom of a non-functioning gene, restoration of gene function may deliver a wide array of additional biochemical benefits throughout the body. |
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History of tolerability in clinical trials. To our knowledge, no instances of insertional oncogenesis or leukemogenesis from lentiviral vectors have been documented in clinical trials of lentiviral gene therapies, with more than 350 total patients treated. To date, we have not seen any unexpected safety events in 14 patients across our four clinical trials, with the longest follow-up more than 3.5 years to date. |
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Larger and varied payloads. In contrast to other viral vectors, lentiviral vectors have the capacity to carry larger gene sequences, which allow them to potentially address a large variety of indications. |
Strategic Selection of Our Initial Indications
There are approximately 50 identified lysosomal disorders, which are characterized by an abnormal toxic build-up of substrates and their metabolites in the body’s cells. We are currently targeting Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, Gaucher disease type 3 and Pompe disease. Each of these disorders affects a meaningful number of patients, has a suboptimal standard of care with unmet medical need and, we believe, is appropriate for lentiviral-based gene therapy. We believe our approach has the potential to address the shortcomings of existing therapies that, despite chronic dosing, cannot halt or reverse disease progression, restore normal lifespan or adequately address symptoms arising in both the peripheral tissues and the central nervous system.
Expanding the Utility of Lentiviral-Based Gene Therapy with TCI-Enabled Conditioning Regimen
A core part of our approach is to expand the use of lentiviral-based gene therapy to treat numerous lysosomal disorders. We believe conditioning is an essential step to optimize these treatments as it is designed to clear space in the patient’s bone marrow and central nervous system for cells carrying the therapeutic gene. This maximizes the potential for their long-term engraftment which may enhance durability of therapeutic effect. We believe that we will be able to demonstrate durable effects in our targeted diseases utilizing a single myeloablative agent, busulfan, which we have transitioned to as part of implementing our plato platform.
We have pioneered precision dosing of busulfan in gene therapy as a single agent in a single treatment cycle, with the goal of enhancing the patient experience. A body of research has identified an optimal exposure range for busulfan (Bu-90), which we plan to implement for the patients enrolled in our Company-sponsored clinical trials. Our approach is to personalize conditioning to each patient using TCI, a precision dosing program. TCI is designed to allow for continually controlled exposure by assessing via simple blood draws how rapidly the individual patient metabolizes busulfan, to inform further administration. Use of busulfan in a conditioning regimen causes adverse side effects and can transiently compromise the patient’s immune system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia. The higher the level of conditioning, the greater the potential risk of more serious complications, such as veno-occlusive disease. However, we believe our approach to conditioning has the potential for reduced, predictable and manageable short- and long-term toxicities and maximized long-term engraftment. If realized, we believe these benefits may promote lentiviral-based gene therapy as a therapeutic option for less acutely severe diseases or diseases with approved therapies in which large unmet medical needs remain.
We believe our approach has the potential to extend the reach of our gene therapies to a broad range of lysosomal disorders as first-line therapies.
plato: Our Commercial-Scale Platform
In addition to developing first-line gene therapies, an important key to our strategy is to continuously improve our technology and production processes and to leverage these improvements across our gene therapies, if approved. Plato is designed to provide the foundation for the potential worldwide commercialization of our gene therapies. It is an ex vivo gene therapy platform incorporating multiple upgrades including a four-plasmid lentiviral vector designed to optimize vector copy number, transduction efficiency and resulting enzyme activity; a closed, automated manufacturing system designed to improve consistency and predictability of the drug product; and a personalized approach to conditioning using busulfan with TCI, which is designed to optimize safety and engraftment. We have submitted data on our upgraded lentiviral vector and
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automated manufacturing process to the applicable regulatory authorities in the United States and Canada, which allows us to incorporate such elements into our FAB-GT and Guard1 clinical trials in those jurisdictions and Australia. Plato has been used to dose a total of three patients in our clinical trials, and we intend to utilize the plato platform for all future patients enrolling in the FAB-GT and Guard1 clinical trials. We believe our plato platform may lead to better patient outcomes and will represent a significant advance in our industry towards achieving the quality and scale required for global commercialization of gene therapies.
Our plato platform is designed to feature:
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Large scale vector production: We currently have manufacturing capabilities, through contract manufacturing organizations, or CMOs, at 200-liter bioreactor scale, with vector production capable of treating a substantial number of patients per year. |
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Global reach: Our automated, closed system for manufacturing is designed to allow for the flexible production of our gene therapies. The automated, closed manufacturing system is portable with proprietary AVROBIO algorithms which allow for efficient establishment of manufacturing capabilities in multiple geographies that can be expanded or adjusted as our global supply requirements evolve. We believe this approach will facilitate global manufacturing and shipping of our gene therapies, and will promote access to our products by patients and caregivers. |
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Quality of manufacturing: Our platform is designed to utilize current good manufacturing practices, or cGMP, and we believe our automated, closed manufacturing system may result in less production variability and reduce the risk of operator error, while enhancing the potency of the drug product. We believe these features will improve the quality of our gene therapies that are produced. |
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Patient convenience: Our gene therapies are cryopreserved, which is a feature designed to promote a longer shelf-life. We believe that a longer shelf-life will allow patients and clinics to schedule treatment sessions with greater convenience. |
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Cost containment: Our platform is designed to control fixed and variable expenses associated with manufacturing our gene therapies. |
We believe the plato platform will form the backbone of our future commercialization efforts and our goal to take gene therapy mainstream.
Next Generation Vector Technology
We have utilized our core expertise in the development and optimization of lentiviral vectors to improve the vectors used in our gene therapies. We have made and expect to continue to make enhancements to our lentiviral vectors to improve safety, efficacy and efficiency. For example, clinical trials of AVR-RD-01 have primarily utilized our original academic three-plasmid-produced lentiviral vector, which we refer to as LV1. However, we dosed the fourth and fifth patient in our ongoing FAB-GT clinical trial of AVR-RD-01 and the first patient in our ongoing Guard1 clinical trial of AVR-RD-02 using our proprietary four-plasmid lentiviral vector, which we refer to as LV2, and expect to dose all future patients in these trials with LV2. Our goal is to employ vectors that are state-of-the-art and that can be produced in a cost-effective and scalable manner.
Automated, Closed Manufacturing System
Our team has significant experience in cell processing and commercial-scale cellular therapy manufacturing. We have developed and are implementing a detailed plan for more cost efficient and scalable manufacturing of our gene therapies. In contrast to a number of other gene therapy companies that have not developed their commercial scale plans from the outset, we have executed on our plans to move to a closed suspension bioreactor system for vector production, as well as a closed, automated system for manufacturing our gene therapy product. Our move to a closed, automated manufacturing system was completed in 2019 as part of implementing upgrades from our plato platform, and the fourth and fifth patients in our ongoing FAB-GT clinical trial of AVR-RD-01 and the first patient in our ongoing Guard1 clinical trial of AVR-RD-02 were each dosed using this system. We believe our plato platform features the first automated, closed manufacturing system in CD34+ gene therapy.
Our manufacturing approach is intended to allow for the production of drug product using relatively small, self-contained devices, which may reduce our reliance on large traditional clean rooms that are expensive to establish and
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maintain. We believe our manufacturing approach may result in greater flexibility in the location of manufacture and help to control costs associated with traditional manufacturing. In addition, we believe our automated manufacturing process may reduce operator error and yield greater consistency and less variability in the manufactured drug product.
We currently have one CMO partner in the United States and two partners in Australia for the production of AVR-RD-01 and AVR-RD-02 drug product. We also are in the process of establishing a CMO partnership in Europe.
Optimization of Conditioning Regimen
The conditioning regimen that we first employed utilized melphalan, a common chemotherapy drug, to ablate the patient’s bone marrow. As part of the upgrades to our plato platform, we transitioned to utilizing busulfan, another chemotherapy drug, that has been in use since the 1950’s. Busulfan is indicated for use in combination with cyclophosphamide as a conditioning regimen prior to allogeneic stem cell transplantation for chronic myeloid leukemia. Busulfan is routinely used in conditioning regimens before allogeneic stem cell transplantations for both malignant and non-malignant conditions. It has also been used as a single-agent, or in combination with an immunosuppressive agent, such as cyclophosphamide, in conditioning regimens prior to ex vivo gene therapy transplants.
We believe that the transition to busulfan for our conditioning regimen may confer several advantages. For example, busulfan will permit utilization of TCI in our conditioning regimen, thereby enabling physicians to personalize the dosing to each patient by titrating over four days to potentially enhance patient tolerability to the conditioning procedure and promote cell engraftment. By contrast, melphalan is administered once with no TCI, and may cause concern of conditioning-related toxicity across patients due to individual differences in metabolism of the drug. In addition, we believe that the utilization of busulfan in our single-agent myeloablative conditioning regimen has the potential to allow our gene therapies to cross the blood-brain barrier, a feature which may yield therapeutic benefit in diseases that have a central nervous system component, such as Fabry disease, Gaucher disease type 3, Hunter syndrome, Pompe disease and other rare and non-rare diseases. Finally, our busulfan conditioning regimen is designed to create more space in the ablated bone marrow compared to melphalan and may increase the average VCN of the patient bone marrow following treatment with the drug product, which are features that we believe will promote better cell engraftment and durability of the gene therapy.
We are aware that there have been cases of therapy-related myelodysplastic syndrome, or t-MDS, a type of blood disorder that is a potential precursor to acute myeloid leukemia, in patients with preexisting cancer where busulfan treatment was posited to be a contributing factor to this secondary malignancy. However, we have reviewed over 700 published cases of busulfan exposure preceding bone marrow transplant, hematopoietic cell transplant, or ex-vivo gene therapy for non-malignant indications, of which 649 were from peer-reviewed literature. Based on our review of these cases, we found only one case of t-MDS, which involved a report from December 2018 that a patient with preexisting sickle cell disease developed t-MDS. In that case, busulfan treatment was posited to be a contributing factor. We believe that due to the presence of other confounding factors in the patient, the cause of that patient’s t-MDS has not been conclusively determined. In response to these potential risks, we are investigating a plan to potentially implement molecular cytogenetic screening.
While the busulfan conditioning regimen is more intensive than the original conditioning regimen that utilizes melphalan, we believe it is still milder than some of the more aggressive conditioning regimens associated with gene therapies for other diseases, such as when busulfan is used in combination with cyclophosphamide, used at a higher dose, or when TCI is not applied. Furthermore, we believe our conditioning regimen may produce the desired effect while potentially allowing for a limited hospital stay.
plato Data
In February 2021, we announced data from the fourth patient dosed in our ongoing FAB-GT clinical trial of AVR-RD-01, who was the first patient dosed using our plato platform. At 12-months post-gene therapy, this patient exhibited plasma and leukocyte AGA enzyme levels that were 4.2x and 6.3x higher, respectively, than the mean plasma and leukocyte AGA activity levels of the other three dosed patients in the FAB-GT clinical trial measured as of 12-months post-gene therapy. Additionally, the fourth patient’s kidney biopsy taken at 12 months post-treatment showed a 100% clearance of Gb3 substrate.
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Advantages of Our Approach over Existing Therapies
We believe our gene therapy solutions offer several potential advantages over existing therapies for lysosomal disorders, including:
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Curative impact that has the potential to halt or reverse disease progression. Existing ERTs for Fabry, Gaucher, Hunter and Pompe, and oral therapies for cystinosis, provide some therapeutic benefit to patients. However, because of their suboptimal pharmacokinetics, these ERTs only transiently increase plasma enzyme levels and the therapies for cystinosis require multiple doses throughout the day. In contrast, our lentiviral-based gene therapies are designed to enable the body to constantly produce the functional enzyme or other protein. This can potentially halt pathological damage and, depending on the targeted indication and organ system, may even reverse disease progression. Our lentiviral-based gene therapies may provide potentially curative treatment to patients. This concept is illustrated in the graphs below. |
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Durable, single-dose treatment. Our gene therapies offer the potential for a single dose to replace life-long, bi-weekly infusions or daily oral therapies that are often accompanied by numerous side effects and impact patients’ quality of life. Our gene therapies are designed to transform the patient’s own cells into a drug product that enables the continuous delivery of functional enzyme or other protein throughout the body after a single dose. |
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Reduced treatment cost over a patient’s lifetime. Existing ERTs and oral therapies can cost millions of dollars over a patient’s lifetime because these therapies require frequent doses of expensive treatments to manage symptoms. Our single-dose gene therapies are designed to replace the costly chronic intravenous and oral therapies that are the current standard of care for patients with lysosomal disorders. |
AVR-RD-01, Our Gene Therapy for Fabry Disease
We are developing AVR-RD-01 for the treatment of Fabry disease. We manufacture AVR-RD-01 from stem cells that are first harvested from the patient, modified to add the gene that encodes for AGA, and then infused into the patient. AVR-RD-01 is currently being evaluated in an investigator-sponsored Phase 1 clinical trial and a Company-sponsored Phase 2 clinical trial. A total of 10 patients have been dosed across both trials as of March 1, 2021.
Disease Overview
Fabry disease is a rare lysosomal disorder associated with significant morbidity and early mortality. It is caused by a gene defect that causes a deficiency of AGA, which breaks down a particular type of fat in the body’s cells known as globotriaosylceramide, or Gb3. As Gb3 and other related substrates increase in patients with Fabry disease, these become toxic to the patient’s cells. Gb3 and other glycosphingolipids accumulate and result in damage to the kidneys, heart and brain. Accumulation of Gb3 in tissues such as the heart and the vascular system can lead to life threatening vascular blockages and thus stroke and heart attacks. In addition, high levels of Gb3 substrate accumulation in the kidney can cause kidney failure. Gb3 can also accumulate in other tissues, such as the nervous system where it leads to debilitating pain. Due to end-stage renal disease and other life-threatening complications associated with Fabry disease, the average life expectancy in affected males is approximately 58 years of age.
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Most patients with Fabry disease begin experiencing chronic pain in childhood but are often not diagnosed with Fabry disease until their twenties, due to a broad variation in patient symptoms. Over 1,000 gene mutations associated with Fabry disease have been identified. It is estimated that Fabry disease is diagnosed in approximately one in 40,000 males and one in 118,000 females in the United States, but studies have suggested that a larger number of patients may be undiagnosed.
Fabry disease is an X-linked disorder, meaning the gene that is responsible is located on the X chromosome. Because males have only one X chromosome, an abnormal copy of the gene that causes Fabry disease is sufficient to cause the disease. However, unlike other X-linked disorders, where female carriers of an abnormal gene are usually unaffected, Fabry disease also often causes significant morbidity in females who inherit one abnormal copy and one normal copy of the gene associated with the disease.
Limitations of Current Therapies
Fabry disease is primarily treated with periodic infusions of ERT consisting of AGA enzyme over the patient’s lifetime. The most commonly prescribed ERTs for Fabry disease are Fabrazyme, marketed by Sanofi Genzyme, and Replagal, marketed by Shire, which was acquired by Takeda Pharmaceutical Company Ltd. In 2020, Fabrazyme and Replagal generated worldwide net sales of approximately €817 million euros and ¥51.6 billion Japanese yen, respectively. We estimate that the average five-year cost to the healthcare system per Fabry patient prescribed standard of care treatment in the United States is approximately $1.7 million. In addition, because ERTs are not curative and only slow, but do not halt, the progression of disease, patients deteriorate and the healthcare system incurs significant costs associated with recurring medical interventions.
Although ERT provides therapeutic benefit and can reduce Gb3 substrate levels and extend a patient’s life expectancy, ERT requires chronic infusions throughout the patient’s life. Patients prescribed ERT generally receive an infusion every other week. However, because of their suboptimal pharmacokinetics, ERTs only temporarily increase plasma enzyme levels. As a result, patients with Fabry disease prescribed ERT continue to have disease progression, including ongoing decline in renal function, potentially including renal failure, cardiovascular disease and ongoing debilitating pain including periods of severe pain crisis. Physicians report that patients have recurrence of symptoms as the therapeutic effect of ERT wanes between bi-weekly treatments.
Alternatives to ERT for patients with Fabry disease are limited. Galafold (migalastat), an oral therapy marketed by Amicus, was approved by the European Medicines Agency, or EMA, in May 2016, and by the FDA in August 2018. Amicus has reported that only 35% to 50% of the gene mutations associated with Fabry disease are amenable to migalastat.
Our Solution
We are developing AVR-RD-01 to halt or reverse disease progression and potentially provide a functional cure to patients with Fabry disease with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure. AVR-RD-01 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained AGA production by hematopoietic stem cells and their progeny.
We believe that AVR-RD-01 offers a promising treatment for Fabry disease for the following reasons:
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One-time delivery. Lentiviral-based gene therapy provides the potential to transform a patient’s own cells into a drug product that enables the continuous delivery of active enzyme throughout the body after a single dose. |
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Proven biology. Years of observations of patients prescribed ERT indicate that even partial plasma AGA activity is associated with improved outcomes. Increased AGA enzyme activity is able to reduce Gb3 levels in multiple cells and tissues supporting the ability of AGA in the plasma to enter lysosomes and degrade Gb3 in a process referred to as cross correction. |
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Wide therapeutic window. We believe that even partial enzyme activity, if continuous, has the potential to provide long-term therapeutic benefit. A wide range of levels of plasma AGA activity has been demonstrated to be both safe and effective in preclinical studies, reducing the need for precise regulation of enzyme expression levels and reinforcing that overexpression of AGA is not associated with increased safety risks. |
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Mutation independent. AVR-RD-01 is designed to increase plasma and leukocyte AGA levels in a patient’s cells, regardless of which of the more than 1,000 specific mutations underlie the patient’s disease. |
Ongoing Multicenter Investigator-Sponsored Clinical Trial
In an ongoing Phase 1 clinical trial of AVR-RD-01 being conducted by the University Health Network, or UHN, and sponsored by Fabry Disease Clinical Research and Therapeutics, or FACTs, at three centers in Canada, a total of five patients with Fabry disease who have been treated with ERT for at least six months have been enrolled, and enrollment is complete. The protocol for this clinical trial originally provided that ERT for these patients would be suspended one month prior to receiving AVR-RD-01 and then resumed one month after the AVR-RD-01 treatment and continued at bi-weekly intervals. The trial protocol was subsequently amended to allow the investigator team, at their discretion, to discontinue ERT six months after treatment with AVR-RD-01. Three of the five patients in the clinical trial have discontinued the regular bi-weekly treatments with ERT and all three remain off ERT as of January 11, 2021.
The primary goal for this clinical trial is to assess the safety and toxicity of AVR-RD-01 as measured by the frequency or severity of clinically notable abnormal vital signs and laboratory values and the frequency or severity of treatment-related adverse events. The safety of our initial, academic-based conditioning regimen is also being assessed in this clinical trial.
A secondary objective for this clinical trial is to obtain preliminary efficacy signals of AVR-RD-01 therapy as assessed by AGA enzyme activity. Plasma and leukocyte AGA enzyme activity derived from administration of ERT decreases rapidly after administration with no residual plasma or leukocyte activity remaining approximately one day after treatment. To evaluate the ability of AVR-RD-01 to increase enzyme activity, the level of AGA activity was assessed in a patient immediately prior to the administration of the patient’s next dose of ERT, when limited or no plasma or leukocyte AGA activity from previously-administered ERT dose would be expected.
All five patients in this clinical trial have been dosed. To date, the treatment was generally well-tolerated with no serious adverse events, or SAEs, related to the study drug. In addition, in all five patients, all of whom are males with classic Fabry disease, the level of plasma and leukocyte AGA enzyme activity began to rise after infusion. In each of the patients, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within approximately three to six months after treatment, followed by a decline and trending to stabilize to levels above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml. We believe that the steep initial increase reflects AGA enzyme activity from the early progeny of the transduced stem cells, while the subsequent decline and stabilization in AGA enzyme levels reflect a shift from short term progenitor cells towards the gradual secretion of AGA enzyme by long-term engraftment cells that become more predominant over time.
AGA Enzyme Activity
As of 42 months after receiving AVR-RD-01, the first patient’s plasma and leukocyte AGA enzyme activity levels continued to be above the range for males with classical Fabry disease. Based on the level of endogenously produced enzyme activity, at the 18-month follow-up visit for this patient, the investigator team for the trial made a clinical decision to discontinue the bi-weekly ERT and the patient remains off ERT as of 42 months post-treatment with AVR-RD-01. Additionally, the third and fourth patients in this clinical trial discontinued ERT and both remain off ERT as of 24 months post-treatment with AVR-RD-01. The second and fifth patients have elected to continue receiving concurrent ERT. Plasma and leukocyte AGA enzyme activity levels in all five patients remained above the range for males with classical Fabry disease, defined as less than 1 nmol/hr/ml, as of 42 months, 36 months, 24 months, 24 months and 18 months after treatment, respectively. We believe these results, particularly from the patients in the trial with longer-term AGA data points reported, support the potential of AVR-RD-01 to drive functional enzyme production for long durations.
Lyso-Gb3 Levels
The substrate, Gb3, and its toxic metabolite, known as lyso-Gb3, are considered surrogate markers for disease activity and treatment response for Fabry disease. In the case of ERT-naïve patients and patients who have discontinued ERT, we believe that reductions in Gb3 levels following treatment with gene therapy are likely driven by the therapeutic effect of gene therapy. In four of the five patients in the Phase 1 clinical trial of AVR-RD-01, we have observed plasma lyso-Gb3 at levels post-treatment that are lower than the levels observed when the patient received only ERT prior to administration of AVR-RD-01, which we refer to as baseline ERT levels. We define baseline ERT for these Phase 1 patients as the mean of the plasma lyso-Gb3 values reported prior to initiating mobilization. Based on the latest interim data we presented in February 2021, these four Phase 1 patients exhibited reductions in plasma lyso-Gb3 levels ranging between 25% and 48% compared to
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their baseline ERT levels. With respect to the fourth patient, who discontinued ERT six months following administration of AVR-RD-01, we observed an initial decline in plasma lyso-Gb3 levels through six months post-treatment compared to baseline ERT, and a 35% increase in plasma lyso-Gb3 levels at 24 months post-treatment compared to baseline ERT. This patient’s plasma lyso-Gb3 levels remain within the range for the Fabry disease patients on ERT observed in this Phase 1 clinical trial.
Vector Copy Number
VCN, which is expressed as VCN per diploid genome, refers to the average number of copies of the lentiviral-vector inserted gene that are integrated into the genome of a cell, and is another measure that can be used to help assess the durability of a gene therapy. We believe that different diseases may require varying levels of VCN based on the underlying condition, and therefore VCN measurements across different diseases should be assessed separately. For example, a VCN of 0.1 may represent 5% to 10% of all nucleated circulating blood cells carrying one to two copies of the inserted gene, which we believe may be sufficient to result in clinically meaningful AGA enzyme activity in the case of Fabry disease, as suggested by our interim data from our ongoing clinical trials of AVR-RD-01. Based on the latest interim data we presented in February 2021, these five Phase 1 patients exhibited VCN levels of 0.04, 0.16, 0.24, 0.12 and 0.86 at 42 months, 36 months, 24 months, 24 months and 18 months after treatment, respectively.
Safety Data
Preliminary interim safety data indicate AVR-RD-01 has been generally well-tolerated with no SAEs related to the study drug.
Adverse events, or AEs, were consistent with expectations for the melphalan conditioning regimen prescribed by the study protocol. As of the most recent safety cut-off date of November 26, 2020, there were 94 AEs reported, 14 of which were Grade 3 or 4. The remainder of the AEs were Grade 2 or Grade 1.
Two SAEs were reported through the safety data cut-off date of November 26, 2020, which included one report of AE Grade 3 febrile neutropenia and one report of AE Grade 2 thrombophlebitis, each occurring following the conditioning regimen and treatment with AVR-RD-01. Both SAEs have subsequently resolved without clinical sequelae. One event, the development of a left thigh mass, was originally reported as an SAE but has now been considered by the study investigator as not serious and has resolved in the patient. No new AEs have been reported for the first patient since January 2018, the second patient since May 2018, the third patient since August 2018, the fourth patient since March 2019 or the fifth patient since August 2019. In addition, investigators observed a temporary suppression of absolute neutrophil counts and platelets, which is an expected consequence of the conditioning regimen. These decreases were transient and not associated with any negative long-term impact on the patients. Neutrophil and platelet counts recovered after dosing.
Pre-existing low anti-AGA antibody titers have been detected in four patients in the Phase 1 trial. We believe none of these are of clinical relevance.
Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.
Ongoing Phase 2 Multinational Clinical Trial (FAB-GT)
We are sponsoring an open label, multinational Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial. This study was initiated in June 2018 in Australia and enrollment in this Phase 2 clinical trial is ongoing. Eight to 12 treatment-naïve males, 16 to 50 years old, with Fabry disease are expected to be enrolled in this trial. Our objectives for this trial are to assess safety and efficacy as measured by multiple indicators, such as AGA enzyme activity, Gb3 and lyso-Gb3 levels in blood and various tissues, kidney and cardiac function, gastrointestinal symptoms, and pain and quality of life scores. All enrolled patients will receive a single treatment with AVR-RD-01 and will be followed for 48 weeks to measure safety and efficacy. We have opened two U.S. sites for our ongoing FAB-GT clinical trial and are actively recruiting potential patients for our sites in Australia, Canada and the United States. We are also engaged in discussions with the Pharmaceuticals and Medical Devices Agency, or PMDA, regarding potential future clinical development of AVR-RD-01 in Japan.
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As of March 1, 2021, five patients have been dosed in the FAB-GT clinical trial. For the fourth and fifth patients, we transitioned the lentiviral vector from LV1 to our optimized proprietary LV2 from our plato platform. All future patients in this clinical trial will be dosed using the plato platform, which we believe will further improve the efficacy and further enhance the safety of our lentiviral-based gene therapy. Because the transition to LV2 only impacts the ex vivo cell transduction process, and not the actual AGA enzyme that is produced by the transduced cells, or drug product, we believe this transition will be supported with in vitro comparability studies.
Kidney Biopsy
The primary efficacy endpoint of our FAB-GT clinical trial is the change from baseline in the average number of Gb3 inclusions per peritubular capillary, or PTC, as measured in a patient kidney biopsy one year (48 weeks) after treatment with AVR-RD-01. Gb3, also referred to as GL-3, is a type of fatty substrate that builds in the cells of Fabry patients, resulting in damage to organs such as kidneys and heart. PTCs, also referred to as kidney interstitial capillaries, or KICs, in Fabry clinical trials, convey blood after filtration in the glomeruli, enabling the blood to eventually exit the kidney and return to the circulatory system. In February 2021, we announced that the fourth patient in our FAB-GT clinical trial exhibited a reduction from an average of 4.02 Gb3 inclusions per PTC at baseline to zero inclusions per PTC one year after administration of AVR-RD-01, representing a 100% clearance of Gb3 substrate. These data followed our 2019 announcement that the first patient in the FAB-GT clinical trial exhibited a reduction from an average of 3.55 Gb3 inclusions per PTC at baseline to an average of 0.47 inclusions per PTC one year after administration of AVR-RD-01, representing an 87% reduction and a numerical decrease of 3.08. The assessments for these two patients were each made by two blinded pathologists who independently scored digital images of the sectioned kidneys from the 12-month biopsies. The second patient in the FAB-GT clinical trial has an N215S genotype, which is associated with a late-onset cardiac variant phenotype. This patient’s cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney, and accordingly this patient’s kidney biopsy had low levels of Gb3 and lyso-Gb3 at all measurements, including at baseline. Although we expect that data obtained from this patient will not provide meaningful insight on the primary efficacy endpoint in our FAB-GT clinical trial, including kidney biopsies, other important efficacy and safety measures continue to be derived from data collected from this patient. A kidney biopsy was conducted on the third patient in the FAB-GT clinical trial, but due to human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions could not be evaluated and will not be available. The fifth patient in this clinical trial was dosed in February 2021 and we expect to have kidney biopsy data available for that patient in the first half of 2022.
The following figure illustrates the decrease in average Gb3 inclusions per PTC for the first and fourth patients in the Phase 2 FAB-GT clinical trial.
Phase 2 FAB-GT: Patients 1 and 4 substrate reduction in kidney biopsy
Baseline: The last available, non-missing observation prior to AVR-RD-01 infusion
Note: With respect to Fabry disease clinical trials, Gb3 inclusions per PTC is interchangeable with GL-3 inclusions per KIC
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Lyso-Gb3 Levels
The first patient in our FAB-GT trial had an 86% reduction in plasma lyso-Gb3 levels as of 29 months post-treatment with AVR-RD-01, the third patient had a plasma lyso-Gb3 reduction of 55% as of 19 months post-treatment, and the fourth patient had a plasma lyso-Gb3 reduction of 69% as of 12 months post-treatment with AVR-RD-01, in each case as compared to baseline. The second patient has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and does not typically result in Gb3 accumulation in the kidney or skin.
AGA Enzyme Activity
In the first two patients in our FAB-GT clinical trial, for whom we have presented data out to 29 and 24 months, respectively, plasma and leukocyte AGA enzyme activity was observed to increase from nearly undetectable levels before treatment to a peak within three months after treatment, followed by a decline and trending to stabilize to levels above the range for males with Fabry disease, defined as less than 1 nmol/hr/ml. The third patient in the FAB-GT trial exhibited a rapid increase in plasma and leukocyte AGA enzyme activity from nearly undetectable levels before treatment to a peak within the first seven days after treatment in the case of plasma enzyme activity and within the first 14 days after treatment in the case of leukocyte enzyme activity, followed by a decline and subsequent increase which is trending toward a stable level above the range for males with Fabry disease at 18 months after treatment. The fourth patient in the FAB-GT trial, who was dosed with the plato platform, exhibited a rapid increase in AGA enzyme activity post-treatment and had not exhibited a substantial decline in AGA levels at 12 months after treatment. Similar to the results observed in the investigator-led Phase 1 trial of AVR-RD-01, we believe that the steep initial increase reflects AGA enzyme activity from the early progeny of the transduced stem cells, while the subsequent decline and stabilization in AGA enzyme levels reflect a shift from short-term progenitor cells towards the gradual secretion of AGA enzyme by long-term engraftment cells that become more predominant over time.
Skin Biopsy
Skin biopsies have been performed in the FAB-GT trial and evaluated by two independent blinded readers using a standard scoring system for Gb3 accumulation and clearance. The scoring system has a range of zero to three, with a score of zero representing none or trace accumulation, and a score of three representing severe accumulation. The first patient scored a three at baseline, a two at six months after treatment with AVR-RD-01 and a one at 12 months post-treatment with AVR-RD-01. The second patient in the FAB-GT trial, whose cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, scored a zero at baseline and at six months post-treatment with AVR-RD-01. The third patient scored a two at baseline and a two at six months post-treatment with AVR-RD-01. After consideration of the clinical relevance of substrate inclusion in the skin of Fabry patients and the lack of direct, strong correlation with substrate in the kidney, we have changed this trial’s exclusion criteria so that patients with no or minimal substrate in their skin at screening will still be eligible to participate in the clinical trial. We expect to continue collecting skin biopsy data as an exploratory measurement.
Vector Copy Number
The first four patients in our FAB-GT clinical trial have exhibited consistent VCN trends following administration of AVR-RD-01. Based on the latest interim data we presented in February 2021, these four FAB-GT patients exhibited VCN levels of 0.04, 0.06, 0.19 and 0.95 at 29 months, 18 months, 19 months and 12 months after treatment, respectively.
Kidney and Cardiac Function
Secondary endpoints of our FAB-GT trial include measurements of kidney function, as measured by estimated glomerular filtration rate, or eGFR, and measured glomerular filtration rate, or mGFR, as well as measures of cardiac function, as assessed by Left Ventricular Mass Index, or LVMI. eGFR is determined using the Chronic Kidney Disease Epidemiology Collaboration, or CKD-EPI, formula and mGFR is determined using plasma clearance of iohexol. The left ventricular mass, or LVM, is assessed by cardiac magnetic resonance imaging, or cardiac MRI, which is an imaging technology that enables non-invasive assessment of the function and structure of the heart. In general, for a patient with Fabry disease, an increase over time in LVM could potentially be expected. Improving patient outcomes by slowing or halting the progression of organ damage is a key mission of our Company and our investigational gene therapy programs.
In February 2021, we presented eGFR data for all five patients in the Phase 1 clinical trial of AVR-RD-01 and the first four patients in our FAB-GT clinical trial. We believe these data suggest that eight out of nine patients are exhibiting stable kidney function, with the first patient from the Phase 1 clinical trial out 42 months post-treatment. One patient, who remains
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on ERT as of January 11, 2021, entered the Phase 1 clinical trial with advanced kidney disease and a baseline eGFR level of less than 50 mL/min/1.73m2. As expected, this patient’s kidney function has not stabilized.
Also in February 2021, we presented mean average data on measures of cardiac function and structure in all four patients in the FAB-GT clinical trial at 12-months post-treatment as compared to mean baseline. The mean measurements of ejection fraction, end diastolic volume, cardiac output and LVMI at 12-months post-treatment showed an average percent change from baseline of 2.2%, 0.2%, 0.8% and 9.8%, respectively.
Safety Data
Preliminary interim safety data from the ongoing FAB-GT study indicate that AVR-RD-01 has been generally well-tolerated in the first four patients enrolled in the study.
As of the safety cut-off date of December 7, 2020, there were 111 AEs reported, 22 of which were Grade 3 or 4. The remainder of the AEs were Grade 2 or Grade 1. No AEs were deemed by the investigator to be possibly, probably, or definitely related to drug product. AEs in this study can be assigned to more than one causality assessment.
As of December 7, 2020, six SAEs were reported, one pre-treatment and five post-treatment. No events were related to AVR-RD-01 and five events were related to the conditioning regimen. All six SAEs subsequently resolved without clinical sequelae. After beginning stem cell mobilization but prior to undergoing the conditioning regimen and treatment with AVR‑RD‑01, the first patient experienced a seizure. In addition, during a scheduled protocol visit after dosing, the same patient experienced nausea and vomiting, dehydration and was admitted to the hospital for fluid hydration. Because this event warranted hospital admission, the event was categorized as an SAE. An additional SAE of febrile neutropenia was reported in each of the second and third patient post-treatment. The fourth patient experienced two post-treatment SAEs of culture negative fevers and mucositis Grade 2.
In addition to the above, each of the FAB-GT patients experienced a temporary suppression of absolute neutrophil counts and platelets, which is an expected consequence of the conditioning regimen. These decreases were transient and not associated with any negative long-term impact on the patients. Neutrophil and platelet counts recovered after dosing.
Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.
AVR-RD-04, Our Gene Therapy for Cystinosis
Together with UCSD, we are developing CTNS-RD-04, which we refer to as AVR-RD-04, for the treatment of patients with cystinosis. AVR-RD-04 is manufactured from hematopoietic stem cells that are first harvested from the patient, modified to add the gene that encodes for cystinosin, and then infused into the patient. AVR-RD-04 is currently being studied by our collaborators at UCSD in a Phase 1/2 investigator-sponsored clinical trial. As of March 1, 2021 three patients have been dosed with AVR-RD-04 and as of January 20, 2021 all three remained off cysteamine pills and eye drops.
Disease Overview
Cystinosis is a rare, genetic, autosomal recessive, lysosomal disorder caused by the accumulation of the amino acid cystine that is produced in the lysosomes of cells as the result of protein degradation. Cystine is normally transported through the lysosomal membrane to the cytosol where it is reutilized after its transformation to cysteine. In cystinosis, cystine accumulates inside the lysosomes because of a defect in the gene that encodes cystinosin, a protein that transports cystine across the lysosomal membrane. Cystine is poorly soluble and forms crystals as its concentration increases. These crystals build up and cause complications in many organs and tissues. The kidneys and eyes are especially vulnerable to damage, and the muscles, thyroid, pancreas and testes may also be affected.
The most severe form of cystinosis begins in infancy, causing poor growth and a particular type of kidney damage in which certain molecules, such as glucose, amino acids, phosphate, and bicarbonate, that should be reabsorbed into the bloodstream are instead eliminated in the urine. These renal problems ultimately lead to impaired growth and may result in soft, bowed bones, especially in the legs. By the time the patient is approximately two years old, cystine crystals may be present in the cornea, and the buildup of these crystals in the eye causes pain and an increased sensitivity to light. Untreated
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children with cystinosis may experience complete kidney failure by the age of ten. Other signs and symptoms that may occur in untreated patients, especially after adolescence, include muscle deterioration, blindness, inability to swallow, diabetes, thyroid and nervous system problems. More than 90% of untreated patients require a kidney transplant before the age of 20. It is estimated that cystinosis disease is diagnosed in approximately one in 170,000 people.
Limitations of Current Therapies
Cystinosis is currently treated with oral formulations of cysteamine that enter the lysosome and stimulate the breakdown of cystine into products that do not require the cystinosin protein to be transported. Oral treatment can delay the development of kidney failure by six to ten years if it is started at a very early age, however it cannot prevent kidney failure or the development of other complications, such as the formation of cystine crystals in the cornea. The most commonly prescribed oral therapies for cystinosis are Procysbi (delayed release cysteamine bitartrate), marketed by Horizon Orphan, and Cystagon (cysteamine bitartrate), marketed by Mylan and Recordati S.p.A. In 2020, Procysbi generated worldwide net sales of approximately $170 million. We estimate that the average five-year cost to the healthcare system per cystinosis patient prescribed standard of care treatment in the United States is approximately $4.3 million.
Procysbi and Cystagon must be taken orally every 12 or six hours, respectively, leading to significant pill burden and compliance challenges. Because cysteamine works by directly binding to cystine, rather than through a typical small molecule that inhibits an enzyme or receptor, a substantial quantity is required. For adults, this can mean taking at least 12 capsules twice a day, every day. Oral therapy with cysteamine is associated with a high degree of noncompliance due to the frequency with which it must be dosed and the accompanying nausea, as well as the acrid sulfur smell that it produces in the breath and body. It has been estimated that only one third of patients are able to adhere to the strict dosing schedule. Studies have shown that adherence diminishes over time in adolescents and adults despite disease impact. Further, oral cysteamine treatment has no effect on ocular cystine crystals deposits, thus requiring patients to be treated with topical cysteamine eye drops which must be applied each hour the patient is awake.
Our Solution
We are developing AVR-RD-04 to potentially provide a functional cure to patients with cystinosis with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure. AVR-RD-04 is a lentiviral-based gene therapy containing a human gene for cystinosin designed to maximize the likelihood of sustained cystinosin production in hematopoietic stem cells and their progeny.
Ongoing Phase 1/2 Investigator-Sponsored Clinical Trial
In the Phase 1/2 clinical trial of AVR-RD-04 that is being conducted by our collaborators at UCSD, six patients with cystinosis who are currently being treated with cysteamine will be enrolled. The clinical trial’s primary endpoints are safety and tolerability, assessed for up to two years after treatment. Secondary endpoints to assess preliminary efficacy include change from baseline in cystine levels in rectal mucosa and granulocytes, as well as cystine crystal counts in the cornea and skin. These secondary efficacy endpoints will also be evaluated through clinical tests of kidney function, ophthalmologic measures, muscle strength, pulmonary function and neurological and psychometric function, as well as through patient-reported outcomes and assessments of health-related quality of life. Mixed leukocyte and granulocyte cystine concentration measures have been part of cystinosis standard of care treatment for the past two decades, and changes in the average level of cystine in granulocytes from baseline was originally a primary endpoint of the clinical trial of AVR-RD-04. However, we and our collaborators at UCSD determined that cystine concentration in leukocytes and granulocytes, which is used to monitor small molecule therapies, is not appropriate to represent the mechanism of action of a gene therapy. As a result, the protocol for this clinical trial was amended in 2020 to retain safety and tolerability as the primary endpoint, as is appropriate for this stage of development, and shift measurement of cystine in granulocytes to a secondary endpoint.
Because this is an investigator-sponsored clinical, the study drug will not be manufactured using our plato platform, and neither the automated, closed manufacturing system nor LV2 will be used in connection with this clinical trial.
Kidney Function
Assessment of kidney function includes measurements of eGFR and serum creatinine, or sCR. eGFR is determined using the CKD-EPI formula and sCR is measured as part of the comprehensive metabolic panel. The first patient in the Phase 1/2 clinical trial exhibited an eGFR value of 42 mL/min/1.73m2 16 months post-treatment as compared to a baseline value of 55 mL/min/1.73m2. This patient’s eGFR values had been trending downward in the three years prior to administration of
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AVR-RD-04. However, at three and 16 months post-treatment the patient’s eGFR values were 43 mL/min/1.73m2 and 42 mL/min/1.73m2, respectively. While these data suggest potential kidney function stabilization after years of pathological decline, this patient’s eGFR levels could resume declining at an accelerated rate due to the irreversible nature of end-stage renal disease. At six months post-treatment the second patient in the clinical trial, who has received two kidney transplants, exhibited an eGFR value of 81 mL/min/1.73m2 as compared to a baseline value of 71 mL/min/1.73m2.
Cystine Crystals in Skin and Rectal Biopsy Tissues
Skin and rectal biopsies were performed on the first patient at baseline and 12-months post-treatment with AVR-RD-04. The data from the biopsies are intended to show the average skin intracytoplasmic crystals per cell, which is a measurement of the number of toxic crystals in each cell, as well as the occupancy of cytoplasmic volume with crystals. In November 2020, we announced that at 12-months post-treatment the first patient’s skin and rectal biopsies exhibited a 44% and 76% reduction, respectively, in average intracytoplasmic crystals per cell, and a 72% and 87% reduction, respectively, in occupancy of cytoplasmic volume, in each case as compared to the patient’s baseline levels. We believe these data suggest that the patient is now producing an endogenous supply of functional cystinosin that is reducing the accumulation of toxic cystine crystals.
Levels of Cystine in Skin
Levels of cystine in the skin are measured with in vivo confocal microscopy, or IVCM, on two separate areas of the skin: behind the ear and in a location determined by the treating physician. The two measurements are analyzed and quantified with 3D Image-Pro software and averaged. The first patient in the Phase 1/2 clinical trial exhibited a 56% reduction from baseline in skin cystine levels measured 12 months post-treatment with AVR-RD-04. These skin measurements are considered experimental methodologies and will require additional study to determine their validity and significance.
Levels of Cystine in Cornea
Levels of corneal cystine crystals are being assessed in this clinical trial using IVCM. In November 2020, we presented one set of images of the first patient’s cornea measured at baseline and 12-months post-administration of AVR-RD-04, and another set of images measured at baseline, seven-, nine- and 12-months post-administration. The baseline IVCM images were taken using a Nidek ConfoScan microscope and the subsequent images were taken using a Heidelberg (HRT3) with Rostock Cornea Module microscope. Each of the post-treatment images showed a noticeable decline in the presence of corneal crystals.
Granulocyte Cystine Levels
The first patient in the Phase 1/2 clinical trial exhibited granulocyte cystine levels of 4.2 nmol half cystine per milligram 12 months post-treatment with AVR-RD-04 as compared to the baseline value of 7.8. This patient’s baseline value was measured two weeks after discontinuation of cysteamine treatment and prior to initiating mobilization.
Vector Copy Number
In February 2021 we presented interim VCN data for the first three patients dosed in the Phase 1/2 clinical trial. At 12 months post-treatment with AVR-RD-04 the first patient exhibited VCN level of 0.9; at six months post-treatment the second patient exhibited VCN level of 1.7; and at one month post-treatment the third patient exhibited VCN level of 2.55.
Photophobia
Photophobia, or light intolerance, is a symptom of cystinosis that is caused by the buildup of cystine crystals in the cornea, inflammatory cell infiltration and corneal nerve damage. In the Phase 1/2 clinical trial, photophobia is being assessed on a grade of zero to five. The first patient in the clinical trial scored a three at baseline and a one at 12-months post-treatment.
Exploratory Measurement – Skin and Hair Melanin
Photographs of the first patient in this clinical trial taken at four-, six- and nine-months post-treatment suggest that the patient’s complexion, eyebrows and hair color have darkened following administration of AVR-RD-04. As is typical of many
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people with cystinosis, this patient had fair hair color and skin tone prior to dosing. Cystinosin has been demonstrated to impact the regulation of melanin synthesis, and the protocol for this trial has been amended to prospectively assess changes in melanin.
Safety Data
As of the safety cut-off date of January 27, 2021, preliminary interim clinical data for the first three patients dosed in the Phase 1/2 clinical trial appear to indicate that the AVR-RD-04 investigational gene therapy has been generally well tolerated with no unexpected safety events identified. There have been no reports of safety events attributed to the AVR-RD-04 drug product. As of the safety data cut-off date of January 27, 2021 one SAE of appendicitis was reported, which occurred post-treatment and was deemed by the investigator to be unrelated to AVR-RD-04 or the treatment procedures. A total of 48 AEs were reported as of the safety cut-off date of January 27, 2021, a majority of which were reported by the investigator to be moderate or mild. All reported AEs were consistent with expectations for the underlying disease and conditioning regimen prescribed by the study protocol.
Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.
AVR-RD-02, Our Gene Therapy for Gaucher Disease type 1
We are developing AVR-RD-02 for the treatment of Gaucher disease type 1. We plan to manufacture AVR-RD-02 from hematopoietic stem cells that are first harvested from the patient, modified to add the gene that encodes for glucocerebrosidase, or GCase, and then infused into the patient. Patient enrollment has commenced for the Phase 1/2 Guard1 clinical trial of AVR-RD-02 in patients with Gaucher disease type 1, and we dosed the first patient in the second quarter of 2020. The Guard1 trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe. As of March 1, 2021 one patient has been dosed.
Disease Overview
Gaucher disease type 1 is the non-neuronopathic form of Gaucher disease, a rare, autosomal recessive, lysosomal disorder caused by a hereditary deficiency of functional GCase, an enzyme responsible for degrading glucocerebroside, a cell membrane building block, into glucose and lipids within lysosomes of cells. In patients with Gaucher disease type 1, the recycling of glucocerebroside from the breakdown of old red and white blood cells is inhibited, leading to its accumulation in macrophages. These abnormal macrophages, known as Gaucher cells, accumulate in multiple organs, particularly the liver, spleen and bone marrow.
Gaucher disease type 1 is one of the most common lysosomal disorders. It is diagnosed in approximately one in 44,000 births worldwide and is more prevalent in certain ethnic groups, such as people of Ashkenazi Jewish heritage. Approximately 90% of patients suffering from Gaucher disease in western countries have Gaucher disease type 1, which manifests as multiple morbidities including enlargement of the spleen and liver, low red blood cells, or anemia, low platelet count, or thrombocytopenia, and bone abnormalities including bone pain, fractures and arthritis. Bruising, risk of bleeding and fatigue are common due to the thrombocytopenia and anemia. Compared with the general population, patients with Gaucher disease type 1 have an approximately 20-fold increased risk of developing Parkinson’s disease. Gaucher disease type 1 does not have manifestations of central nervous system symptoms.
Limitations of Current Therapies
Gaucher disease type 1 is currently treated with bi-weekly infusions of ERT consisting of recombinant GCase over a patient’s lifetime. The most commonly prescribed ERTs for Gaucher disease are Cerezyme, marketed by Sanofi Genzyme, and VPRIV, marketed by Shire.
Although long-term ERT for Gaucher disease type 1 results in some therapeutic benefit, ERTs leave patients with significant unmet needs. Twenty-five percent of patients with Gaucher disease continue to experience physical limitations following two years of ERT, and a clinically significant percentage of patients continue to experience bone pain, thrombocytopenia and enlargement of spleen following ten years of ERT. In a published study of ERT therapy for Gaucher disease type 1, six target goals were evaluated, including parameters for hemoglobin and platelet levels, spleen and liver
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volumes, and general bone pain and severe disabling bone pain known as bone crisis. Following at least four years of ERT in this study, approximately 60% of patients failed to achieve one or more of these six target goals.
In addition to ERTs, the FDA has approved several oral therapies for the treatment of Gaucher disease, including Zavesca (miglustat) marketed by Actelion and Cerdelga (eliglustat) marketed by Sanofi Genzyme. We believe these oral therapies also provide suboptimal treatment. Zavesca is approved as a second line therapy and is associated with significant toxicities, including diarrhea, weight loss and tremors. Cerdelga is not approved for use in children, has highly variable metabolism due to patient-to-patient genetic variations and is highly susceptible to interactions with other drugs.
Both ERTs and oral therapies for Gaucher type 1 impose significant costs on the healthcare system. We estimate that the average five-year cost to the healthcare system per Gaucher patient (all types) prescribed standard of care treatment in the United States is approximately $2.3 million. In 2020, Sanofi Genzyme’s Cerezyme and Cerdelga together generated worldwide net sales of approximately €924 million euros and Takeda’s VPRIV generated worldwide net sales of approximately ¥38.5 billion Japanese yen.
Our Solution
We are developing AVR-RD-02 to potentially provide a functional cure to patients with Gaucher disease type 1 with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure. AVR-RD-02 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained GCase production in hematopoietic stem cells and their progeny.
Ongoing Phase 1/2 Clinical Trial (Guard1)
We have initiated our Guard1 Phase 1/2 clinical trial of AVR-RD-02 in patients with Gaucher disease type 1. Patient enrollment has commenced, and as of March 1, 2021 one patient has been dosed. This clinical trial is actively recruiting in Australia and Canada, with additional sites planned in the United States, Israel and Europe. Our initial clinical trial will be an adaptive trial that will include both treatment-naïve patients and patients that are currently stable on ERT. We intend to enroll eight to 16 patients, between the ages of 16 and 35, with Gaucher disease type 1. Patients currently prescribed ERT will cease treatment throughout the clinical trial. All enrolled patients will receive a single treatment with AVR-RD-02 and will be followed for 52 weeks to measure safety and efficacy. We intend to utilize our plato platform for all patients enrolling in our Phase 1/2 clinical trial of AVR-RD-02. Our efficacy endpoints for this clinical trial will include measures of clinical efficacy, such as liver and spleen volumes, hemoglobin, platelet counts, bone pain and bone density measures along with other blood markers used in Gaucher disease type 1.
In February 2021 we presented data on the first patient in the Guard1 clinical trial, who discontinued ERT one month prior to dosing of AVR-RD-02 and remains off ERT as of February 8, 2021.
Plasma Lyso-Gb1 Reductions
Glucosylsphingosine, or lyso-Gb1, is considered a surrogate marker for disease activity and treatment response for Gaucher disease type 1. In the case of ERT-naïve patients and patients who have discontinued ERT, we believe that reductions in lyso-Gb1 levels following treatment with gene therapy are likely driven by the therapeutic effect of gene therapy. In February 2021, we announced that the first patient in our Guard1 clinical trial exhibited a 44% reduction in plasma lyso-Gb1 levels six months post-administration of AVR-RD-02 as compared to baseline while on ERT. In this study baseline ERT is the measurement of a single plasma lyso-Gb1 value observed prior to initiating mobilization.
Plasma Chitotriosidase Reductions
Chitotriosidase is a biomarker of macrophage activation that is found in high levels in Gaucher patients where the macrophages have accumulated an excess lipid burden. In February 2021, we announced that at six months post-treatment with AVR-RD-02 the first patient in the Guard1 clinical trial exhibited a 49% reduction in chitotriosidase levels as compared to baseline while on ERT. In this study baseline ERT is the measurement of a single chitotriosidase value observed prior to initiating mobilization.
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Hemoglobin Concentration and Platelet Counts
Gaucher disease type 1 typically causes patients to have low levels of hemoglobin and platelets. In February 2021, we presented data on the hemoglobin and platelet levels of the first patient dosed in the Guard1 clinical trial at screening, baseline and six months post-administration of AVR-RD-02. The baseline measurement was taken one month prior to discontinuation of ERT. At screening, baseline and six months post-treatment, the patient’s platelet counts were 455x109/L, 432x109/L and 351 x109/L, respectively, and the patient’s hemoglobin concentration was 12.5 g/dL, 11.2 g/dL and 12.2 g/dL, respectively. Both six-month measurements are within the normal range for a healthy individual.
Vector Copy Number
In February 2021 we presented VCN data for the first patient dosed in the Guard1 trial. At six months post-treatment, the patient exhibited a VCN of 0.6. In addition, at three months post-treatment an exploratory assessment of VCN in specific cell populations showed a VCN ≥ 0.7 in the myeloid cell lines, which we believe could be indicative of transgene presence in the macrophages, the essential cell impacted in Gaucher patients.
Safety
As of the safety cut-off date of January 4, 2021, preliminary interim clinical data for the first patient dosed in the Guard1 clinical trial appear to indicate that the AVR-RD-02 investigational gene therapy has been generally well tolerated with no unexpected safety events identified. There have been no reports of safety events attributed to the AVR-RD-02 drug product, and no SAEs were reported as of the safety data cut-off date. A total of 29 AEs were reported as of the safety cut-off date, two of which were Grade 4 and seven of which were Grade 3. The remainder of the AEs were Grade 2 or Grade 1. All reported AEs were consistent with expectations for the underlying disease and conditioning regimen prescribed by the study protocol and have resolved.
Because this clinical trial is ongoing, safety and efficacy data are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.
AVR-RD-05, Our Gene Therapy for Hunter Syndrome
We are developing AVR-RD-05 for the treatment of mucopolysaccharidosis type II (MPSII), or Hunter syndrome. AVR-RD-05 involves ex vivo transduction of the patient’s own hematopoietic stem cells with a therapeutic transgene, in-licensed from the University of Manchester, or UoM, designed to express functional iduronate 2-sulfatase, or IDS, which is the enzyme the patient needs to maintain cellular health, coupled to a proprietary ApoE2 protein tag that is designed to improve stability of the enzyme in the bloodstream and facilitate uptake by tissues.
AVR-RD-05 will be studied by our collaborators at UoM and a Phase 1/2 investigator-sponsored clinical trial of AVR-RD-05 is expected to commence in the first half of 2022.
Disease Overview
Hunter syndrome disease is a rare, recessive lysosomal disorder caused by a mutation in the gene that encodes for IDS that results in accumulation of the glycosaminoglycans heparan and dermatan sulfate. Hunter syndrome affects a multitude of organs and is a chronic and progressive multi‐system disorder. Clinical manifestations in Hunter syndrome include skeletal abnormalities, known as dysostosis multiplex, short stature, joint stiffness, and hepatosplenomegaly, accompanied by cardiorespiratory symptoms. Severe cases of Hunter syndrome, which are most common, also feature progressive neurodegeneration, typically followed by death in teenage years due to obstructive airway disease and cardiac failure.
Hunter syndrome is an X-linked disorder, meaning the gene that is responsible is located on the X chromosome. Because males have only one X chromosome, an abnormal copy of the gene that causes Hunter syndrome disease is sufficient to cause the disease. The overall diagnosed incidence of Hunter syndrome is estimated to be approximately one in 100,000 to one in 170,000 males worldwide.
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Limitations of Current Therapies
Hunter syndrome is currently treated with ERT delivered by weekly intravenous infusion. The only approved therapy for Hunter syndrome is Elaprase, marketed by Shire, which generated worldwide net sales of approximately ¥67 billion Japanese yen in 2020. We estimate that the average five-year cost to the healthcare system per Hunter patient prescribed standard of care treatment in the United States is approximately $2.4 million.
Two-thirds of patients experience developmental and neurological decline, which is often noted by approximately age two. Due to lack of newborn screening, diagnosis usually occurs much later in patient’s lives, around five years of age and can be as late as eight years. Although patients typically begin ERT treatment almost immediately after diagnosis, often the disease symptoms are far advanced and ERT is insufficient to halt the disease progression. ERT does not treat the neurological symptoms of the disease, and therefore a significant unmet need remains in a majority of patients with Hunter syndrome. Furthermore, anti-ERT antibodies are a limitation for a significant part of the entire patient population.
Our Solution
We, together with our collaborators at UoM, are developing AVR-RD-05 to potentially provide a functional cure to patients with Hunter syndrome. AVR-RD-05 is intended to be a gene therapy product containing a codon-optimized human gene for IDS attached to a ApoE2 protein tag designed to increase the cells’ secretion of IDS to potentially restore healthy cellular function, stabilize the secreted IDS so it has a longer half-life, and facilitate uptake of IDS into the brain. In addition, we believe that the utilization of busulfan in our conditioning regimen may have the potential to allow AVR-RD-05 to cross the blood-brain barrier, a feature which may yield therapeutic benefit.
Preclinical Data
In November 2020, we presented previously published preclinical data on AVR-RD-05. The study presented data from normal study mice, mice affected with the equivalent of Hunter syndrome, mice treated with AVR-RD-05 modified to not incorporate the ApoE2 protein tag, and mice treated with AVR-RD-05 incorporating the proprietary ApoE2 tag. These data demonstrated the effect of AVR-RD-05 on levels and composition of heparan sulfate in the brain, neuro-inflammatory pathologies, facial and skeletal abnormalities, as well as cognitive performance and sensorimotor coordination and balance. We believe these data support the potential of AVR-RD-05 to treat this progressive disease, and potentially prevent the onset of severe symptoms if treated early.
Planned Phase 1/2 Investigator-Sponsored Clinical Trial
Our collaborators at UoM plan to initiate a Phase 1/2 clinical trial in the first half of 2022. The Phase 1/2 clinical trial is expected to enroll five male patients, age three months to 24 months, with an early progressive form of the disease. The clinical trial is expected to be open to treatment-naïve patients as well as patients currently on ERT. The clinical trial’s primary endpoints are expected to be safety and tolerability. Secondary endpoints to assess preliminary efficacy are expected to include measurements of IDS levels and its activity as well as levels of glycosaminoglycans. Neurocognitive evaluations will also be conducted to evaluate therapeutic activity in the brain.
Because this is an investigator-sponsored clinical, the study drug will not be manufactured using our plato platform, and neither the automated, closed manufacturing system nor LV2 will be used in connection with this clinical trial.
AVR-RD-06, Our Gene Therapy for Gaucher disease type 3
In November 2020, we announced an expansion of our lysosomal disorder pipeline with a new preclinical product candidate, AVR-RD-06, our investigational gene therapy for Gaucher disease type 3. Gaucher disease type 3 is the subacute neurological form of Gaucher disease characterized by progressive encephalopathy and associated with the systemic manifestations of Gaucher type 1. As with Gaucher type 1, Gaucher type 3 disease is caused by a gene that codes for the enzyme glucocerebrosidase. The deficiency in glucocerebrosidase leads to the accumulation of Gb1 and its toxic metabolite, lyso-Gb1. AVR-RD-06 is expected to use the same vector and drug product that we use in AVR-RD-02, our investigational gene therapy for Gaucher disease type 1. We currently expect to request a meeting with the FDA this year to discuss a potential path to the clinic for AVR-RD-06.
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Disease Overview
Gaucher disease type 3 is the subacute, chronic neurological form of Gaucher disease, a rare, autosomal recessive, lysosomal disorder caused by a hereditary deficiency of functional GCase, an enzyme responsible for degrading glucocerebroside, a cell membrane building block, into glucose and lipids within lysosomes of cells. In patients with Gaucher type 3 disease, the recycling of glucocerebroside from the breakdown of old red and white blood cells is inhibited, leading to its accumulation in macrophages. These abnormal macrophages, known as Gaucher cells, accumulate in multiple organs, particularly the liver, spleen and bone marrow. In addition, glucosylceramide accumulates in perivascular macrophages and brain glial cells and neurons leading to neuronal death. Clinically, central nervous system manifestations of Gaucher disease type 3 appear in childhood or adolescence, typically within the latter part of the first decade for the majority of patients, although the course of disease is markedly heterogenous.
Gaucher disease type 3 is estimated to occur in one in 100,000-300,00 births and is more prevalent in certain ethnic groups, such as people of Swedish Norrbottnian descent. Systemic manifestations of Gaucher disease type 3 may include enlargement of the spleen and liver, low red blood cells, or anemia, low platelet count, or thrombocytopenia, and bone abnormalities including bone pain, fractures and arthritis. Bruising, risk of bleeding and fatigue are common due to the thrombocytopenia and anemia. Variable other features of Gaucher disease type 3 include pulmonary infiltrates and esophageal varices associated with liver cirrhosis. Presentation of diverse neurologic features may begin at any time during infancy and early childhood with the most prevalent finding of horizontal supranuclear gaze palsy. Other manifestations of neurological disease include generalized seizures, myoclonus, ataxia, and/or dementia.
Limitations of Current Therapies
Current therapies used to treat Gaucher disease type 1, namely, ERT and substrate reduction therapy, or SRT, do not penetrate the brain and therefore have no effect on the neurological aspects of Gaucher disease type 3. The most commonly prescribed ERTs for Gaucher disease are Cerezyme, marketed by Sanofi Genzyme, and VPRIV, marketed by Shire.
Patients with Gaucher disease type 3 may exhibit wide variation of disease progression with the severity of systemic disease and neurological deficits differing considerably between patients. In a published study of SRT therapy for Gaucher disease type 3, no significant benefits were demonstrated on the neurological manifestations of Gaucher disease type 3. Although long-term ERT for Gaucher disease type 3 results in some therapeutic benefit on visceral, hematological and bone manifestations, ERTs leave patients with significant unmet needs owing to persisting accumulation of substrate within the central nervous system. Following 10 years of ERT, two patients’ epilepsy had worsened while a third patient developed epilepsy around eight years after treatment initiation. Another published study on ERT showed that enzyme infusions had no effect on patients with myoclonus and approximately 40% of patients deteriorated neurologically during a median 3.5 year follow-up period.
Our Solution
We are developing AVR-RD-06 to potentially provide a functional cure to patients with Gaucher disease type 3 with a single dose of the patient’s own hematopoietic stem cells modified in an ex vivo procedure. AVR-RD-06 is a lentiviral-based gene therapy that contains a codon-optimized human gene and is designed to maximize the likelihood of sustained GCase production in hematopoietic stem cells and their progeny.
Preclinical Data
In November 2020, we presented preclinical data from a mouse study which we believe demonstrate the potential of lentiviral gene therapy to repopulate the microglia compartment of the brain with microglia cells carrying the therapeutic gene. We also presented preclinical data demonstrating a technique that potentially allows us to examine individual cells in the brain to determine which cell types contain the therapeutic gene. Finally, we presented data comparing the genetically modified microglia and endogenous microglia, which we believe suggest that even though the modified cells are not native to the brain, they do not act as “invaders” and thus could be expected to carry out normal physiological functions.
AVR-RD-03, Our Gene Therapy for Pompe Disease
We are developing AVR-RD-03 for the treatment of Pompe disease. We will manufacture AVR-RD-03 from hematopoietic stem cells that are first harvested from the patient, modified to add the gene that encodes for acid alpha glucosidase A, or GAA, attached to a peptide sequence known as a glycosylation-independent lysosomal targeting, or GILT,
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tag and then infused into the patient. AVR-RD-03 will incorporate a GILT tag because the GILT tag has been found to increase the uptake of GAA into cells, especially in muscle cells by a multiple of 25, which is a particularly important target tissue for patients with Pompe disease and a target tissue that is considered difficult to access for ERT. AVR-RD-03 is designed to incorporate a potent promoter to increase volume of system enzyme in circulation.
Disease Overview
Pompe disease is a rare, autosomal recessive lysosomal disorder caused by a mutation in the gene that encodes for GAA that results in the buildup of glycogen, a complex sugar, in the body’s cells. The accumulation of glycogen in certain organs and tissues, especially muscles, impairs normal tissue and organ function. Patients with Pompe disease experience serious muscle related problems, including progressive muscle weakness, especially in the legs and trunk, and the muscles that control breathing. As the disorder progresses, breathing problems can lead to respiratory failure.
The overall diagnosed incidence of Pompe disease is estimated to be approximately one in 58,000 people although frequency and disease progression varies with age of onset, ethnicity and geography. Overall diagnosed incidence of Pompe disease is projected to increase to one in 22,000 people as it is increasingly included in newborn screening panels.
The severity of Pompe disease symptoms and rate of progression is highly variable and correlated with age of symptom onset and the degree of enzyme deficiency. Infantile or early onset disease, the most severe form of Pompe disease, accounts for approximately 25% of all affected patients. Those with early-onset disease are usually diagnosed in the first few months of life and is associated with cardiomyopathy. Left untreated, these patients can die due to heart failure, respiratory distress or malnutrition resulting from feeding difficulties within the first year of life. Patients with late-onset disease typically have higher enzyme levels and usually have symptoms such as reduced mobility and respiratory problems but are not at increased risk of developing cardiomyopathy. Late-onset patients experience progressive difficulty walking and respiratory decline. While life expectancy can vary, Pompe disease is a life-limiting disease that can result in death due to complications from respiratory failure.
Limitations of Current Therapies
Pompe disease is currently treated with ERT delivered by bi-weekly intravenous infusion. The only approved therapy for Pompe disease is Lumizyme (known as Myozyme outside of the United States), marketed by Sanofi Genzyme, which generated worldwide net sales of approximately €948 million euros in 2020. We estimate that the average five-year cost to the healthcare system per Pompe patient prescribed standard of care treatment in the United States is approximately $3.2 million.
Though patients treated with ERT for Pompe disease have improved survival and respiratory function, ERT is not curative, and patients in long-term observational studies continue to have increased risk of heart failure and have residual muscle weakness including difficulties swallowing with risk of aspiration. One challenge with ERT treatment for Pompe disease is that a standard dose requires approximately twenty-fold more enzyme compared to standard doses for Fabry or Gaucher diseases. Large doses of Lumizyme that are delivered systemically in order to achieve potentially therapeutic levels in the target tissues result in approximately 90% of patients developing antibodies against the therapy. These antibody responses may impact both the efficacy and safety of Lumizyme. The FDA approval of Lumizyme carries a black box warning related to the risk of severe allergic and immune mediated reactions, including life-threatening anaphylaxis.
Our Solution
Our AVR-RD-03 program for Pompe disease is currently in preclinical development, and in 2020 we completed IND-enabling proof-of-concept preclinical studies, with toxicology studies expected to be completed in 2021.We are developing AVR-RD-03 to be a gene therapy product containing a codon-optimized human gene for GAA attached to a GILT tag designed to increase uptake of GAA in muscle cells. AVR-RD-03 will target patients with late onset Pompe disease, which represent the majority of patients with this disease. In addition, we believe that the utilization of busulfan in our conditioning regimen may have the potential to allow AVR-RD-03 to cross the blood-brain barrier, a feature which may yield therapeutic benefit.
Preclinical Data
In November 2020 we presented data from a study in which mice with the equivalent of classic infantile-onset Pompe disease were treated with AVR-RD-03. We these data believe support the potential of lentiviral-based gene expression of
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GAA to prevent some of the symptoms of GAA deficiency. These results also demonstrated the need to further increase the uptake of GAA into muscle cells to treat patients, which is a known challenge for ERTs and leads to the use of large quantities of enzyme to attempt to deliver effective treatment levels.
We believe we can use a GILT tag to address the known challenges of skeletal muscle uptake in patients with Pompe disease. Attachment of a GILT tag to a particular protein can increase the effective uptake of that protein into target tissues. We are designing AVR-RD-03 to use a GILT tag to facilitate GAA uptake into cells and thereby reduce the therapeutically required amount of GAA produced by a patient’s cells following gene therapy treatment.
In mouse models of Pompe, administration of recombinant GAA with the GILT tag demonstrated significant reduction in glycogen in cardiac and skeletal muscles as compared to the administration of recombinant GAA alone. We licensed GILT tag technology from BioMarin and are incorporating a GILT tag into our lentiviral vector with the goal of the patient producing GILT-tagged GAA following treatment with AVR-RD-03.
GAA Enzyme Production
Our preclinical study measured the levels of GAA observed in normal mice, mice with the equivalent of infantile-onset Pompe disease, mice treated with AVR-RD-03 modified to not incorporate our proprietary GILT tag, and mice treated with AVR-RD-03 including our GILT tag, in each case measured 16 weeks post-treatment. These data showed significant overexpression of GAA in bone marrow, white blood cells and plasma in mice treated with AVR-RD-03 without our GILT tag as well as AVR-RD-03 incorporating our GILT tag.
Glycogen Reduction
Our preclinical study also measured glycogen levels in the heart and brain at four months post-treatment with our GILT-tagged version of AVR-RD-03, which showed a 99% and 100% reduction, respectively, in glycogen levels. In addition, our study measured glycogen levels in various organs of the study mice at eight months post-treatment. The data showed an average of greater than 99% reduction in glycogen levels in the heart, greater than 97% reduction in the diaphragm, greater than 85% reduction in skeletal muscle, greater than 95% reduction in the brain, and greater than 99% reduction in the spinal cord.
Manufacturing
Industrializing Our Gene Therapies Through Our Outsourced Manufacture and Supply Network
We are establishing global manufacturing relationships that we believe will provide us with drug product manufacturing capabilities to support all aspects of the development and eventual commercialization of our gene therapies. Our team has leveraged their broad expertise in the manufacturing of gene and cellular therapies to build a global network of CMO partners for the development and manufacture of drug products and outsourced suppliers for the supply of vectors and plasmids. We believe that our third-party CMO partners and suppliers have capacity to accommodate current and future clinical trials and we are continuing to build a global network that we expect will have capacity to generate sufficient quantities to meet our expected commercial needs.
To optimize production of our gene therapies, we have moved our cell processing to an automated, closed system using disposable supplies. We believe this industrialized manufacturing process will enable a repeatable approach through which we can design and manufacture commercially viable lentiviral gene therapies to potentially treat a large variety of genetic disorders. We expect that our automation of the manufacturing processes will further increase our CMO partners’ manufacturing capacity.
Producing a Patient’s Gene Therapy
We start the process to produce a patient’s gene therapy with the mobilization of a patient’s stem cells from the bone marrow to the blood stream and isolate them using a standard procedure used in stem cell transplants. We then treat these cells with a lentiviral vector to insert the equivalent of a functional copy of the gene that is defective in the target disease in a 48-hour process. We preserve patients’ modified cells at a very low temperature, using cryopreservation to maintain the cellular material in optimal condition until it is thawed prior to being infused into the patient. The cryopreservation allows us to conduct a number of tests to validate the modified cells prior to introducing them into the patient. We believe cryopreservation will also enable us to supply our products globally, as well as significantly increase the convenience of
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infusion scheduling for clinicians and patients, compared to fresh ex vivo gene therapy products that may have shelf-lives of only 24 hours.
Prior to infusion of the gene therapy-modified cells into the patient, the patients undergo a conditioning regimen to remove some of the patient’s unmodified cells from the bone marrow to create sufficient space for the modified hematopoietic stem cells to engraft and produce their progeny.
After the conditioning regimen is complete, the lentivirally-modified stem cells are infused into the patient by intravenous administration in an outpatient setting. After infusion, these cells engraft into the bone marrow, replicate and differentiate into all the various types of blood cells that will distribute throughout the body. These widely distributed cells lead to sustained expression of the desired therapeutic enzyme or other protein. The sustained expression of the functional enzyme is a direct substitute for the protein currently delivered by ERTs, which require periodic infusions.
Intellectual Property and Other Barriers to Entry
The proprietary nature of, or protection for, our gene therapy technology, our product candidates, our production methods and supply chain are an important part of our strategy to develop and commercialize novel therapies. To maximize the commercial opportunity for our gene therapies, if approved, we and our partners have been building and continue to build barriers to entry by our competitors, including:
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We in-license and develop know-how, including data, relating to certain of our product candidates. |
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We rely on trade secret protection to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. |
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Our management team has significant experience in cell processing and commercial-scale cellular therapy manufacturing. Leveraging this experience, we are building our global network of suppliers and CMO partners which combines their expertise in vector manufacturing with a closed, automated manufacturing system, all utilizing cGMP. |
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Our gene therapies are designed to potentially provide a curative benefit. If our gene therapies are approved before any other potentially curative treatments, we believe the benefits of our approach and the resulting first mover advantage may provide meaningful disincentive for companies seeking to develop potentially curative therapies that may compete with our own. See “—Competition.” |
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We are developing therapies to treat rare diseases and expect to pursue orphan-drug designation in the United States and similar protection outside of the United States. To date, the FDA and the European Commission have each granted orphan drug designation to AVR-RD-01 for the treatment of Fabry disease, AVR-RD-04 for the treatment of cystinosis, and AVR-RD-02 for the treatment of Gaucher disease type 1. These and other regulatory exclusivities, if granted or applicable, can prevent competitors, during the exclusivity period, from obtaining regulatory approval of the same drug or biological product for the same indication. See “—Government Regulation.” |
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We currently in-license, and we expect to file our own, patents and patent applications relating to certain of our product candidates. |
We have in-licensed patents and patent applications from BioMarin Pharmaceutical Inc., GenStem Therapeutics, Inc. and The University of Manchester directed to compositions and methods related to the manufacture and use of certain of our gene therapies. In addition, we have in-licensed certain intellectual property rights and know-how from the University Health Network and affiliates of Lund University. For example, we have in-licensed know-how and data related to AVR-RD-01, including certain information about the vector and its use, from University Health Network, and we have in-licensed know-how and data related to AVR-RD-02, including certain information about the vector and its use, from certain academic scientists affiliated with Lund University. Each of our licenses are limited to particular fields, such as Fabry disease, Gaucher disease type 1, Pompe disease, cystinosis, or Hunter syndrome, and are subject to certain retained rights. We do not control the prosecution and maintenance of all of our in-licensed patents and patent applications, and our rights to enforce the patents are limited in certain ways. For additional detail regarding the risks associated with our license agreements see “Risk Factors—Risks Related to Intellectual Property.”
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As of March 1, 2021, our in-licensed patent portfolio relating to certain of our gene therapies included the following:
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AVR-RD-03 (Pompe program): two U.S. patents, projected to expire in 2022 and 2023, and two U.S. patent applications, which if granted, would be projected to expire in 2022 and 2029, as well as corresponding patents and patent applications in certain foreign jurisdictions, as they pertain to compositions and methods for promoting lysosomal uptake of acid alpha-glucosidase and the treatment of Pompe disease. These patents and patent applications are licensed to us by BioMarin and relate to the GILT tag. |
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AVR-RD-04 (cystinosis program): one U.S. patent application, which, if granted, would be projected to expire in 2038, as well as corresponding patents and patent applications in certain foreign jurisdictions, containing claims directed to hematopoietic stem cells expressing cystinosin and methods of using the same for the treatment of cystinosis. These patent applications are licensed to us by GenStem Therapeutics, and GenStem obtained its rights from the University of California, San Diego. |
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AVR-RD-05 (Hunter program): one U.S. patent application, which, if granted, would be projected to expire in 2038, as well as corresponding patents and patent applications in certain foreign jurisdictions, containing claims directed to gene therapy vectors encoding iduronate-2-sulfatase and methods of using the same for the treatment of Hunter syndrome. These patent applications are licensed to us by the University of Manchester. |
The term of any given patent depends upon the legal term of patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing the application, subject to the timely payment of maintenance fees, among other considerations. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or USPTO, in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed commonly owned patent. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of FDA regulatory review period. However, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. In certain foreign jurisdictions similar extensions as compensation for regulatory delays are also available. The actual protection afforded by a patent varies on a claim by claim and country by country basis for each applicable product and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. Currently, we do not own or license patents or patent applications related to our AVR-RD-01, AVR-RD-02 or AVR-RD-06 product candidates. We rely, in some circumstances, on trade secrets and unpatented know-how that is either owned by or licensed to us to protect our technology. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors.
License Agreements
License Agreement with The University of Manchester
In September 2020, we entered into an agreement, or the MPSII License Agreement, with The University of Manchester, England, or UoM, whereby UoM granted us an exclusive worldwide license under certain patent and other intellectual property rights, subject to certain retained rights, to develop, commercialize and sell an ex vivo lentiviral gene therapy for use in the treatment of Hunter syndrome, or mucopolysaccharidosis type II. As consideration for the MPSII License Agreement, we agreed to pay UoM an upfront, one-time fee of $8.0 million.
As part of the agreement, we are obligated to make milestone payments of up to an aggregate of $80.0 million upon the achievement of specified development and regulatory milestones, to pay royalties, on a product-by-product and country-by-country basis, of a mid-single digit percentage based on net sales of products licensed under the agreement and to pay a low double-digit percentage of any sublicense fees received by us. The next anticipated payment milestones under the MPSII License Agreement include $2.0 million, which would become due following the date of regulatory approval of the clinical trial application for the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM, and $4.0 million, upon the dosing of the first patient in the investigator-sponsored Phase 1/2 clinical trial sponsored by UoM.
Unless terminated earlier, the agreement expires upon the later of 15 years from the effective date or the expiration of the last valid claim of the licensed patents, subject to certain surviving rights and obligations. We and UoM can each terminate the agreement in the event of the bankruptcy or insolvency of the other party, or a material breach by the other party and failure to cure such breach within a certain period of time. UoM has the right to terminate the agreement in the event of certain actions relating to challenge or opposition to the licensed intellectual property brought us or its affiliates or sublicensees.
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Concurrently with the MPSII License Agreement, we entered into a collaborative research funding agreement with UoM, or the CRFA. Under the CRFA, we have agreed to fund the budgeted costs of an investigator-sponsored Phase 1/2 clinical trial to be sponsored by UoM in connection with the development activities under the MPSII License Agreement, which are currently estimated to equal approximately £9.1 million in the aggregate.
Exclusive License Agreement with University Health Network
In November 2016, we entered into a license agreement with University Health Network, or UHN, pursuant to which UHN granted us an exclusive worldwide license under certain intellectual property rights and a non-exclusive worldwide license under certain know-how, including certain rights to data, in each case subject to certain retained rights, to develop, commercialize and sell products for use in the treatment of Fabry disease. Intellectual property licensed to us under this agreement relates to our Fabry program. In addition, for three years following the execution of the agreement, UHN granted us an exclusive option to obtain an exclusive license under certain improvements to the licensed intellectual property rights as well as an exclusive option to negotiate a license under certain other improvements. Under the terms of the agreement, we are required to meet certain performance milestones within specified timeframes. UHN may terminate the agreement if we fail to meet these performance milestones despite using commercially reasonable efforts and we are unable to reach agreement with UHN on revised timeframes.
As consideration for the licenses, we paid to UHN a one-time upfront fee in the amount of C$75,000 and are obligated to pay an additional annual fee until the first sale of a licensed product in certain markets. We are also required to make payments to UHN in connection with the achievement of certain development and regulatory milestones, in an aggregate amount of C$2.45 million, as well as royalties on a country-by-country basis of a low to mid-single digit percentages on annual sales of licensed products and a lower single digit royalty in certain circumstances. Additionally, we will pay a low double-digit percentage of all sublicensing revenue. Our royalty obligation expires on a licensed product-by-licensed product and country-by-country basis upon the latest to occur of the expiration or termination of the last valid claim under the licensed patent rights in such country (if and when any such patent rights come into existence under the license agreement in the future), the tenth anniversary of the first commercial sale of such licensed product in such country and the expiration of any applicable regulatory exclusivity in such country.
In addition, under this agreement we made a philanthropic commitment to donate funds to organizations for the benefit of the Canadian Fabry community in an amount equal to a low double-digit percentage of our royalty payments and regulatory milestone payments, up to a maximum amount of C$0.5 million in any calendar year.
Unless terminated earlier, this exclusive license agreement with UHN will expire upon the expiration of our royalty obligation for all licensed products. Either we or UHN may terminate the license agreement if the other party commits a material breach and fails to cure such breach within a certain period of time. UHN may terminate this agreement if we enter into bankruptcy or insolvency. We may terminate this agreement for any reason upon notice to UHN.
License Agreement with Lund University Rights Holders
In January 2017, we entered into an exclusive license agreement with Prof. Stefan Karlsson and Dr. Maria Dahl, affiliates of Lund University, pursuant to which Prof. Karlsson and Dr. Dahl, and certain other relevant rights holders that may have an interest in intellectual property generated under a research project we are funding with Lund University, granted to us an exclusive worldwide license, subject to certain retained rights, under certain intellectual property rights to develop, commercialize and sell products in any and all uses relevant to Gaucher disease. Intellectual property licensed to us under this agreement relates to our Gaucher program.
As consideration for the license, we are required to make payments in connection with the achievement of certain milestones up to an aggregate of $0.55 million.
Our license agreement with the rights holders expires on the latest of (i) the twentieth anniversary of the end of a certain research project we are funding pursuant to an agreement with Lund University, (ii) the expiration of the term of any patent filed on the licensed rights that covers a licensed product, (iii) the expiration of any applicable marketing exclusivity right and (iv) such time that neither we nor any of our sublicensees or partners or contractors are commercializing a licensed product. Either we or the rights holders acting together may terminate the license agreement if the other such party commits a material breach and fails to cure such breach within a certain period of time, or if the other party enters into liquidation, becomes insolvent, or enters into composition or statutory reorganization proceedings.
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License Agreement with BioMarin Pharmaceutical Inc.
In August 2017, we entered into a license agreement with BioMarin Pharmaceutical Inc., or BioMarin, pursuant to which BioMarin granted us an exclusive worldwide license under certain intellectual property rights related to GILT tags owned or controlled by BioMarin to develop, commercialize and sell retroviridae-based gene therapy products for use in the treatment of Pompe disease. This agreement was amended in February 2018 and again in January 2020 to, among things, provide that BioMarin would supply us with certain materials related to the GILT tags technology. Under the terms of the agreement, we must use commercially reasonable efforts to develop and commercialize one or more licensed products in the United States and certain European countries. In addition, we are required to initiate an IND-enabling pharmacology/toxicology study of a licensed product within a specified period of time.
As consideration for the license, we paid an initial license fee in the amount of $0.5 million and issued 233,765 shares of our Series B preferred stock to BioMarin at the time of our Series B financing. We are also obligated to make payments to BioMarin upon achievement of certain milestones up to an aggregate of $13.0 million and pay to BioMarin a low single digit royalty percentage on net sales of licensed products covered by patent rights in a relevant country. Our royalty obligation expires on a licensed product-by-licensed product and country-by-country basis upon the latest to occur of the expiration or termination of the last valid claim under the licensed patent rights in such country, which is currently projected to occur in 2029, the tenth anniversary of the first commercial sale of such licensed product in such country and the expiration of any applicable regulatory exclusivity in such country.
Unless terminated earlier, our license agreement with BioMarin will expire upon the expiration of our royalty obligation for all licensed products throughout the world. Either we or BioMarin may terminate the license agreement if the other party commits a material breach and fails to cure such breach within a certain period of time. BioMarin may also terminate the agreement in the event of any challenge or opposition to the licensed patent rights or related actions brought by us or our affiliates or sublicensees, or if we, our affiliates or sublicensees knowingly assist a third party in challenging or otherwise opposing the licensed patent rights, except as required under a court order or subpoena. In addition, BioMarin may terminate the agreement upon our bankruptcy or insolvency. We may terminate the agreement for any reason upon notice to BioMarin.
License Agreement with GenStem Therapeutics, Inc.
In October 2017, we entered into a license agreement with GenStem Therapeutics, Inc., or GenStem, pursuant to which GenStem granted us an exclusive worldwide license, subject to certain retained rights, under certain intellectual property rights owned or controlled by GenStem related to our cystinosis program, including certain rights licensed to GenStem from the University of California, San Diego, to develop, commercialize and sell products for use in the treatment of cystinosis. Under the terms of the agreement, we must use commercially reasonable efforts to develop and commercialize one or more licensed products in the United States and in at least one country from other specified markets. We also agreed to comply with certain access requirements consistent with the California Institute for Regenerative Medicine regulations and to manufacture certain licensed products substantially in the United States.
As consideration for the license, we paid an initial license fee in the amount of $1.0 million and are required to make payments upon completion of certain development milestones up to an aggregate of $16.0 million. For example, in November 2019 we made a $2.0 million payment in connection with the dosing of the first patient in the investigator-sponsored Phase 1/2 clinical trial of AVR-RD-04 in cystinosis in the United States. Additionally, we will pay to GenStem a tiered mid to high-single digit royalty percentage on annual net sales of licensed products as well as a low double-digit percentage of sublicense income received from certain third party sublicensees. Our royalty obligation expires on a licensed product-by-licensed product and country-by-country basis on the eleventh anniversary of the first commercial sale of such licensed product in such country or the expiration of the last valid claim under the licensed patent rights covering such licensed product in such country, which is currently projected to occur in 2038, whichever is later.
Unless terminated earlier, our license agreement with GenStem will terminate upon the expiration of our royalty obligation for all licensed products throughout the world. Either we or GenStem may terminate the license agreement if the other party commits a material breach and fails to cure such breach within a certain period of time. In addition, we may terminate the agreement for any reason upon notice to GenStem.
Competition
Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as academic institutions,
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government agencies and private and public research institutions. Key competitive factors affecting the commercial success of our gene therapies are likely to be efficacy, safety and tolerability profile, reliability, convenience, price and reimbursement.
The market for treatment of lysosomal disorders is especially large and competitive. The gene therapies we are currently developing, if approved, will face competition.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of our competitors. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ products may be more effective, or more effectively marketed and sold, than any product we may commercialize and may render our gene therapies obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our gene therapies. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our gene therapies non-competitive or obsolete. See “Risk Factors—Risks related to the discovery and development of our product candidates—We face significant competition and our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our product candidates,” and elsewhere in this Annual Report on Form 10-K for more information regarding competitors and competitive products.
Government Regulation
In the United States, biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act, and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biological products. Each clinical study protocol for a gene therapy product must be reviewed by the FDA and, in some instances, the National Institute of Health, or NIH, through its Recombinant DNA Advisory Committee, or RAC. FDA approval must be obtained before the marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals.
Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products. The CBER works closely with the NIH and its RAC, which makes recommendations to the NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societal issues related to proposed and ongoing gene therapy protocols. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols. The FDA also has published guidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observing subjects involved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturing and control information in INDs for gene therapies.
Ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restricting or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.
U.S. Biological Products Development Process
The process required by the FDA before a biological product may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for the humane use of laboratory animals or other applicable regulations; |
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submission to the FDA of an application for an IND, which must become effective before human clinical studies may begin; |
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approval by an independent institutional review board, or IRB, or ethics committee at each clinical study site before each study may be initiated; |
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performance of adequate and well-controlled human clinical studies according to the FDA’s regulations commonly referred to as good clinical practices, or GCPs, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use; |
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submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical studies; |
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with CGMPs, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity and, if applicable, the FDA’s current good tissue practices, or GTPs, for the use of human cellular and tissue products; |
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potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA; |
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payment of user fees for FDA review of the BLA (unless a fee waiver applies); and |
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FDA review and approval, or licensure, of the BLA. |
Before testing any biological product candidate, including a gene therapy product, in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.
The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. An IND is a request for authorization from the FDA to ship an unapproved, investigational product in interstate commerce and to administer it to humans, and must become effective before clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules had historically been subject to review by the Recombinant DNA Advisory Committee, or RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16, 2018, the NIH announced that it will no longer accept new human gene transfer protocols for review as a part of the protocol registration process or convene the RAC to review individual clinical protocols. In April 2019, NIH announced the updated guidelines, which reflect these proposed changes, and clarified that these trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level will continue as set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The FDA also may impose clinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.
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Clinical studies involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the study sponsor’s control. Clinical studies are conducted under protocols detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical study must be reviewed and approved by an Institutional Review Board, or IRB, at or servicing each institution at which the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical study subject or his or her legal representative and must monitor the clinical study until completed. Clinical research involving recombinant DNA that is subject to NIH guidelines also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.
Clinical studies typically are conducted in three sequential phases that may overlap or be combined:
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Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. |
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Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. |
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Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for approval and product labeling. |
Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of five years of annual examinations followed by ten years of annual queries, either in person or by questionnaire, of study subjects.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical study investigators. Annual progress reports detailing the results of the clinical studies must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, if at all. The FDA or the sponsor, acting on its own or based on a recommendation from the sponsor’s data safety monitoring board may suspend a clinical study at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to patients.
Human gene therapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there can be no assurance as to the length of the study period, the number of patients the FDA will require to be enrolled in the studies in order to establish the safety, efficacy, purity and potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDA to support marketing approval. The NIH has a publicly accessible database, the Genetic Modification Clinical Research Information System which includes information on gene transfer studies and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these studies.
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Concurrent with clinical studies, companies usually complete additional animal studies and also must develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with CGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
After the completion of clinical studies of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. In most cases, the submission of a BLA is subject to a substantial application user fee, although the fee may be waived under certain circumstances. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, for original BLAs, the FDA has ten months from the filing date in which to complete its initial review of a standard application and respond to the applicant, and six months from the filing date for an application with priority review. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification. This review typically takes twelve months from the date the BLA is submitted to the FDA because the FDA has approximately two months to make a ‘‘filing’’ decision. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.
Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with CGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.
Before approving a BLA, the FDA typically will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with CGMP requirements and adequate to assure consistent production of the product within required specifications. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance with GTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical studies were conducted in compliance with IND study requirements and GCP requirements. To assure CGMP, GTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
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Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA for a novel product (e.g., new active ingredient, new indication, etc.) must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase 4 clinical studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting a BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphan drug status in the European Union has similar, but not identical, benefits.
Expedited Development and Review Programs
The FDA has various programs, including Fast Track designation, breakthrough therapy designation, accelerated approval and priority review, that are intended to expedite or simplify the process for the development and FDA review of drugs and biologics that are intended for the treatment of serious or life-threatening diseases or conditions. These programs do not change the standards for approval but may expedite the development or approval process. To be eligible for fast track designation, new drugs and biological products must be intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biologic
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may request the FDA to designate the drug or biologic as a Fast Track product at any time during the clinical development of the product. One benefit of fast track designation, for example, is that the FDA may consider for review sections of the marketing application for a product that has received Fast Track designation on a rolling basis before the complete application is submitted.
Under the breakthrough therapy program, products intended to treat a serious or life-threatening disease or condition may be eligible for the benefits of the Fast Track program when preliminary clinical evidence demonstrates that such product may have substantial improvement on one or more clinically significant endpoints over existing therapies. Additionally, FDA will seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design and conduct a development program as efficiently as possible.
Any product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the review. Under priority review, the FDA’s goal is to review an application in six months, compared to ten months for a standard review.
Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.
Regenerative Medicine Advanced Therapies Designation
As part of the 21st Century Cures Act, enacted in December 2016, Congress amended the FD&C Act to facilitate an efficient development program for, and expedite review of regenerative medicine advanced therapies, which include cell and gene therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Regenerative medicine advanced therapies do not include those human cells, tissues, and cellular and tissue based products regulated solely under section 361 of the Public Health Service Act and 21 CFR Part 1271. This program is intended to facilitate efficient development and expedite review of regenerative medicine therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and qualify for RMAT designation. A drug sponsor may request that the FDA designate a drug as a RMAT concurrently with or at any time after submission of an IND. The FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is preliminary clinical evidence indicating that the drug has the potential to address unmet medical needs for a serious or life-threatening disease or condition. A BLA for a regenerative medicine therapy that has received RMAT designation may be eligible for priority review or accelerated approval through use of surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites. Benefits of RMAT designation also include early interactions with the FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A regenerative medicine therapy with RMAT designation that is granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence from clinical studies, patient registries, or other sources of real world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. Like the FDA’s other expedited development programs, RMAT designation does not change the standards for approval but may expedite the development or approval process.
Post-Approval Requirements
Maintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to CGMP. We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the CGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological
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products, include reporting of CGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.
We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical holds, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors or other stakeholders, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with CGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain CGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. In addition, a patent can only be extended once and only for a single product. The U.S. PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend to apply for restoration of patent term for one of our patents, if and as applicable, to add patent life beyond its current expiration date, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant BLA.
A biological product can obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods, including some regulatory exclusivity periods tied to patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
The ACA, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize
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duplicative testing. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structure of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.
A reference biological product is granted four and 12 year exclusivity periods from the time of first licensure of the product. FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product, and FDA will not approve an application for a biosimilar or interchangeable product based on the reference biological product until twelve years after the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity, or potency. Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed product that results in a change in safety, purity, or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, to which we are subject, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.
Government Regulation outside of the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical studies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.
Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical studies or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical study application much like the IND prior to the commencement of human clinical studies. In the European Union, for example, a Clinical Trial Application, or CTA, must be submitted for each clinical trial to each country’s national health authority and an independent ethics committee, much like the FDA and an IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, the corresponding clinical study may proceed.
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The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical studies must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
To obtain regulatory approval of an investigational product under European Union regulatory systems, we must submit a marketing authorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of, among other things, region-specific document requirements. The European Union also provides opportunities for market exclusivity. For example, in the European Union, upon receiving marketing authorization, innovative medicinal products generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic or biosimilar application. During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be an innovative medicinal product, and products may not qualify for data exclusivity. Products receiving orphan designation in the European Union can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union for pediatric studies. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.
The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if:
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The second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; |
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The applicant consents to a second orphan medicinal product application; or |
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The applicant cannot supply enough orphan medicinal product. |
For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical studies must be conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
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Other Healthcare Laws and Compliance Requirements
In addition to FDA restrictions on the marketing of pharmaceutical products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our business or financial arrangements and relationships through which we market, sell and distribute the gene therapies for which we obtain approval. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. On December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed; |
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federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery; |
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the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program; |
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information; |
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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members. |
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federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; and |
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers. |
Additionally, we are subject to state and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties. Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines, imprisonment and/or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the federal False Claims Act as well as under the false claims laws of several states.
Law enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our current and future business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices, including our arrangements with physicians and other healthcare providers, some of whom receive stock options as compensation for services provided, may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our gene therapies outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which may also adversely affect our business.
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Regulators globally are also imposing greater monetary fines for privacy violations. For example, in 2016, the European Union adopted a new regulation governing data practices and privacy called the General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher. Notably, on January 21, 2019, Google was fined almost $57 million by French regulators for violating GDPR.
European Data Collection
The collection and use of personal health data in the European Union is governed by the provisions of the Data Protection Directive, and as of May 25, 2018 the GDPR. The GDPR applies to any company established in the European Union as well as to those outside the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we may operate in.
Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. For example, in March 2010, the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care plans; created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjects drug manufacturers to new annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and established the Center for Medicare Innovation at Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court and members of Congress have introduced several pieces of legislation aimed at significantly revising or repealing the ACA. The United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021. The implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. In addition, the Budget Control Act of 2011 and the Bipartisan Budget Act of 2015 led to aggregate reductions of Medicare payments to providers of up to 2% per fiscal year that will remain in effect through 2030 unless additional Congressional action is taken. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. Further, on January 2, 2013, the American Taxpayer Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Individual states in the United States have also become increasingly active in proposing and passing legislation and implementing regulations designed to control pharmaceutical
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product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Finally, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA -approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that additional foreign, federal and state healthcare reform measures will be adopted in the future, any of which could limit the amounts that foreign federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, if approved, or additional pricing pressures.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any gene therapies for which we obtain regulatory approval. In the United States and markets in other countries, sales of any gene therapies for which we receive regulatory approval for commercial sale will depend, in part, on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication. A decision by a third-party payor not to cover our gene therapies could reduce physician utilization of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
In addition, coverage and reimbursement for products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate.
As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming process.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain and maintain coverage and reimbursement for any product, we may need to conduct expensive clinical trials in order to demonstrate the medical necessity and cost-effectiveness of such product, in addition to the costs required to obtain regulatory approvals. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit. Factors payors consider in determining reimbursement are based on whether the product is:
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a covered benefit under its health plan; |
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safe, effective and medically necessary; |
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appropriate for the specific patient; |
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cost-effective; and |
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neither experimental nor investigational. |
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Outside of the United States, the pricing of pharmaceutical products is subject to governmental control in many countries. For example, in the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular therapy to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval. Other countries may allow companies to fix their own prices for products, but monitor and control product volumes and issue guidance to physicians to limit prescriptions. Efforts to control prices and utilization of pharmaceutical products and medical devices will likely continue as countries attempt to manage healthcare expenditures.
Employees
As of December 31, 2020, we had 121 full-time employees, 34 of whom have Ph.D. or M.D. degrees. Of these full-time employees, 88 employees are engaged in research and development activities and 33 employees are engaged in finance, legal, human resources, facilities and general management. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our relationship with our employees to be good.
Website Access to Reports
We are subject to the informational requirements of the Exchange Act and are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings at the SEC’s website at www.sec.gov. We also maintain a website at www.avrobio.com. You may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
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Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission, or the SEC, before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common stock. Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Forward-Looking Information” in this Annual Report on Form 10-K.
Risks related to our business, financial position and need for additional capital
We have incurred net losses since inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability.
Since inception, we have incurred net losses. We incurred net losses of $119.7 million and $73.0 million for the years ended December 31, 2020 and 2019, respectively. We historically financed our operations primarily through private placements of our preferred stock and, more recently, our initial public offering and follow-on public offerings of our common stock, as well as sales of our common stock under our “at-the-market” facility. We have devoted substantially all of our efforts to research and development, including clinical and preclinical development of our product candidates, as well as assembling our team. We expect that it will be several years, if ever, before we have commercialized any product candidates. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if, and as, we:
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continue our development of our product candidates, including continuing enrollment in our ongoing clinical trials, particularly if and as we commence and continue clinical-stage activities for our product candidates; |
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initiate additional clinical trials, including the planned investigator-sponsored clinical trial of AVR-RD-05, and preclinical studies for our current and future product candidates; |
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experience delays or interruptions in preclinical studies, clinical trials, or our supply chain due to the COVID-19 pandemic; |
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seek to identify and develop or in-license additional product candidates; |
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seek marketing approvals for our product candidates that successfully complete clinical trials, if any; |
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establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval; |
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continue our implementation of our plato platform as we seek to industrialize our ex vivo lentiviral gene therapy approach into a robust, scalable and, if approved, commercially viable process; |
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hire and retain additional personnel, such as clinical, quality control, commercial and scientific personnel; |
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expand our office space, infrastructure and facilities to accommodate our growing employee base, including adding equipment and physical infrastructure to support our research and development; and |
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continue to incur additional public company-related costs. |
To become and remain profitable, we must develop and eventually commercialize product candidates with significant market potential. This will require us to be successful in a range of challenging activities, and our expenses will increase substantially as we seek to complete preclinical and clinical trials of our product candidates, and manufacture, market and sell these or any future product candidates for which we may obtain marketing approval, if any, and satisfy any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our Company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our Company also could cause you to lose all or part of your investment.
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We have never generated revenue from product sales and do not expect to do so for the next several years, if ever.
Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with collaborative partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, our product candidates. We do not anticipate generating revenues from product sales for the next several years, if ever. Our ability to generate future revenues from product sales depends heavily on our, or our collaborators’, success in:
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completing research and preclinical and clinical development of our product candidates and identifying new lentiviral-based gene therapy product candidates; |
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seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical trials; |
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launching and commercializing product candidates for which we obtain regulatory and marketing approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; |
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qualifying for adequate coverage and reimbursement by government and third-party payors for our product candidates; |
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establishing and maintaining supply and manufacturing processes and relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and the market demand for our product candidates, if approved; |
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obtaining market acceptance of our product candidates, if approved, as a viable treatment option; |
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addressing any competing technological and market developments; |
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negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements; and |
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attracting, hiring and retaining qualified personnel. |
Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA or other foreign regulatory authorities to perform clinical and other studies in addition to those that we currently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.
We will need additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.
As of December 31, 2020, we had cash and cash equivalents of $259.7 million. We believe that our existing cash and cash equivalents as of December 31, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2023. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate further clinical trials of and seek marketing approval for, our product candidates and continue to enhance and optimize our vector technology and manufacturing processes. For example, as part of our registration strategy for AVR-RD-01, we are evaluating expanding our clinical development program in support of optimizing the potential for a broad label. Such expansion, if implemented, could require significant additional development costs for AVR-RD-01. Furthermore, we have expanded the number of programs in our pipeline to a total of six investigational gene therapies, three of which are in clinical development. As a result, further development of these programs will require us to expend significant resources to advance these candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing and distribution. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise
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capital when needed or on reasonable terms, we would be forced to delay, reduce or eliminate certain of our research and development programs. Our future capital requirements will depend on many factors, including:
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the scope, progress, results and costs of drug discovery, laboratory testing, preclinical development and clinical trials for our other product candidates, including the extent of any impacts from the COVID-19 pandemic on these activities; |
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the costs, timing and outcome of regulatory review of our product candidates; |
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the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
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the costs associated with our manufacturing process development and evaluation of third-party manufacturers; |
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revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; |
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
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the terms of our current and any future license agreements and collaborations; and |
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the extent to which we acquire or in-license other product candidates, technologies and intellectual property. |
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our product revenues, if any, will be derived from or based on sales of products that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or cause us to relinquish valuable rights.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Any additional indebtedness we incur would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, or our product candidates, or grant licenses on terms unfavorable to us. Adequate additional financing may not be available to us on acceptable terms, or at all.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are a clinical-stage company founded in November 2015. Our operations to date have been limited to corporate organization, recruiting key personnel, business planning, raising capital, acquiring rights to our technology, identifying potential product candidates, undertaking preclinical studies and planning and supporting clinical trials of certain of our product candidates and establishing research and development and manufacturing capabilities. We have not yet demonstrated the ability to complete clinical trials of our product candidates, obtain marketing approvals, manufacture products on a clinical or commercial scale or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. In addition, as an early-stage company, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.
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Risks related to the discovery and development of our product candidates
Business interruptions resulting from the coronavirus disease (COVID-19) pandemic or similar public health crises have caused and may continue to cause a disruption of the development of our product candidates and adversely impact our business.
Public health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease, or COVID-19, was reported to have surfaced in Wuhan, China and subsequently spread across the world. The COVID-19 pandemic has led to the implementation of various responses, including government-imposed quarantines and stay-at-home orders, business closures, border closures and travel restrictions, cancellations of public gatherings, and other public health safety measures. These measures continue to disrupt normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.
We continue to monitor our operations and applicable government recommendations and have implemented a work-from-home policy for most employees, excluding our laboratory staff and a limited number of non-laboratory employees. Notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties on which we rely. If members of our management and other key personnel are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. We may experience limitations in employee resources, including because of sickness of employees or their families or the desire of employees to avoid contact with individuals or large groups of people.
In addition, clinical trial activities, including patient enrollment and data collection, are dependent upon global clinical trial sites which have been and continue to be adversely affected by the COVID-19 pandemic. For example, as the global healthcare community responded to the fluctuations in COVID-19 cases and hospitalizations, many hospitals, including our clinical sites, temporarily paused elective procedures, which included dosing of new patients with our investigational gene therapies. While dosing of new patients has begun to resume, our ability to continue clinical activities without further delay or interruption will depend on future developments that are highly uncertain and cannot be accurately predicted. Additionally, while ongoing data collection has continued for our patients that have been dosed, certain data collection has been delayed and additional delays could result from COVID-19-related interruptions. We are currently conducting clinical trials for our product candidates in the United States, Canada and Australia, and plan to expand to other geographies including Japan, Europe and Israel, and each of these regions are currently being affected by COVID-19.
Additional factors from the COVID-19 pandemic that have delayed and may continue to delay or otherwise adversely affect enrollment in or the progress of the clinical trials of our product candidates, as well as our business generally, include:
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the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, including the attention of physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; |
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limitations on travel that could interrupt key trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by employees, contractors or patients to clinical trial sites, including any government-imposed travel restrictions or quarantines that may impact the ability or willingness of patients, employees or contractors to travel to our clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or progress of our clinical trials; |
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interruption in global shipping affecting the transport of clinical trial materials, such as patient samples, investigational drug product and conditioning drugs and other supplies used in our clinical trials; |
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business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel limitations or mass transit disruptions, any of which could adversely impact our business operations or those of third party service providers, contractors, or suppliers on whom we rely, impair the productivity of our personnel, subject us to additional cybersecurity risks, create data accessibility problems, cause us to become more susceptible to communication disruptions, or delay necessary interactions with local regulators, ethics committees and other important agencies and contractors; |
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business disruptions involving our third parties on whom we rely, including CROs and other collaborators for the conduct of our clinical trials or our third party suppliers or manufacturers, which could impact their ability to perform adequately or disrupt our supply chain; and |
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changes in hospital or research institution policies or government regulations, which could delay or adversely impact our ability to conduct our clinical trials. |
Additionally, three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more are likely to be authorized in the coming months. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials.
These and other factors arising from the COVID-19 pandemic could worsen and further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results. The extent to which the COVID-19 pandemic impacts our operations or those of our third party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, the efficacy and safety of vaccines, the ability of third parties to manufacture and distribute vaccines, new information that may emerge concerning mutations of the coronavirus, and the actions to contain or mitigate the coronavirus or treat its impact, among others.
Our lentiviral-based gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and of subsequently obtaining regulatory approval.
We have concentrated our research and development efforts on our lentiviral-based gene therapy approach, and our future success depends on our successful development of viable gene therapy product candidates. There can be no assurance that we will not experience problems or delays in developing new product candidates and that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved. For example, timely enrollment in our clinical trials is dependent upon global clinical trial sites which have been and may continue to be adversely affected by the COVID-19 pandemic. In addition, the implementation of our plato platform and upgrades, including our transition to TCI conditioning using busulfan for our single-agent conditioning regimen, may result in delays or setbacks in our research and development activities, and we may not realize the intended benefits of these efforts. In addition, we may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all. For example, as of March 1, 2021 we have only dosed three patients using our plato platform, which we plan to utilize for the majority of patients in our ongoing FAB-GT clinical trial for AVR-RD-01 and all patients in the Guard1 clinical trial of AVR-RD-02. Our implementation of the LV2 lentiviral vector or of our cell processing to an industrialized, automated closed system using disposable supplies may not be successful or may experience unforeseen delays, which may cause shortages or delays in the supply of our products available for clinical trials and future commercial sales, if any, or impair our research and development efforts, including those in our ongoing and future clinical trials. In addition, there is no assurance that products using our proprietary LV2 lentiviral vector or manufactured using this automated system will ultimately achieve the same favorable preliminary results observed to date.
In addition, the clinical trial requirements of the FDA and other foreign regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidates. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or more extensively studied product candidates. To date, only a limited number of gene therapies have received marketing authorization from the FDA or foreign regulatory authorities. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, Canada or other major markets or how long it will take to commercialize our product candidates, if any are approved. Approvals by foreign regulatory authorities may not be indicative of what the FDA may require for approval, and vice versa.
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. The FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise the CBER in its review. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the United States National Institutes of Health, or NIH, also are subject to the NIH Guidelines, under which supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay
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before initiation of a clinical trial. If we were to engage an NIH-funded institution to conduct a clinical trial, that institution’s IBC as well as its institutional review board, or IRB, would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, foreign regulatory authorities may issue new guidelines concerning the development and marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines.
The FDA, NIH and the European Medicines Agency, or EMA, have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing. For example, the EMA advocates a risk-based approach to the development of a gene therapy product. Agencies at both the federal and state level in the United States, as well as the U.S. congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such action may delay or prevent commercialization of some or all of our product candidates.
These regulatory review committees and advisory groups and any new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of certain of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be materially and adversely affected.
The FDA continues to develop its approach to assessing gene and cell therapy products. For example, the agency has released a series of draft and final guidance documents relating to, among other topics, various aspects of gene therapy product development, review, and approval, including aspects relating to clinical and manufacturing issues related to gene therapy products. In January 2020, the FDA released a final guidance with recommendations for long-term follow-up studies of patients following human gene therapy administration due to the increased risk of undesirable and unpredictable outcomes with gene therapies that may present as delayed adverse events. We cannot be certain whether such guidance, or other guidance that the FDA may issue, will be relevant to or have an adversely impact on our gene therapy candidates or the duration or expense of any applicable regulatory development and review processes.
Our product candidates and the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, patients may experience changes in their health, including illnesses, injuries, discomforts or a fatal outcome. It is possible that as we test our product candidates in larger, longer and more extensive clinical programs, or as use of our product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier clinical trials, as well as conditions that did not occur or went undetected in previous clinical trials, will be reported by patients. Gene therapies are also subject to the potential risk that occurrence of adverse events will be delayed following administration of the gene therapy due to persistent biological activity of the genetic material or other components of the vectors used to carry the genetic material. Many times, side effects are only detectable after investigational products are tested in larger scale, pivotal clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval. FDA guidance advises that patients treated with gene therapies undergo long-term follow-up observation for potential adverse events for as long as 15 years. If additional clinical or long-term follow-up experience indicates that any of our product candidates have side effects or cause serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked or limited.
There have been several significant adverse side effects in gene therapy treatments in the past, including multiple reported cases of leukemia, myelodysplastic syndrome and death seen in other clinical trials. For example, in February 2021 a case of potential myelodysplastic syndrome and a separate case of acute myeloid leukemia were reported in a third party’s clinical trials of lentiviral gene therapy for the treatment of sickle cell disease. These safety events are currently under investigation, and while several factors have been posited as potential direct or contributing causes, including the use of busulfan in the conditioning process, no definitive conclusion has been made as of the date of this Annual Report on Form 10-K. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop.
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Possible adverse side effects that may occur with treatment with gene therapy products include an immunologic reaction early after administration that could substantially limit the effectiveness of the treatment or represent safety risks for patients. Another traditional safety concern for gene therapies using viral vectors has been the possibility of insertional oncogenesis by the vectors, leading to malignant transformation of transduced cells. In addition, dominant clonal expansion due to vector integration has been observed in third-party ex vivo lentiviral gene therapy clinical trials, including one case of thalassemia and two cases of cerebral adrenoleukodystrophy. Although to date there have been no reports of malignant transformation in these patients, these cases and any similar cases will require further monitoring and follow-up. While our lentiviral gene therapy approach is designed to avoid immunogenicity against the vector after administration, there can be no assurance that patients would not create antibodies that may impair treatment. In addition, although we are investigating a plan to potentially implement molecular cytogenetic screening, there can be no assurance that we will successfully implement such screening procedures or that, if implemented, they will enhance the safety profile of our gene therapy product candidates. If any of our gene therapy product candidates demonstrates adverse side effects at unacceptable rates or degrees of severity, we may decide or be required to halt or delay clinical development of such product candidates.
In addition to side effects caused by our product candidates, the conditioning, administration process or related procedures, which we evaluate from time to time as part of our process improvement and optimization efforts, also can cause adverse side effects. A gene therapy patient is generally administered one or more myeloablative drugs to remove stem cells from the bone marrow to create sufficient space in the bone marrow for the modified gene-corrected stem cells to engraft and produce their progeny. This procedure causes adverse side effects and transiently compromises the patient’s immune system, known as neutropenia, and ability to form blood clots, known as thrombocytopenia.
In 2019 we began transitioning, in connection with our Company-sponsored clinical trials, towards a new conditioning regimen for our product candidates utilizing busulfan as the myeloablative conditioning agent instead of the melphalan that we previously used. The use of this conditioning regimen is designed to utilize a precision dosing program, TCI, to achieve a balance between the removal of a sufficient amount of bone marrow cells from a patient against potential risks such as toxicity or graft failure. While we believe that the conditioning regimen could be performed during a limited hospital stay, we cannot guarantee that the conditioning will not require a lengthier hospitalization. Our conditioning regimens may not be successful or may nevertheless result in adverse side effects. For example, in each of our ongoing clinical trials several adverse events, including suppression of neutrophils and platelet counts following the conditioning process, were observed. While such adverse events in connection with conditioning is expected, if in the future any such adverse events caused by the conditioning process or related procedures continue at unacceptable rates or degrees of severity, the FDA or other foreign regulatory authorities could order us to cease development of, or deny approval of, our product candidates for any or all targeted indications. There have been cases of therapy-related myelodysplastic syndrome, a type of blood disorder that is a potential precursor to acute myeloid leukemia, in patients with preexisting cancer where busulfan treatment was posited to be a contributing factor to this secondary malignancy. Although we are investigating a plan to potentially implement molecular cytogenetic screening as an additional risk reduction measure, there can be no guarantees that these procedures, if implemented, would be successful. Even if we are able to demonstrate that adverse events are not product-related, such occurrences could adversely affect patient recruitment or the ability of enrolled patients to complete the clinical trial.
Additionally, if any of our product candidates receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients, a communication plan to health care practitioners, and restrictions on how or where the product can be distributed, dispensed or used. Furthermore, if we or others later identify undesirable side effects caused by our product candidates, several potentially significant negative consequences could result, including:
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regulatory authorities may suspend or withdraw approvals of such product candidate; |
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regulatory authorities may require additional or boxed warnings on the label; |
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we may be required to change the way a product candidate is distributed, dispensed, or administered or conduct additional clinical trials; |
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we could be sued and held liable for harm caused to patients; and |
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our reputation may suffer. |
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates, lead to a drop in our stock price, and significantly harm our business, prospects, financial condition and results of operations.
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We have never completed a pivotal clinical trial, and may be unable to do so for any product candidates we may develop.
We are at an early stage of development for all of our product candidates. As of March 1, 2021, we have dosed only 14 patients across four ongoing clinical trials. These ongoing clinical trials, as well as potentially additional pivotal clinical trials, must be completed in order to obtain FDA approval to market these product candidates. We have limited experience in preparing, submitting and prosecuting regulatory filings, and have not previously submitted a biologics license application, or BLA, for any product candidate.
Carrying out later-stage clinical trials is a complicated and lengthy process, and we do not expect that all data from patients participating in the clinical trials will be relevant or meaningful. For example, the primary efficacy endpoint of our Phase 2 clinical trial of AVR-RD-01, which we refer to as the FAB-GT clinical trial, is the change, from baseline to one year post-treatment with AVR-RD-01, in the average number of Gb3 inclusions per PTC, as measured in a patient kidney biopsy. The second patient in the FAB-GT trial has an N215S genotype, which is associated with a late-onset cardiac variant phenotype and lower plasma lyso-Gb3 levels. This patient’s cardiac variant phenotype does not typically result in Gb3 accumulation in the kidney and skin, and accordingly we do not expect that data obtained from this patient will have a meaningful impact on certain efficacy endpoints in our FAB-GT clinical trial, including kidney and skin biopsies. Nonetheless, there may be other important insights derived from data collected from this patient in the FAB-GT clinical trial. In addition, although a kidney biopsy was performed on the third patient in the FAB-GT clinical trial, as a result of human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions could not be evaluated and will not be available. However, we expect to continue collecting other data from the third patient, including measures of kidney function such as estimated glomerular filtration rate and measured glomerular filtration rate.
In addition, we have not yet conducted any company-sponsored clinical trials of any of our product candidates in the United States, and our interactions with the FDA have generally been limited. We cannot be certain how many additional clinical trials of AVR-RD-01, AVR-RD-04, AVR-RD-02 or any other product candidates will be required or how such trials should be designed. In order to commence a clinical trial in the United States, we are required to seek FDA acceptance of an IND for each of our product candidates. We cannot be sure any IND we submit to the FDA, or any similar clinical trial application we submit in other countries, will be accepted. While we have received clearance from the FDA to commence clinical testing in the United States for AVR-RD-01 and AVR-RD-02, and the sponsor of the investigator-led clinical trial for AVR-RD-04 has received the same, there can be no assurance that we will be able to submit and secure similar clearances for any of our other product candidates. We may also be required to conduct additional preclinical testing prior to filing an IND for any of our product candidates, and the results of any such testing may not be positive. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to a BLA submission and approval of any of our product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing any of our product candidates.
The ongoing Phase 1 clinical trial of AVR-RD-01 is an investigator-sponsored trial being conducted by University Health Network, and the ongoing Phase 1/2 clinical trial of AVR-RD-04 is also an investigator-sponsored clinical trial, which is being conducted by our collaborators at the University of California, San Diego. In addition, the planned Phase 1/2 clinical trial of AVR-RD-05 will be an investigator-sponsored trial conducted by our collaborators at The University of Manchester. We do not control the design or administration of investigator-sponsored trials, nor the submission or approval of any IND or foreign equivalent required to conduct these trials, and the investigator-sponsored trials could, depending on the actions of such third parties, jeopardize the validity of the clinical data generated, identify significant concerns with respect to our product candidates that could impact our findings or clinical trials, and adversely affect our ability to obtain marketing approval from the FDA or other applicable regulatory authorities. To the extent the results of this or other investigator-sponsored trials are inconsistent with, or different from, the results of our planned Company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the Company-sponsored trial, or subject such results to greater scrutiny than it otherwise would. In these circumstances, the FDA or such foreign regulatory authorities may require us to obtain and submit additional clinical data, which could delay clinical development or marketing approval of our product candidates. In addition, while investigator-sponsored trials could be useful to inform our own clinical development efforts, there is no guarantee that we will be able to use the data from these trials to form the basis for regulatory approval of our product candidates.
Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials.
Results from preclinical studies or early clinical trials are not necessarily predictive of future clinical trial results and are not necessarily indicative of final results. For example, there can be no assurance that prior results, such as signals of
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safety, activity or durability of effect, observed from preclinical studies or clinical trials will be replicated or will continue in ongoing or future studies or trials. Furthermore, preliminary results may not be indicative of the final results of a trial after all data have been collected and analyzed. There is a high failure rate for gene therapy and biologic product candidates proceeding through clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, the design of a pivotal 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. Our Company has limited experience in designing and conducting clinical trials and we may be unable to design and execute a clinical trial to support regulatory approval. Although we plan to meet with the FDA in the first quarter of 2021 to discuss our regulatory strategy and a potential accelerated approval pathway for AVR-RD-01, to date we have not received definitive guidance from the FDA or other foreign regulatory bodies regarding the necessary endpoints for approval of any of our product candidates. While we are aware that the FDA utilized an efficacy endpoint based on patients’ kidney biopsy in the recent approval of Migalastat for Fabry disease, for which we are also measuring as our primary efficacy endpoint in our ongoing Phase 2 FAB-GT clinical trial of AVR-RD-01, there can be no guarantees that regulatory agencies will permit us to use the same endpoint in connection with further development of AVR-RD-01. Therefore, there are no assurances that the FDA or other foreign regulatory bodies will find the efficacy endpoints we propose in future pivotal trials to be sufficiently validated and clinically meaningful, or that our product candidates will achieve the pre-specified endpoints in future pivotal trials to a degree of statistical significance. We also may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development. Any of our current or future product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies. Any such failure would cause us to abandon the product candidate.
Additionally, the clinical trials performed to date have been open-label studies and have been conducted at a limited number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Moreover, patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware that patients have received treatment and may interpret the information more favorably given this knowledge. Because our clinical trials are ongoing, the data that we report are preliminary and subject to change. As is typical in open-label studies in which interim reports are provided, the safety and efficacy data are regularly reviewed and validated. As a result, certain data may change over time, including reductions or increases in the number of reported safety events, until the database is locked at the end of the study.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.
Although we hope to have dosed an aggregate of 30 patients across all our clinical programs by the end of 2021, there can be no assurance we will achieve that goal. The timing and success of our patient enrollment and clinical trial activities depend on our ability to recruit patients to participate as well as the completion of required follow-up periods. Patients may be unwilling to participate in our gene therapy clinical trials because of negative publicity from adverse events related to the biotechnology or gene therapy fields, such as the recent announcement from a lentiviral gene therapy company regarding potential cases of myelodysplastic syndrome and acute myeloid leukemia in its clinical trials for sickle cell disease, competitive clinical trials for similar patient populations, clinical trials in product candidates employing our vectors, the existence of current treatments or for other reasons. In addition, the indications that we are currently targeting and may in the future target are rare diseases, which may limit the pool of patients that may be enrolled in our ongoing or planned clinical trials. The timeline for recruiting patients, conducting studies and obtaining regulatory approval of our product candidates may be delayed, including as a result of the ongoing COVID-19 pandemic, which could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether. For example, as a result of the COVID-19 pandemic, patient enrollment and dosing was temporarily paused in our ongoing clinical trials and certain data collection has been delayed. While patient enrollment and dosing activities have begun to resume, there could be additional pauses in the future as a result of the COVID-19 pandemic or other factors.
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We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical trials in a timely manner. For example, in 2017, the ongoing investigator-sponsored Phase 1 clinical trial of AVR-RD-01 encountered delays in the enrollment of patients due to delays in identifying patients for enrollment and the evaluation of information from screened potential trial participants. In 2019, we encountered delays in the enrollment of patients in the Company-sponsored Phase 1/2 clinical trial of AVR-RD-02 for Gaucher disease, which we refer to as the Guard1 clinical trial. While a number of patients had been identified for the Guard1 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment.
Patient enrollment and trial completion is affected by factors including the:
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ability to enroll patients and conduct studies as a result of the ongoing COVID-19 pandemic; |
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size of the patient population and process for identifying patients; |
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design of the trial protocol; |
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eligibility and exclusion criteria; |
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perceived risks and benefits of the product candidate under study; |
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perceived risks and benefits of gene therapy-based approaches to treatment of diseases, including any required pretreatment conditioning regimens; |
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availability of competing therapies and clinical trials; |
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severity of the disease under investigation; |
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availability of genetic testing for potential patients; |
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proximity and availability of clinical trial sites for prospective patients; |
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ability to obtain and maintain subject consent; |
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risk that enrolled patients will drop out before completion of the trial; |
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patient referral practices of physicians; and |
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ability to monitor patients adequately during and after treatment. |
We are expanding our patient enrollment activities to include patients who reside in a country other than the country where the applicable clinical site is located, and who are required to travel for some or all of the clinical testing and procedures required for patients in the applicable clinical trial. We have encountered and in the future may continue to encounter logistical and regulatory challenges that could delay or prevent any such international patients from successfully enrolling and completing clinical trial procedures, including delays in processing or obtaining patient travel visas or denials of entry at borders, potential travel disruptions, or de-prioritization or unavailability of resources at clinical sites for non-resident international clinical trial participants, any of which could delay our progress and completion of planned clinical trials and which would have an adverse effect on our business. In addition, once these international patients return to their home country they may need to travel back to the country where the applicable clinical site is located. If these patients are unwilling or unable to return to the clinical site for testing and procedures, progress and completion of the clinical trial could be delayed or prevented.
Our current product candidates are being developed to treat rare conditions. We plan to seek initial marketing approvals in the United States, Europe and certain other major markets, including Japan. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by FDA or other foreign regulatory authorities. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:
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difficulty in establishing or managing relationships with contract research organizations, or CROs, and physicians; |
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different standards for the conduct of clinical trials; |
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the absence in some countries of established groups with sufficient regulatory expertise for review of gene therapy protocols; |
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our inability to locate qualified local consultants, physicians and partners; and |
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the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatment. |
If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.
We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
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delays as a result of the ongoing COVID-19 pandemic; |
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delays in reaching a consensus with regulatory agencies on study design; |
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delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites; |
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delays in obtaining required Institutional Review Board, or IRB, approval at each clinical study site; |
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delays in recruiting suitable patients to participate in our clinical studies; |
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imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites; |
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failure by our CROs, other third parties or us to adhere to clinical study requirements; |
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failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines in other countries; |
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delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites; |
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delays in having patients complete participation in a study or return for post-treatment follow-up; |
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clinical study sites or patients dropping out of a study; |
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the occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or |
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. |
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues. In addition, if we make changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plan or marketing approval for our product candidates. For example, for our FAB-GT clinical trial of AVR-RD-01, we have transitioned our lentiviral vectors to an LV2 version in connection with our plato platform implementation. In addition, the transition from LV1 to LV2 has required (and is anticipated to continue to require) submission of relevant data to the applicable regulatory authorities in connection with certain of our regulatory filings, including our INDs and clinical trial applications, to demonstrate analytic comparability between LV1 and LV2. Our IND application for our FAB-GT clinical study of AVR-RD-01 for Fabry disease in the United States, which was cleared by the FDA in April 2019, included data to demonstrate comparability between LV1 and LV2 and a transition to an automated manufacturing platform. In addition, our CTA (including amendments) and IND for our Guard1 clinical study of AVR-RD-02 for Gaucher disease in Canada and the United States, for which Health Canada has issued no objection letters and the FDA has cleared, respectively, included data utilizing LV2 and our automated manufacturing platform. While these applications included data relating to our LV2 lentiviral vector and our automated manufacturing process, which are elements of our plato platform, and allow us to commence clinical trials incorporating such elements, there can be no assurance that the FDA, Health Canada or other regulatory authorities will not require us to undertake additional actions in connection with our transition to our plato platform, including submission of additional comparability studies in connection with future regulatory filings, which may result in delays, suspension or termination of ongoing or future clinical trials, or our inability to conduct our trials according
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to the plans or the timelines that we have envisioned. For example, the Phase 1/2 investigator-sponsored clinical study of AVR-RD-04 for cystinosis in the United States, which has been cleared by the FDA, does not include our LV2 lentiviral vector or our automated manufacturing platform, and we anticipate that we will be required to submit comparability data in future regulatory filings relating to our transition to LV2 and the automated manufacturing platform. Any such filings may result in delay, suspension or termination of ongoing or future clinical trials pending our submission, and the applicable regulatory agency’s review, of such updates. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
If the results of our clinical studies are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:
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be delayed in obtaining marketing approval for our product candidates, if at all; |
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obtain approval for indications or patient populations that are not as broad as intended or desired; |
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obtain approval with labeling or a REMS that includes significant use or distribution restrictions or safety warnings; |
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be subject to changes with the way the product is administered; |
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be required to perform additional clinical studies to support approval or be subject to additional post-marketing testing requirements; |
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have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a REMS; |
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be subject to the addition of labeling statements, such as warnings or contraindications; |
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be sued; or |
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experience damage to our reputation. |
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our products.
Even if we complete the necessary preclinical and clinical studies, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate and the approval may be for a narrower indication than we seek.
We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical studies, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. 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 agency policy during the period of product development, clinical studies and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. If we are unable to obtain necessary regulatory approvals, our business, prospects, financial condition and results of operations may suffer.
Only certain of our clinical trials, including the Phase 2 FAB-GT clinical trial of AVR-RD-01 for Fabry disease and the Phase 1/2 Guard1 clinical trial of AVR-RD-02 for Gaucher disease type 1, utilize our commercial-scale plato platform.
While we have submitted and intend to continue to submit comparability studies to the FDA and other regulatory agencies, as needed, with respect to our implementation of our commercial-scale plato platform in these and future clinical trials sponsored by us, there can be no assurance that the FDA or other regulatory agencies will not in the future require us to conduct additional preclinical studies or clinical trials that could result in delays and additional costs in our development or commercialization programs for our product candidates, which could adversely affect our business. We intend to continue implementing our commercial-scale plato platform, including heightened vector efficiency, our closed, automated manufacturing system and utilization of a TCI conditioning regimen with busulfan, in connection with each of our
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investigational product candidates. We have developed the plato platform to form the backbone of our commercial programs, with the intent of replacing our original academic platform with improved solutions for delivering our gene therapy candidates to patients in multiple disease indications. We believe improvements from our plato platform may lead to better patient outcomes with our gene therapy candidates. In order to implement this transition, we have been and will be required to conduct additional studies to bridge our modified product candidates to earlier versions, which could delay our clinical development plans or marketing approvals, if any. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
We face significant competition in our industry and there can be no assurance that our product candidates, if approved, will achieve acceptance in the market over existing established therapies. In addition, our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our product candidates.
We operate in a highly competitive segment of the biopharmaceutical market. We face competition from many different sources, including larger pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Our product candidates, if successfully developed and approved, will compete with established therapies, some of which are being marketed by large and international companies. In addition, we expect to compete with new treatments that are under development or may be advanced into the clinic by our competitors. There are a variety of product candidates, including gene therapies, in development for the indications that we are targeting.
We anticipate competing with the largest pharmaceutical companies in the world. For example, Sanofi Genzyme and Shire, acquired by Takeda Pharmaceutical Company Ltd., market the enzyme replacement therapies, or ERTs, that represent the standard of care for Fabry patients. Amicus has secured regulatory approval in the United States and Europe for Migalastat, its oral chaperone therapy for Fabry disease. In addition, in August 2020, Protalix BioTherapeutics, together with Chiesi Global Rare Diseases, announced that the FDA had accepted a BLA and granted priority review designation for pegunigalsidase alfa, their investigational product candidate for Fabry disease. For Gaucher disease, we expect to compete with existing enzyme replacement therapies marketed by Sanofi Genzyme, Shire, Protalix and Pfizer, as well as oral therapies marketed by Actelion and Sanofi. Sanofi also markets an enzyme replacement therapy for Pompe disease, and Shire markets an enzyme replacement therapy for Hunter syndrome. Cystinosis is currently treated by therapies marketed by Horizon Orphan, Mylan, Chiesi, Recordati and Sigma Tau Pharmaceuticals, and Eloxx Pharmaceuticals has been advancing a new treatment in clinical trials, though in March 2020 it announced that its Phase 2 study of the new treatment has been discontinued. In addition, we may compete with other gene therapy companies in our industry such as bluebird bio and Spark Therapeutics (which was acquired by Roche in 2019). In particular, a number of gene therapy companies have announced preclinical or clinical non-viral and adeno-associated viral based gene therapy programs that, if successful in obtaining regulatory approval, could compete with our gene therapies.
Many of our competitors have significantly greater financial, product candidate development, manufacturing and marketing resources than we do. Large pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and mergers and acquisitions within these industries may result in even more resources being concentrated among a smaller number of larger competitors. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our business would be materially and adversely affected if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any product candidate that we may develop.
Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.
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While we intend to seek designations for our product candidates with the FDA and comparable foreign regulatory authorities that are intended to confer benefits such as a faster development process or an accelerated regulatory pathway, there can be no assurance that we will successfully obtain such designations. In addition, even if one or more of our product candidates are granted such designations, we may not be able to realize the intended benefits of such designations.
The FDA and comparable foreign regulatory authorities offer certain designations for product candidates that are designed to encourage the research and development of product candidates that are intended to address conditions with significant unmet medical need. These designations may confer benefits such as additional interaction with regulatory authorities, a potentially accelerated regulatory pathway and priority review. However, there can be no assurance that we will successfully obtain such designations for any of our product candidates. In addition, while such designations could expedite the development or approval process, they generally do not change the standards for approval. Even if we obtain such designations for one or more of our product candidates, there can be no assurance that we will realize their intended benefits.
For example, we have submitted a briefing book to the FDA outlining our proposal for a potential accelerated approval strategy for AVR-RD-01, and we currently expect to meet with the FDA in the first quarter of 2021 to discuss our proposed strategy. The outcome of our meeting with the FDA is highly uncertain at this time, and there can be no assurances that the FDA will agree to our proposals or provide any accelerated regulatory pathway for AVR-RD-01.
We may seek a Breakthrough Therapy Designation for some of our product candidates. A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For therapies that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Therapies designated as breakthrough therapies by the FDA are also eligible for accelerated approval. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification.
In addition, we may seek Fast Track Designation for some of our product candidates. If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address unmet medical needs for this condition, the therapy sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, there can be no assurance that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures, and receiving a Fast Track Designation does not provide assurance of ultimate FDA approval. In addition, the FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.
In addition, we may seek a regenerative medicine advanced therapy, or RMAT, designation for some of our product candidates. An RMAT is defined as cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Gene therapies, including genetically modified cells that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine therapy. The RMAT program is intended to facilitate efficient development and expedite review of RMATs, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition. A new drug application or a BLA for an RMAT may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites. Benefits of such designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A regenerative medicine therapy that is granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence, clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. RMAT designation is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a regenerative medicine advanced therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of RMAT designation for a product candidate may not result in a faster development process, review or
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approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify for RMAT designation, the FDA may later decide that the biological products no longer meet the conditions for qualification.
Outside of the United States, we intend to develop AVR-RD-01 in Japan under the purview of the Japanese Pharmaceutical and Medical Device Agency, or PMDA. Pursuant to Japan’s regenerative medicine law, an expedited path to conditional approval may exist for regenerative medicine products that show sufficient safety evidence and signals of efficacy in a Phase 2 clinical trial. However, there can be no assurance that the results of our ongoing Phase 2 FAB-GT clinical trial will demonstrate the safety evidence and efficacy signals required for such conditional approval. In addition, this conditional approval is time-limited, and there must be an agreement as to follow-up collection of information to confirm efficacy and safety, similar to a post-marketing commitment in the United States.
We may be unable to obtain orphan drug designation for our product candidates and, even if we obtain such designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved.
Regulatory authorities in some jurisdictions, including the United States and other major markets, may designate drugs intended to treat conditions or diseases affecting relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union. Additionally, orphan designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.
In December 2018, October 2019 and March 2020, the FDA granted our requests for orphan drug designation for AVR-RD-01 for the treatment of Fabry disease, AVR-RD-02 for the treatment of Gaucher disease and AVR-RD-04 for the treatment of cystinosis, respectively. In September 2020, October 2020 and March 2021 we announced that the European Commission granted our request for orphan drug designation for AVR-RD-02 for the treatment of Gaucher disease, AVR-RD-01 for the treatment of Fabry disease, and AVR-RD-04 for the treatment of cystinosis, respectively. If we request orphan drug designation (or the foreign equivalent) for any other product candidates, there can be no assurances that the FDA or foreign regulatory authorities will grant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an orphan product does not mean that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval.
Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or foreign regulatory authorities from approving another marketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another sponsor receives such approval before we do (regardless of our orphan drug designation), we will be precluded from receiving marketing approval for our product for the applicable exclusivity period. The applicable period is seven years in the United States and 10 years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.
Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the United States. Even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or
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makes a major contribution to patient care. In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan indication if:
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the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior; |
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the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application; or |
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the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of orphan medicinal product. |
Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory oversight.
Even if we obtain any regulatory approval for our product candidates, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information. Any regulatory approvals that we receive for our product candidates also may be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the quality, safety and efficacy of the product. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. FDA guidance advises that patients treated with gene therapies undergo long-term follow-up observation for potential adverse events for as long as 15 years. The holder of an approved BLA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.
In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or CGMP, requirements and adherence to commitments made in the BLA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory authority may:
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issue a warning letter asserting that we are in violation of the law; |
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seek an injunction or impose administrative, civil or criminal penalties or monetary fines; |
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suspend or withdraw regulatory approval; |
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suspend any ongoing clinical trials; |
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refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners; |
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restrict the marketing or manufacturing of the product; |
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seize or detain the product or otherwise require the withdrawal of the product from the market; |
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refuse to permit the import or export of products; or |
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refuse to allow us to enter into supply contracts, including government contracts. |
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition, results of operations and prospects.
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In addition, the FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.
Our focus on developing our current product candidates may not yield any commercially viable products, and our failure to successfully identify and develop additional product candidates could impair our ability to grow.
As part of our growth strategy, we intend to identify, develop and market additional product candidates beyond our existing product candidates. We may spend several years completing our development of any particular current or future product candidates, and failure can occur at any stage. The product candidates to which we allocate our resources may not end up being successful. Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential than our product candidates. Our spending on current and future research and development programs may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate.
Because our internal research capabilities are limited, we may be dependent upon biotechnology companies, academic scientists and other researchers to sell or license product candidates, approved products or the underlying technology to us. The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising product candidates and products.
In addition, certain of our current or future product candidates may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess or compare favorably to existing, approved therapies, such as ERT. We have not yet succeeded and may never succeed in demonstrating efficacy and safety of our product candidates or any future product candidates in clinical trials or in obtaining marketing approval thereafter. Accordingly, our focus on treating these diseases may not result in the development of commercially viable products.
If we are unsuccessful in our development efforts, we may not be able to advance the development of our product candidates, commercialize products, raise capital, expand our business or continue our operations.
Risks related to manufacturing
Gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.
The manufacturing process we use to produce our product candidates is complex, novel and has not been validated for commercial use. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.
Our product candidates require processing steps that are more complex than those required for most chemical pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as ours generally cannot be fully characterized. As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, we and our manufacturing suppliers employ multiple steps to control the manufacturing process with the goal of ensuring that the product candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, including even minor deviations from the intended process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA or other applicable regulatory standards or specifications with consistent and acceptable production yields and costs.
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In addition, the FDA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA or other foreign regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Even slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. There is no assurance we will not experience lot failures in the future. Lot failures or product recalls could cause us to delay clinical trials, or, if approved, commercial product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.
Risks related to our reliance on third parties
We expect to rely on third parties to conduct some or all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.
We do not expect to independently conduct all aspects of our vector production, product manufacturing, protocol development, research and preclinical and clinical testing. We currently rely, and expect to continue to rely, on third parties with respect to these items. For example, we have moved our cell processing to an automated, closed system with a single third-party supplier.
Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our preclinical and clinical studies are conducted in accordance with the study plan, protocols and regulatory requirements.
If our contract counterparties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical and clinical studies required to support approval of our product candidates or the FDA or other regulatory agencies may refuse to accept our clinical or preclinical data. For example, in 2017, the ongoing investigator-sponsored Phase 1 clinical trial of AVR-RD-01 encountered delays in the enrollment of patients due to delays in identifying patients for enrollment and the evaluation of information from screened potential trial participants. In 2019, we encountered delays in the enrollment of patients in the Company-sponsored Guard1 clinical trial of AVR-RD-02 for Gaucher disease. While a number of interested patients had been identified for the Guard1 clinical trial, we encountered patient pre-screening failures that impacted the commencement of enrollment in these studies. In 2020, a kidney biopsy was conducted on the third patient in the FAB-GT clinical trial of AVR-RD-01, but due to human error in processing the biopsy sample at the external laboratory vendor, the kidney Gb3 inclusions could not be evaluated and will not be available. Although our quality assurance personnel have worked closely with the external vendor to identify the cause of the vendor error and to identify additional protocols for implementation by the vendor that are designed to prevent similar errors in the future, there can be no assurances that such protocols will be successfully implemented by the vendor.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:
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the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms; |
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reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities; |
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termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and |
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disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the impact of the ongoing COVID-19 pandemic or the bankruptcy of the manufacturer or supplier. |
Any of these events could lead to delays of our preclinical and clinical studies or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.
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We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates.
We currently depend on a limited number of suppliers for some of the components necessary for our product candidates. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. Our use of a limited number of suppliers of raw materials, components and finished goods exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand. There are, in general, relatively few alternative sources of supply for these components. These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or replacement suppliers for these components could take a substantial amount of time and it may be difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from any supplier or manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects.
If we are required to switch to a replacement supplier or manufacture materials ourselves, the manufacture and delivery of our product candidates could be interrupted for an extended period, adversely affecting our business. Establishing additional or replacement suppliers may not be accomplished quickly, and we may not be able to enter agreements with replacement suppliers on reasonable terms, if at all. In either scenario, our clinical trials supply could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. For example, the FDA could require additional supplemental bridging data if we rely upon a new supplier. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials. While we seek to maintain adequate inventory of the components and materials used in our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to conduct our clinical trials and, if our product candidates are approved, to meet the demand of our customers and cause them to cancel orders.
In addition, as part of the FDA’s approval of our product candidates, the FDA must review and approve the individual components of our production process, which includes the manufacturing processes and facilities of our suppliers. Our current suppliers have not undergone this process, nor have they had any components included in any product approved by the FDA.
Our reliance on these suppliers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:
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delays in production, supply, shipment or delivery as a result of the ongoing COVID-19 pandemic; |
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the interruption of supply resulting from modifications to or discontinuation of a supplier’s operations; |
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delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component; |
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a lack of long-term supply arrangements for key components with our suppliers; |
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the inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms; |
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difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner; |
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production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications; |
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a delay in delivery due to our suppliers prioritizing other customer orders over ours; |
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damage to our reputation caused by defective components produced by our suppliers; |
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increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and |
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fluctuation in delivery by our suppliers due to changes in demand from us or their other customers. |
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If any of these risks materialize, costs could significantly increase and our ability to conduct our clinical trials and, if our product candidates are approved, to meet demand for our products could be impacted.
We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.
We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities.
All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in clinical studies must be manufactured in accordance with CGMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. 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. We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and CGMP regulations enforced by the FDA through its facilities inspection program. Some of our contract manufacturers have not produced a commercially-approved product and have never been inspected by the FDA before. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, or if the FDA is unable to conduct such an inspection due to the COVID-19 pandemic, the FDA may issue a complete response letter or defer action on our applications, and approval of the products may be delayed or may not be granted.
The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. As a result, our business, financial condition and results of operations may be materially harmed.
These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our preclinical and clinical studies may be delayed.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to manufacture our vectors and our product candidates, and because we collaborate with various organizations and academic institutions on the advancement of our gene therapy approach, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or
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disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets.
Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
Risks related to commercialization of our product candidates
If we are unable to establish sales, distribution and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we will be unable to generate any product revenue.
We are in the preliminary stages of building our commercial organization. To successfully commercialize any of our current or future product candidates, if approved, we will need to develop these capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time-consuming and could delay any product launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may enter into collaborations regarding any approved product candidates with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well-funded sales, distribution and marketing operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates, if approved. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
If the market opportunities for our product candidates are smaller than we believe they are, our product revenues may be adversely affected and our business may suffer.
We focus our research and product development on treatments for serious lysosomal disorders. Our understanding of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. The number of patients in the United States and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment with our products or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.
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The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.
Even if we obtain any regulatory approval for our product candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and third-party payors accepting gene therapy products in general, and our product candidates in particular, as effective, safe and cost-effective. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:
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the potential efficacy and potential advantages over alternative treatments, including any similar generic treatments; |
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the efficacy and safety as demonstrated in pivotal clinical trials and published in peer-reviewed journals; |
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the prevalence and severity of any adverse events or side effects, including any limitations or warnings contained in a product’s approved labeling or that are later found to be associated with a product, including in findings from long-term follow-up studies; |
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the prevalence and severity of any side effects resulting from the conditioning regimen for the administration of our product candidates; |
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the ability to offer the products for sale at competitive prices; |
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the clinical indications for which the products are approved by the FDA or comparable regulatory agencies; |
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the relative convenience and ease of dosing and administration compared to alternative treatments; |
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
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the strength of marketing and distribution support and timing of market introduction of competitive products; |
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restrictions on how the product is distributed; |
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publicity concerning our products or competing products and treatments; and |
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favorable third-party insurance coverage and sufficient reimbursement. |
Sales of medical products also depend on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost effective. In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment. We cannot predict whether physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that our product is safe, therapeutically effective and cost effective as compared with competing treatments.
Even if a product candidate displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product, if approved for commercial sale, will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.
If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.
We are currently conducting clinical trials for our product candidates in the United States, Canada and Australia, and plan to expand to other geographies including Japan, Europe and Israel. If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject to additional risks related to entering into international business relationships, including:
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different regulatory requirements for approval of drugs and biologics in foreign countries; |
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reduced protection for intellectual property rights; |
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unexpected changes in tariffs, trade barriers and regulatory requirements; |
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economic weakness, including inflation, or political instability in particular foreign economies and markets; |
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; |
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; |
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workforce uncertainty in countries where labor unrest is more common than in the United States; |
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires. |
The insurance coverage and reimbursement status of newly-approved products are uncertain. Failure to obtain or maintain adequate coverage and reimbursement for any of our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. In the United States, recently enacted legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or their commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.
Our ability to successfully commercialize our product candidates or any other products that we or they may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford treatments. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement is not available, or is available only at limited levels, we may not be able to successfully commercialize our product candidates, if approved. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs and commercial payors are critical to new product acceptance. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:
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a covered benefit under its health plan; |
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safe, effective and medically necessary; |
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appropriate for the specific patient; |
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cost-effective; and |
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neither experimental nor investigational. |
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and certain other major markets where we plan to commercialize may put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems, and pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.
Moreover, efforts by governmental and other third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Due to the novel nature of our technology and the potential for our product candidates to offer therapeutic benefit in a single administration, we face uncertainty related to pricing and reimbursement for these product candidates.
Our target patient populations are relatively small, as a result of which the pricing and reimbursement of our product candidates, if approved, must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our product candidates, if approved.
Healthcare legislative reform measures and constraints on national budget social security systems may have a material adverse effect on our business and results of operations.
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates or any future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval. Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA, was enacted, which, substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, subjects biologic products to potential competition by lower-cost biosimilars, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extends the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid
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managed care organizations, subjects manufacturers to new annual fees and taxes for certain branded prescription drugs, creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, and provides incentives to programs that increase the federal government’s comparative effectiveness research.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court and members of Congress have introduced several pieces of legislation aimed at significantly revising or repealing the ACA. The United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021. The implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to continue, with unpredictable and uncertain results.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2030 unless additional Congressional action is taken; however, pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
In 2020, the former President signed four Executive Orders aimed at lowering drug prices. In response, the FDA released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and would have applied to all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. However, in response to a lawsuit filed by several industry groups, on December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register. Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we receive for any of our product candidates. Additionally, on December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service
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fees are currently under review by the Biden administration and may be amended or repealed. The regulatory and market implications of the Executive Orders are unknown at this time, but could decrease the price we receive for any products that we may develop and commercialize and could adversely affect our future revenues and prospects for profitability. Additionally, HHS, has already implemented certain measures. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payors.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
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the demand for our drug product candidates, if we obtain regulatory approval; |
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our ability to set a price that we believe is fair for our products; |
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our ability to generate revenue and achieve or maintain profitability; |
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the level of taxes that we are required to pay; and |
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the availability of capital. |
Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.
Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. Additionally, as of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals; however, the FDA may not be able to continue its current pace and review timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the COVID-19 pandemic and travel restrictions FDA is unable to complete such required inspections during the review period. Since March 2020, foreign and domestic inspections by the FDA have largely been on hold with the FDA announcing plans in July 2020 to resume prioritized domestic inspections. However, the FDA’s inspection activities will depend on data about the virus’ trajectory in a given state and locality and the rules and guidelines that are put in place by state and local governments. The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections. Should the FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, the FDA has stated that it generally intends to issue a complete response letter. Further, if there is inadequate information to make a determination on the acceptability of a
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facility, the FDA may defer action on the application until an inspection can be completed. In 2020, several companies announced receipt of complete response letters due to the FDA's inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future shutdowns of other government agencies, such as the SEC, may also impact our business through review of our public filings and our ability to access the public markets.
Any contamination in our manufacturing process, shortages of materials or failure of any of our key suppliers to deliver necessary components could result in interruption in the supply of our product candidates and delays in our clinical development or commercialization schedules.
Given the nature of biologics manufacturing, there is a risk of contamination in our manufacturing processes. Any contamination could materially adversely affect our ability to produce product candidates on schedule and could, therefore, harm our results of operations and cause reputational damage.
Some of the materials required in our manufacturing process are derived from biologic sources. Such materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations and prospects.
Risks related to our business operations
Our gene therapy approach utilizes lentiviral vectors derived from viruses, which may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
Gene therapy remains a novel technology, with only a limited number of gene therapy products approved to date. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia, myelodysplastic syndromes and deaths seen in other trials using other vectors. In addition, in February 2021 a lentiviral gene therapy company reported a potential case of myelodysplastic syndrome and another case of acute myeloid leukemia in their clinical trials for sickle cell disease, and these cases remain under investigation. Adverse events in our clinical studies or discovered in long-term follow-up, even if not ultimately attributable to our product candidates (such as the many adverse events that typically arise from the conditioning process), or adverse events in other lentiviral gene therapy trials, and the resulting publicity could result in a decline in our stock price, increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.
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Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.
We are highly dependent on principal members of our executive team and key employees, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees. The loss of the services of one or more of our current employees might impede the achievement of our research, development and commercialization objectives. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which is likely to continue. As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing, is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, failure to succeed in preclinical or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit or the loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.
We will need to expand our operations and we may experience difficulties in managing this growth, which could disrupt our operations.
As of December 31, 2020, we had 121 full-time employees. As we mature, we expect to rapidly expand our full-time employee base and to hire more consultants and contractors. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.
If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.
If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities and, in the longer term, build a commercial infrastructure to support commercialization of any of our product candidates that are approved for sale. Future growth would impose significant added responsibilities on members of management. It is likely that our management, finance, development personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and product candidates requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA or of other foreign regulatory authorities, provide accurate information to the FDA and other foreign regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct
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applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We can face serious consequences for violations.
Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We also expect our non-U.S. activities to increase in time. We plan to engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the United States Foreign Corrupt Practices Act’s accounting provisions.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health information privacy and security laws, and other health care laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. On December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed; |
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federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery; |
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the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program; |
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information; |
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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members. |
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federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; and |
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers |
Additionally, we are subject to state and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties. Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.
The failure to comply with any of these laws or regulatory requirements subjects entities to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in federal and state funded healthcare programs (such as Medicare and Medicaid), contractual damages and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Any action for violation of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.
We and any potential collaborators may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial patients, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights,
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failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
European data collection is governed by restrictive regulations governing the use, processing and cross-border transfer of personal information.
We currently plan to conduct clinical trials in the European Union, or EU, and as a result will be subject to additional privacy restrictions. The collection and use of personal health data in the EU is governed by the provisions of the General Data Protection Regulation, or GDPR. This directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States. Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the European Union Member States may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the European Union and substantial fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with these and/or new data protection rules. This may be onerous and adversely affect our business, financial condition, prospects and results of operations.
We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.
The use of our product candidates in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:
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the impairment of our business reputation; |
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the withdrawal of clinical study participants; |
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costs due to related litigation; |
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the distraction of management’s attention from our primary business; |
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substantial monetary awards to patients or other claimants; |
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the inability to commercialize our product candidates; and |
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decreased demand for our product candidates, if approved for commercial sale. |
We carry master product liability insurance of $5.0 million per occurrence and $5.0 million in the aggregate in the United States. For studies conducted in Australia and Canada, we maintain local admitted policies with varying limits. We believe our product liability insurance coverage is sufficient in light of our current clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.
Patients with the diseases targeted by certain of our product candidates are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and potentially life- threatening health risks. During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an
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adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.
We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
As of December 31, 2020, we had federal and state net operating loss carryforwards of $214.0 million and $201.6 million, respectively, and federal and state research and development tax credit carryforwards of approximately $3.7 million and $0.7 million, respectively. If not utilized, the net operating loss carryforwards and research and development credits will generally expire at various dates through 2038 (other than federal net operating loss carryforwards generated in taxable years ending after December 31, 2017, which are not subject to expiration and generally may not be carried back to prior taxable years except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years). These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We may have experienced ownership changes in the past. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurred or occurs and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development carryforwards are adjusted, it would harm our future operating results by effectively increasing our future tax obligations.
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Risks related to our intellectual property
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the U.S. Patent and Trademark Office, or USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we or our licensors are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. In particular, we are aware of issued patents in the United States that cover the lentiviral vectors used in the manufacture of our product candidates. While we believe that we have reasonable defenses against a claim of infringement, potentially including that certain of these patents are expected to expire prior to commercializing our product candidates, if approved, in the United States, there can be no assurance that we will prevail in any such action by the holder of these patents. In the event that the holder of these patents seeks to enforce its patent rights and our defenses against a claim of infringement are unsuccessful, we may not be able to commercialize our product candidates in the United States, if approved, without first obtaining a license to some or all of these patents, which may not be available on commercially reasonable terms or at all. In addition, the defense of any claim of infringement, even if successful, is time-consuming, expensive and diverts the attention of our management from our ongoing business operations.
Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe or be alleged to infringe. In addition, third parties may obtain patents in the future and claim that use of our or our licensors’ technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.
Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Even in the absence of a finding of infringement, we may choose to obtain a license, if such a license is available. A successful claim of patent or other intellectual property infringement against us could materially adversely affect our business, results of operations and financial condition.
Our rights to develop and commercialize our product candidates are subject, in part, to the terms and conditions of licenses granted to us by others.
We depend upon the intellectual property rights granted to us under licenses from third parties that are important or necessary to the development of our technology and products, including technology related to our manufacturing process and our gene therapy product candidates. In particular, we have in-licensed certain intellectual property rights and know-how from the University Health Network (relevant to AVR-RD-01 and our Fabry program) and affiliates of Lund University (relevant to AVR-RD-02 and our Gaucher type 1 program). In addition, we have in-licensed patents and patent applications from BioMarin Pharmaceutical Inc., or BioMarin (relevant to AVR-RD-03 and our Pompe program), GenStem Therapeutics,
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Inc., or GenStem (relevant to AVR-RD-04 and our cystinosis program) and The University of Manchester (relevant to AVR-RD-05 and our Hunter program), directed to compositions and methods related to the manufacture and use of AVR-RD-03, AVR-RD-04 and AVR-RD-05, respectively. Any termination of these licenses could result in the loss of significant rights and could harm or prevent our ability to commercialize our product candidates.
Each of our existing licenses are exclusive but are limited to particular fields, such as Fabry disease, cystinosis, Gaucher disease type 1, Hunter syndrome, or Pompe disease, and are subject to certain retained rights. Absent an amendment or additional agreement, we may not have the right to use intellectual property in-licensed for one of our programs for another program. In addition, licenses that we may enter into in the future may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses. Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial condition.
In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. For example, pursuant to each of our intellectual property licenses with GenStem, BioMarin, the rights holders associated with Lund University, and The University of Manchester, our licensors retain control of such activities. Therefore, we cannot be certain that these patents and applications will be prosecuted, maintained and enforced in a manner consistent with the best interests of our business. If our licensors fail to maintain such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected.
Our current license agreements impose, and we expect that future license agreements that we may enter into will impose, various obligations, including diligence and certain payment obligations. If we fail to satisfy our obligations, the licensor may have the right to terminate the agreement. Disputes may arise between us and any of our licensors regarding intellectual property subject to such agreements and other issues. Such disputes over intellectual property that we have licensed or the terms of our license agreements may prevent or impair our ability to maintain our current arrangements on acceptable terms, or at all, or may impair the value of the arrangement to us. Any such dispute could have a material adverse effect on our business. If we cannot maintain a necessary license agreement or if the agreement is terminated, we may be unable to successfully develop and commercialize the affected product candidates.
If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.
Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We rely on manufacturing and other know-how, patents, trade secrets, trademarks, license agreements and contractual provisions to establish our intellectual property rights and protect our products. These legal means, however, afford only limited protection and may not adequately protect our rights. The failure to obtain, maintain, enforce or defend such intellectual property rights, for any reason, could allow third parties to make competing products or impact our ability to develop, manufacture and market our products, if approved, on a commercially viable basis, or at all, which could have a material adverse effect on our financial condition and results of operations.
In particular, we rely primarily on trade secrets, know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.
Our licensors and we have sought, and we intend to continue to seek to protect our proprietary position by filing patent applications in the United States and, in at least some cases, one or more countries outside the United States related to current and future product candidates that are important to our business. However, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents, whether the claims of any issued patents will provide us
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with a competitive advantage, or whether we will be able to successfully pursue patent applications in the future related to our current or future product candidates. While we have in-licensed patents and patent applications relevant to AVR-RD-03, we currently have no owned or in-licensed patents or patent applications covering AVR-RD-01, AVR-RD-02 or AVR-RD-06, and the patent applications that we in-licensed related to AVR-RD-04 and AVR-RD-05 are at a very early stage. Many of our product candidates are in-licensed from third parties. Accordingly, in some cases, the availability and scope of potential patent protection is limited based on prior decisions by our licensors or the inventors, such as decisions on when to file patent applications or whether to file patent applications at all.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. Although our license agreements grant us worldwide rights, and our currently in-licensed U.S. patent rights have certain corresponding foreign patents or patent applications, there can be no assurance that we will obtain or maintain such corresponding patents or patent applications with respect to any future license agreements. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States even in jurisdictions where we and our licensors pursue patent protection. Consequently, we and our licensors may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we and our licensors pursue patent protection, or from selling or importing products