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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2021

or

 

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

 

For the transition period from to

Commission File Number 001-35945

EPIZYME, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

26-1349956

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

400 Technology Square, 4th Floor

Cambridge, Massachusetts

 

02139

(Address of principal executive offices)

 

(Zip code)

 

617-229-5872

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value

EPZM

Nasdaq Global Select Market

 

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

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

The aggregate market value of the registrant’s common stock, par value $0.0001 per share, held by non-affiliates of the registrant on June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $794.6 million based on the closing price of the registrant’s common stock on the Nasdaq Global Select Market on that date.

The number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, as of February 24, 2022 was 164,482,036.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement that the registrant intends to file with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.

 

 


 

Epizyme, Inc.

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2021

Table of Contents

 

 

 

 

 

Page

Item No.

 

PART I

 

 

 

 

Item 1.

 

Business

 

5

Item 1A.

 

Risk Factors

 

45

Item 1B.

 

Unresolved Staff Comments

 

89

Item 2.

 

Properties

 

89

Item 3.

 

Legal Proceedings

 

89

Item 4.

 

Mine Safety Disclosures

 

89

 

 

 

 

PART II

 

 

 

 

Item 5.

 

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

 

90

Item 6.

 

[Reserved]

 

91

Item 7.

 

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

 

92

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

 

112

Item 8.

 

Financial Statements and Supplementary Data

 

112

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

114

Item 9A.

 

Controls and Procedures

 

114

Item 9B.

 

Other Information

 

116

Item 9C.

 

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

 

 

 

 

 

 

PART III

 

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

117

Item 11.

 

Executive Compensation

 

117

Item 12.

 

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

 

117

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

117

Item 14.

 

Principal Accounting Fees and Services

 

117

 

 

 

 

PART IV

 

 

 

 

Item 15.

 

Exhibits, Financial Statement Schedules

 

118

Item 16.

 

Form 10-K Summary

 

123

 

 

Signatures

 

124

 

Epizyme® and TAZVERIK® are registered trademarks of Epizyme, Inc. in the United States and other countries. Epizyme, Inc. has also submitted trademark applications for Epizyme™ and for TAZVERIK™ in other countries. All other trademarks, service marks or other tradenames appearing in this Annual Report on Form 10-K are the property of their respective owners.

 


 

Forward-looking Information

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These statements may be identified by such forward-looking terminology as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar statements or variations of such terms. 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:

our plans to research, develop and commercialize novel epigenetic therapies for patients with cancer;
the ongoing commercialization of TAZVERIK;
our sales, marketing and distribution capabilities and strategies, including for the commercialization and manufacturing of TAZVERIK and any future products;
the rate and degree of market acceptance and clinical utility of TAZVERIK and any future products;
our ongoing and planned clinical trials, including the timing of initiation and enrollment in the trials, the timing of availability of data from the trials and the anticipated results of the trials;
the timing of and our ability to apply for, obtain and maintain regulatory approvals for tazemetostat in epithelioid sarcoma, follicular lymphoma and other indications, EZM0414 and any future product candidates;
our ability to achieve anticipated milestones under our collaborations or to enter into additional collaborations;
the impact of the COVID-19 pandemic on our business, results of operations, and financial condition;
our intellectual property position;
our ability to successfully implement and execute on our changes to our commercial strategy and organization, adjustments to our operating plans, including operating expense reductions, and leadership transitions; and
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

All of our forward-looking statements are made 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 as a result of various important factors. 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 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 which modify or impact any of the forward-looking statements

1


 

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 certain references in this Annual Report on Form 10-K

Unless otherwise stated or the context indicates otherwise, all references herein to “Epizyme,” “Epizyme, Inc.,” “we,” “us,” “our,” “our company,” “the Company” and similar references refer to Epizyme, Inc. and its wholly owned subsidiary, Epizyme Securities Corporation.

In addition, unless otherwise stated or the context indicates otherwise, all references in this Annual Report on Form 10-K to “TAZVERIK (tazemetostat),” “TAZVERIK” and “TAZVERIK” refer to tazemetostat in the context of the commercially-available product for which we received accelerated approval from the United States Food and Drug Administration in January 2020 for epithelioid sarcoma and in June 2020 for follicular lymphoma, as more fully described herein; whereas, unless otherwise stated or the context indicates otherwise, all references herein to “tazemetostat” refer to tazemetostat in the context of the product candidate for which we are exploring further applications and indications, as more fully described herein.

 

Risk Factors Summary

 

Our business is subject to a number of risks of which you should be aware in evaluating our company and our business. These risks are discussed more fully below in the “Risk Factors” section of this Annual Report on Form 10-K for the year ended December 31, 2021. These risks include the following:

 

We are dependent on the successful development and commercialization of tazemetostat. If we do not successfully commercialize TAZVERIK for the indications for which TAZVERIK is approved or are unable to develop, obtain marketing approval of, and commercialize tazemetostat for additional indications, either alone or through collaborations, or if we experience significant delays in doing so, our business could be harmed.
In connection with the accelerated approval of our epithelioid sarcoma, or ES, new drug application and our follicular lymphoma, or FL, supplemental NDA, continued approval of TAZVERIK for these approved indications is contingent upon verification and description of clinical benefit in a confirmatory program in each indication. We are conducting Phase 1b/3 trials to confirm the clinical benefit of TAZVERIK in each indication. These trials are expensive and time-consuming and may not confirm such benefit. If a confirmatory program does not verify clinical benefit for an indication, we may have to withdraw our accelerated approval for that indication, which could significantly harm our business.
The marketing approval process is expensive, time-consuming and uncertain and we may be unable to obtain approvals for the commercialization of tazemetostat in the United States for any additional indication or in any foreign jurisdiction, or of EZM0414 or any other future product candidates we may develop. If we are not able to obtain, or if there are delays in obtaining, required marketing approvals of tazemetostat in the United States for any additional indication or in any foreign jurisdiction, or of EZM0414 or any other future product candidates we may develop, we will not be able to commercialize tazemetostat for such indications or in such foreign jurisdiction or such other future product candidates, and our ability to generate revenue will be materially impaired.
The COVID-19 pandemic has impacted and may continue to impact our commercial launch efforts for TAZVERIK in FL and ES and has led to some delays in clinical trial startup, may affect our ability to initiate and complete preclinical studies and our ongoing and planned clinical trials, disrupt regulatory activities, further disrupt commercialization of TAZVERIK, or have other adverse effects on our business and operations.
Tazemetostat,EZM0414 or any other future product candidate that we commercialize may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. If tazemetostat, EZM0414 or any other future product candidate does not

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achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable.
If we are unable to maintain effective sales, marketing and distribution capabilities, we may not be successful in commercializing tazemetostat or any other future product candidates that we commercialize.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than tazemetostat for ES, FL or any other indication for which we may develop tazemetostat or any other future product candidates that we may commercialize.
Tazemetostat and any other future product candidate that we commercialize may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could adversely impact the product revenues we may generate from tazemetostat or such other future product candidate and harm our business.
Our research and development is focused on the creation of novel epigenetic therapies for patients with cancer, which is a rapidly evolving area of science, and the approach we are taking to discover and develop drugs is novel.
Clinical drug development is a lengthy and expensive process, with an uncertain outcome. We are conducting multiple clinical trials of tazemetostat in different potential indications as a monotherapy and in combination with other products. A failure of one or more of these clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, the outcome of a clinical trial for an indication may not be predictive of the success of clinical trials for other indications, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
If we are required by the U.S. Food and Drug Administration, or FDA, to obtain approval of a companion or complementary diagnostic in connection with approval of a therapeutic product, and there are delays in obtaining such FDA approval of a diagnostic device, we will not be able to commercialize the product candidate and our ability to generate revenue will be materially impaired.
We may not be successful in our efforts to use and expand our proprietary drug discovery platform to build or advance a pipeline of future product candidates.
Our existing therapeutic collaborations are important to our business and provide us with resources and capabilities we may not otherwise have. If we are unable to enter into additional therapeutic collaborations on acceptable terms or at all or maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.
We contract with third parties for the manufacture of tazemetostat for commercialization and clinical testing, and expect to contract with third parties for the manufacture of any other future product candidates that we develop for preclinical and clinical testing and commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of tazemetostat or other future product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
We have incurred significant losses since our inception. We expect to incur significant expenses and operating losses over the next several years and may never achieve or maintain profitability.

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We will need substantial additional funding to maintain and grow our operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.
Our changes to our commercial strategy and organization, adjustments to our operating plans, including operating expense reductions, prioritization of development activities and leadership transitions may not be successful, may not result in accelerated commercial adoption of TAZVERIK and greater product revenues or anticipated savings, could result in total costs and expenses that are greater than expected, could result in us forgoing business opportunities and could disrupt our business.
We have incurred secured indebtedness of $220.0 million under our amended and restated loan agreement with BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership and BioPharma Credit PLC. Our debt service obligations could limit cash flow available for our operations and expose us to risks that could adversely affect our business, financial condition and results of operations. In the event of a default of our obligations under the loan agreement, we may not have sufficient funds or the ability to raise capital to repay our indebtedness.

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PART I

Item 1. Business

 

Note on the COVID-19 Pandemic

The ongoing COVID-19 pandemic continues to have widespread, evolving, and unpredictable impacts on global economies, financial markets, business practices and societies. We are closely monitoring the impact of the COVID-19 pandemic and related developments on our business, operations and financial performance. Our focus remains on continuing to advance our efforts with respect to the commercialization of TAZVERIK® and to continue to advance the development of our pipeline, while making the health and safety of our employees and their families, healthcare providers, patients and communities a top priority. We believe that the COVID-19 pandemic has had an adverse impact on sales of TAZERIK and the initiation of clinical trials since the June 2020 FDA approval of TAZVERIK for follicular lymphoma, or FL. Due to the evolving and uncertain global impacts of the COVID-19 pandemic, however, we cannot precisely determine or quantify the impact that this pandemic has had on our business, operations and financial performance to date or the impact that this pandemic will have in 2022 and beyond. Please see “Risk Factors” in Part I, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K for further discussion regarding the impact and the risk of the COVID-19 pandemic on our business, operations and financial performance.

Overview

We are a commercial-stage biopharmaceutical company that is committed to rewriting treatment for people with cancer through the discovery, development, and commercialization of novel epigenetic medicines. We aspire to change the standard of care for patients and physicians by developing targeted medicines with fundamentally new mechanisms of action directed at specific causes of hematological malignancies and solid tumors.

We have one approved product, TAZVERIK (tazemetostat), which was granted accelerated approval by the U.S. Food and Drug Administration, or FDA, in 2020 for epithelioid sarcoma, or ES, and FL. Our focus is on maximizing our effectiveness as a commercial organization to achieve adoption of TAZVERIK among as many appropriate patients as possible, including in earlier treatment lines and in combination regimens with the data to support this expanded use; building on TAZVERIK’s pipeline-in-a-drug potential; and expanding our pipeline and evolving oncology portfolio, including with SET-101, our first-in-human Phase 1/1b trial of EZM0414, our novel, first-in-class, oral SETD2 inhibitor. We are leveraging our drug discovery platform and expertise as a leader in epigenetics, as well as our team’s deep experience across clinical development and commercialization to execute on our strategy.

In January 2020, the FDA granted accelerated approval of TAZVERIK (tazemetostat), an oral, first in class, selective small molecule inhibitor of the EZH2 histone methyltransferase, or HMT, for the treatment of adult and pediatric patients aged 16 years and older with metastatic or locally advanced ES not eligible for complete resection. This approval was based on overall response rate and duration of response data shown in the ES cohort of our Phase 2 trial in patients with INI1-negative tumors. We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

As part of the accelerated approval for ES, continued approval for this indication is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for this indication, we are conducting a single, randomized, controlled Phase 1b/3 confirmatory trial in the United States (EZH-301) assessing tazemetostat in combination with doxorubicin compared with doxorubicin plus placebo as a front-line treatment for ES. The trial is expected to enroll approximately 152 patients. We have completed the planned enrollment in the Phase 1b safety run-in portion of the trial, and the Phase 3 efficacy portion of the trial is open for accrual. We reported safety and preliminary activity data from the patients in the safety run-in portion of the EZH-301 trial at the American Society of Clinical Oncology (ASCO) Annual Meeting in June 2021.

In June 2020, the FDA approved a supplemental New Drug Application, or sNDA, for TAZVERIK for adult patients with relapsed or refractory (R/R) FL whose tumors are positive for an EZH2 mutation as detected by an FDA-approved test and who have received at least two prior systemic therapies, and adult patients with R/R FL who have no satisfactory alternative treatment options. These indications were approved under accelerated approval with

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a priority review, based on overall response rate and duration of response data shown in the FL cohorts of our Phase 2 clinical trial in patients with EZH2 mutations and wild-type EZH2. We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

As part of the accelerated approval for FL, continued approval for these R/R FL indications is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for these indications, we are conducting a single global, randomized, adaptive Phase 1b/3 confirmatory trial (EZH-302, SYMPHONY-1) assessing the combination of tazemetostat with “R2” (lenalidomide and rituximab), an approved chemotherapy-free treatment regimen, compared with R2 plus placebo for R/R FL patients in the second-line or later treatment setting. We plan to leverage the confirmatory trial and also conduct post-marketing commitments to expand the TAZVERIK label into the second-line treatment setting.

In December 2021 we presented updated safety and activity data from the Phase 1b safety run-in portion of this confirmatory trial at the 2021 American Society of Hematology (ASH) Annual Meeting. We continue to follow the 40 patients in the Phase 1b safety run-in portion of the trial, and we expect to present follow-up data from the safety run-in portion of the trial at a medical conference later in 2022.

We expect that the Phase 3 portion of the SYMPHONY-1 trial will be a global, randomized and adaptive confirmatory trial in 500 patients. Based on the Phase 1b safety run-in results, in December 2021 we submitted a protocol amendment to the FDA with 800 mg twice-daily as the recommended tazemetostat dose (RP3D) for the Phase 3 portion of the trial. After completing the 30-day voluntary waiting period following submission of the protocol amendment for 800 mg RP3D without any objection from the FDA, and as we continue to conduct the Phase 1b safety run-in portion of the trial, we have accelerated global start-up activities and are activating as many study sites as possible, globally, for the Phase 3 portion of the trial. The primary endpoint for the Phase 3 portion of the trial will be based on progression free survival as determined by investigator. Based on discussions with the FDA, this portion of the trial will include two interim analyses, the first of which is for futility only and the second of which will be conducted for futility, and if 65% of progression free survival events have occurred, the trial will also include an efficacy evaluation. In July 2021 China’s Center for Drug Evaluation, or CDE, approved the Investigational New Drug Application, or IND, we filed in China for SYMPHONY-1. We are currently screening patients in the Phase 3 portion of this trial and we expect to enroll the first patient in the Phase 3 portion of this trial in the first quarter of 2022.

Through our planned development efforts, including the following trials, our intention is to eventually make TAZVERIK available in all lines of treatment for patients with FL.

In collaboration with The Lymphoma Study Association, or LYSA, and based on clinical activity observed with tazemetostat in combination with R-CHOP (rituximab, cyclophosphamide, doxorubicin, vincristine and prednisolone) as a front-line treatment for patients with high risk diffuse large B-cell lymphoma, or DLBCL, LYSA is conducting a Phase 1b/2 clinical trial to evaluate this combination as a front-line treatment for high-risk patients with FL and DLBCL. Patient enrollment in the Phase 2 portion of this trial is now nearly complete with 111 patients out of a target of approximately 122 patients in DLBCL and 61 patients out of a target of approximately 62 patients in FL enrolled as of February 23, 2022. We expect that interim results from the Phase 2 portion of this trial will be presented at a medical conference in the second half of 2022.
In addition, we are finalizing plans for investigator-sponsored studies to evaluate tazemetostat in combination with venetoclax or BTK inhibitors for the treatment of patients with FL in the third-line or later treatment settings.

We are also developing tazemetostat for the treatment of a broad range of other cancer types in multiple treatment settings. Tazemetostat has shown meaningful clinical activity as an investigational monotherapy in multiple cancer indications and has been generally well-tolerated across clinical trials to date. We believe tazemetostat is a “pipeline in a product” opportunity and plan to explore its potential utility in additional indications and combinations.

There are four areas where we see the greatest potential for tazemetostat, all of which are based on a strong scientific hypothesis and are for patients suffering from diseases that would benefit from a new effective and safe treatment option, including:

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Lymphomas and B-cell malignancies, such as DLBCL, mantle cell lymphoma, or MCL, multiple myeloma and others;
Molecularly defined solid tumors, such as chordoma, melanoma, mesothelioma, and tumors harboring an EZH2 or SWI/SNF alteration;
PARPi-resistant tumors, such as castration-resistant prostate cancer, small cell lung cancer, and others; and
Immuno-oncology sensitive tumors, such as small cell lung cancer, prostate cancer, and others.

 

As part of these broader tazemetostat development efforts, we are evaluating tazemetostat for the treatment of prostate cancer. We are conducting a global, multi-center, open-label, randomized Phase 1b/2 trial (EZH-1101, CELLO-1) evaluating tazemetostat in combination with enzalutamide or abiraterone plus prednisone, the standard of care treatments for metastatic castration-resistant prostate cancer, or mCRPC. As of February 2021, we had completed enrollment in the Phase 1b safety run-in portion of CELLO-1 with a total of 21 men with mCRPC. In September 2021, at the European Society for Medical Oncology (ESMO) Congress, we announced preliminary data from the Phase 1b safety run-in portion of the trial with a data cutoff date of July 22, 2021. We continue to follow patients from the Phase 1b portion of the study, and we expect to present updated data from these patients in the second half of 2022. Based on early safety and activity findings observed in the Phase 1b safety run-in portion of CELLO-1, in the first quarter of 2021 we initiated enrollment in the Phase 2 efficacy portion of CELLO-1 evaluating tazemetostat in combination with enzalutamide compared to enzalutamide alone, and we expect to include 80 men with mCRPC in this Phase 2 portion of the trial. The primary endpoint for CELLO-1 is radiographic progression free survival. The Phase 2 efficacy portion of the trial is approximately 75% enrolled toward the target of 80 patients, and we expect to complete enrollment in the Phase 2 portion of the trial in 2022. We plan to provide updated data from the safety run-in portion of the trial as well as interim data from the Phase 2 portion of the trial in the second half of 2022.

To efficiently evaluate tazemetostat’s potential safety and efficacy across multiple types of hematological malignancies, we initiated a signal-finding Phase 1b/2 basket study (EZH-1501) evaluating tazemetostat with multiple combinations in hematological malignancies in December 2021 and we are actively screening patients for enrollment in this study. In the conduct of EZH-1501, we plan to study multiple combinations with standard of care therapies and novel mechanisms of action as we seek to expand the potential of TAZVERIK to patients with hematological malignancies and the physicians who treat them. We plan to provide updates as EZH-1501 reaches key enrollment milestones and we plan to provide preliminary data from EZH-1501 in the second half of 2022.

On March 1, 2022, we announced a pipeline reprioritization. Given the breadth of our current tazemetostat clinical development program, we have discontinued enrollment in our Phase 2 study of tazemetostat in combination with rituximab with FL in the third-line or later treatment settings (SYMPHONY-2, EZH-1401), as well as in our Phase 1/1b basket study evaluating tazemetostat combinations in patients with solid tumors (EZH-1301). We have enrolled five patients in the EZH-1401 study and one patient in the EZH-1301 study and plan to continue to follow the patients currently enrolled in each of these two studies. The decision to discontinue these studies was based on evolving market dynamics and a continued focus on optimizing our investments and eliminating potentially overlapping studies. We continue to study tazemetostat in combination with other therapies for both hematologic and solid tumor malignancies, both in ongoing Company-sponsored studies as well as investigator-initiated studies.

We own the global development and commercialization rights to tazemetostat outside of Japan and greater China. Eisai Co. Ltd, or Eisai, holds the rights to develop and commercialize tazemetostat in Japan, and Hutchison China MediTech Investment Limited, or HutchMed, holds certain rights to develop and commercialize tazemetostat in greater China.

TAZVERIK is available to eligible patients in the United States via a specialty distribution network. Through this specialty distribution network, we sell TAZVERIK principally to a limited number of specialty pharmacies, which dispense the product directly to patients, and specialty distributors, which in turn sell the product to hospital pharmacies and community practice pharmacies for the treatment of patients. To commercialize TAZVERIK for the approved ES and FL indications in the United States, we have built a focused field presence and marketing capabilities.

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On August 7, 2021, we entered into a strategic collaboration pursuant to a license agreement with HutchMed through which we granted a license to HutchMed for the co-exclusive (with us) development and exclusive commercialization of tazemetostat, either as monotherapy or as a part of combinations with other therapies, including HutchMed proprietary compounds, agreed by us and HutchMed for the treatment of ES, FL and DLBCL in humans, and any additional indications agreed to by us and HutchMed in mainland China, Taiwan, Hong Kong and Macau, or the HutchMed Territory.

For other geographies outside the United States, we are evaluating the most efficient path to obtain marketing approval, commercialize and distribute TAZVERIK to reach patients, including pursuing potential strategic collaborations. Based on comparators and the regulatory landscape, we have decided not to pursue marketing approval of tazemetostat as monotherapy from the European Medicines Agency, or EMA at this time.

Tazemetostat is covered by claims of U.S. and European composition of matter patents, which are expected to expire in 2032, exclusive of any patent term or other extensions. Tazemetostat has been granted Fast Track designation by the FDA in patients with relapsed or refractory FL, relapsed or refractory DLBCL with EZH2 activating mutations and metastatic or locally advanced ES who have progressed on or following an anthracycline-based treatment regimen. The FDA has also granted orphan drug designation to tazemetostat for the treatment of patients with malignant rhabdoid tumors, soft tissue sarcoma, and mesothelioma, and a seven-year orphan drug exclusivity period from the dates of our respective approvals of TAZVERIK for the treatment of patients with ES and for the treatment of patients with FL.

Beyond tazemetostat, we are utilizing our drug discovery platform to progress preclinical efforts and discover and identify additional product candidates to expand our pipeline of inhibitors against several classes of chromatin modifying proteins, or CMPs, including HMTs, histone acetyltransferases, or HATs, and helicases.

Our most advanced product candidate, EZM0414, is a novel first-in-class oral inhibitor of the SETD2 HMT.

SETD2 is an HMT that plays multiple important roles in oncogenesis. Based on the potential of SETD2 inhibition demonstrated in multiple preclinical settings, including multiple myeloma, and in particular high risk t(4;14) multiple myeloma and in other B-cell malignancies such as DLBCL, as well as in combination with existing and emerging therapies including tazemetostat, we submitted an IND for EZM0414 to the FDA in July 2021. We received “study may proceed” from the FDA with respect to our IND for EZM0414 in July 2021. In October 2021, EZM0414 was granted Fast Track designation by the FDA in adult patients with relapsed or refractory DLBCL and in January 2022 we received orphan drug designation from the FDA for EZM0414 for the treatment of multiple myeloma. In the fourth quarter of 2021, we initiated a Phase 1/1b trial (SET-101) intended to evaluate the safety and optimize the dose and schedule of EZM0414 in R/R multiple myeloma and DLBCL patients. The Phase 1 portion of our SET-101 trial is a 3 + 3 dose escalation design and includes six planned dose levels ranging from 100 mg to 900 mg once daily. Once we have optimized the dose, we then expect to expand the trial to two patient cohorts in multiple myeloma: t(4;14) multiple myeloma and non t(4;14) multiple myeloma. Based on dose optimization data from the trial, we may add a third patient cohort in DLBCL. We are screening patients with one site open for the Phase 1 dose escalation portion of the SET-101 trial, which we expect will enroll between 30-36 patients. We plan to provide updates as the trial reaches key enrollment milestones along with preliminary data from the trial in 2022.

To date we have entered into various strategic collaborations, including with Eisai, HutchMed, Roche and other third parties. As one of several key aspects of our strategy, we plan to continue to leverage our existing collaborations and to seek to identify new potential strategic collaborations to further support and grow our business in and outside of the United States.

Our Corporate Strategy

We are a commercial-stage biopharmaceutical company that is committed to rewriting treatment for people with cancer through the discovery, development and commercialization of novel epigenetic medicines. We aspire to change the standard of care for patients and physicians by developing targeted medicines with fundamentally new mechanisms of action directed at specific causes of hematological malignancies and solid tumors.

Our corporate strategy is focused on four critical imperatives that we refer to as The Next EPIsode: Rewriting Oncology Treatment with Epigenetics:

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Maximize our effectiveness as a commercial organization to achieve adoption of TAZVERIK among as many FL and ES patients as possible, including in earlier treatment lines and in combination regimens with the data to support this potential expanded use;
Build on TAZVERIK’s pipeline-in-a-drug potential, demonstrating tazemetostat’s benefit in additional hematological malignancies and solid tumors;
Expand our pipeline and evolving oncology portfolio, bringing novel oncology therapeutics into clinical development to maintain our position as a leader in epigenetics; and
Leverage options to expand patient reach, including through commercial, clinical and research collaborations.

 

TAZVERIK (tazemetostat) for Epithelioid Sarcoma

In January 2020, the FDA granted accelerated approval of TAZVERIK (tazemetostat) for the treatment of adults and pediatric patients aged 16 years and older with metastatic or locally advanced ES not eligible for complete resection. This approval was based on overall response rate and duration of response shown in an open-label, single-arm cohort of a multi-cohort, global Phase 2 trial of tazemetostat in adults with INI1-negative tumors. The cohort was conducted in 62 patients with histologically confirmed, metastatic or locally advanced ES. Patients were required to have INI1 loss, detected using local tests, and an Eastern Cooperative Oncology Group performance status, or ECOG PS, of 0-2. Patients in the cohort received TAZVERIK 800 mg orally twice daily until disease progression or unacceptable toxicity. Tumor response assessments were performed every eight weeks. The major efficacy outcome measures were confirmed overall response rate, or ORR, according to Response Evaluation Criteria in Solid Tumors, or RECIST, v1.1, as assessed by blinded independent central review, and duration of response. Median duration of follow-up was 14 months (range 0.4 to 31).

Among the 62 patients who received TAZVERIK, the median age was 34 years (range 16 to 79); 63% were male, 76% were White, 11% were Asian, 44% had proximal disease, 92% had an ECOG PS of 0 or 1, and 8% had an ECOG PS of 2. Prior surgery occurred in 77% of patients; 61% received prior systemic chemotherapy.

In the total of 62 patients treated, the overall response rate (95% confidence interval) was 15% (7%, 26%), with 1.6% of patients achieving a complete response and 13% achieving a partial response. Among responders in the trial, 67% had a duration of response of six months or longer as of the data cutoff date of September 17, 2018.

Serious adverse reactions occurred in 37% of patients receiving TAZVERIK. The serious adverse reactions in ≥3% of patients who received TAZVERIK were hemorrhage, pleural effusion, skin infection, dyspnea, pain, and respiratory distress.

One patient (2%) permanently discontinued TAZVERIK due to an adverse reaction of altered mood.

Dosage interruptions due to an adverse reaction occurred in 34% of patients who received TAZVERIK. The most frequent adverse reactions requiring dosage interruptions in ≥3% of patients were hemorrhage, increased alanine aminotransferase (ALT), and increased aspartate aminotransferase (AST). Dose reduction due to an adverse reaction occurred in one (2%) patient who received TAZVERIK due to decreased appetite.

The most common adverse reactions (≥20%, any grade) were pain, fatigue, nausea, decreased appetite, vomiting, and constipation.

The label for TAZVERIK includes warning and precautions for the increase in risk of developing secondary malignancies following treatment with TAZVERIK and the risk of embryo fetal toxicity when administered to pregnant women.

The Lancet Oncology published results of our Phase 2 trial evaluating TAZVERIK for the treatment of ES in October 2020.

We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

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Background on ES: Epithelioid sarcoma is an ultra-rare and aggressive type of soft tissue sarcoma, comprising less than 1 percent of all soft tissue sarcoma cases, and is characterized by a loss of the INI1 protein. It is most commonly diagnosed in young adults (20-40 years old) and is often fatal. There is no established standard-of-care for treating these patients, who are typically resistant to chemotherapy. Patients diagnosed with metastatic disease typically have a 5-year overall survival rate of zero percent and there are no approved treatment options specifically indicated for ES other than TAZVERIK. Typically, once patients have been deemed appropriate for systemic therapy, most are treated with chemotherapy. There are an estimated 800 patients in the United States living with ES with approximately 300 patients with metastatic or locally advanced disease that are eligible for systemic therapy.

TAZVERIK for Epithelioid Sarcoma Post-Marketing Requirements
 

Confirmatory Trial. As part of the accelerated approval for ES, continued approval for this indication is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for this indication, we are conducting a 1:1 randomized, controlled Phase 1b/3 clinical trial in the United States in the front-line treatment setting comparing tazemetostat in combination with doxorubicin, a commonly used systemic treatment in this setting, versus placebo plus doxorubicin. The trial is expected to enroll approximately 152 ES patients. The primary efficacy endpoint of the Phase 3 portion of the trial is progression-free survival, and secondary efficacy endpoints include overall survival, disease control rate, overall response rate, duration of response and health-related quality of life. We have completed the planned enrollment in the Phase 1b safety run-in portion of the trial, and the Phase 3 efficacy portion of the trial is open for accrual. We reported safety and preliminary activity data from patients in the safety run-in portion of the trial at the ASCO annual meeting in June 2021.

 

We have several additional post-marketing activities underway, intended to address aspects of the label in the future. These include clinical pharmacology evaluations to assess the effect of TAZVERIK on liver function and the effect of CYP3A inhibitors and inducers on TAZVERIK for patients with ES. We have also expanded enrollment in a cohort of our Phase 2 study in adults with INI1-negative tumors, to enroll a total of at least 60 ES patients. The cohort is a paired biopsy cohort designed to assess potential immune biomarkers, and the expansion is intended to provide more experience in patients with ES.

TAZVERIK for Follicular Lymphoma

In June 2020, the FDA approved an sNDA for TAZVERIK for the following FL indications: (1) adult patients with relapsed or refractory FL whose tumors are positive for an EZH2 mutation as detected by an FDA-approved test and who have received at least two prior systemic therapies, and (2) adult patients with relapsed or refractory FL who have no satisfactory alternative treatment options. These indications were approved under accelerated approval with a priority review, based on overall response rate and duration of response shown in the FL cohorts of our Phase 2 clinical trial in patients with EZH2 mutations and wild-type EZH2.

TAZVERIK was evaluated in an open-label, single-arm, multi-center Phase 2 clinical trial in patients with histologically confirmed FL whose disease had progressed following at least two prior systemic treatment regimens. Patients were enrolled into two cohorts: one cohort enrolled 45 patients with EZH2 activating mutations and a second cohort enrolled 54 patients with wild-type EZH2. All patients were treated with 800 mg of tazemetostat, administered orally twice a day. The major efficacy outcome measures were overall response rate (ORR) and duration of response (DOR) according to the International Working Group Non-Hodgkin Lymphoma (IWG-NHL) criteria (Cheson 2007) as assessed by Independent Review Committee. Median duration of follow-up was 22 months for patients with EZH2 activating mutations and 36 months for patients with wild-type EZH2.

Among the 45 FL patients with an EZH2 activating mutation who received TAZVERIK, the median age was 62 years (range 38 to 80); 42% were male; 42% had early progression following front-line therapy (POD24); and all had an ECOG PS of 0 or 1. The median number of lines of prior systemic therapy was 2.0 (range 1 to 11); 49% were refractory to rituximab and 49% were refractory to their last therapy. In the 42 patients treated with at least two prior systemic therapies, the ORR (95% confidence interval) was 69% (53%, 82%), with 12% of patients achieving a complete response and 57% achieving a partial response. The median DOR was 10.9 months and ongoing.

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Among the 54 FL patients with wild-type EZH2 who received TAZVERIK, the median age was 61 years (range 36 to 87); 63% were male; 59% had POD24; and 91% had an ECOG PS of 0 or 1. The median number of lines of prior systemic therapy was 3.0 (range 1 to 8); 59% were refractory to rituximab and 41% were refractory to their last therapy. In the 53 patients treated with at least two prior systemic therapies, the ORR (95% confidence interval) was 34% (22%, 48%), with 4% of patients achieving a complete response and 30% achieving a partial response. The median DOR was 13.0 months.

Serious adverse reactions, irrespective of attribution, occurred in 30% of patients receiving TAZVERIK. Serious adverse reactions in ≥2% of patients who received TAZVERIK were general physical health deterioration, abdominal pain, pneumonia, sepsis, and anemia. The most common (≥20%) adverse reactions were fatigue, upper respiratory tract infection, musculoskeletal pain, nausea and abdominal pain.

Eight patients (8%) discontinued due to adverse reaction during the trial. There were no reported deaths on study, and no black box warnings or contraindications.

The Lancet Oncology published in October 2020 results of our Phase 2 trial evaluating TAZVERIK for the treatment of FL.

We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

Background on FL: Follicular lymphoma is the most common indolent lymphoma and the second most common non-Hodgkin lymphoma – accounting for about 10-20% of all lymphomas in Western countries. FL is considered to be incurable with existing treatments and is characterized by cycles of relapse that become increasingly difficult to treat with each disease progression. We estimate that approximately 14,000 patients are diagnosed with FL in the United States annually, of whom the majority have advanced disease at diagnosis. We estimate that there are approximately 10,000 patients with relapsed and/or refractory disease in the United States. Based on literature and an extensive natural history study that we conducted, we believe that approximately 20% of FL tumors carry an EZH2 activating mutation. Common treatments for FL include multi-agent chemotherapy, usually combined with rituximab (Rituxan), including R-CHOP and R-Bendamustine. Upon clinical progression, treatment regimens are typically other combinations of rituximab, and other chemotherapy regimens, utilization of off-label agents, clinical trials, or one of the two approved PI3k inhibitors: copanlisib or umbralisib, or one approved CAR-T therapy: YESCARTA.

TAZVERIK for Follicular Lymphoma Post-Marketing Requirements

As part of the accelerated approval for FL, continued approval for these indications is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for these indications, we are conducting a single global, randomized, adaptive Phase 1b/3 confirmatory trial (EZH-302, SYMPHONY-1) assessing the combination of tazemetostat with “R2” (lenalidomide plus rituximab), an approved chemotherapy-free treatment regimen, compared with R2 plus placebo for FL patients in the second-line or later treatment setting.

In December 2021 we presented updated safety and activity data from the Phase 1b safety run-in portion of this confirmatory trial at the 2021 ASH Annual Meeting, which included 40 FL patients who had received treatment with tazemetostat and R2, including patients at the 400 mg tazemetostat twice daily dosing regimen [n=4], the 600 mg tazemetostat twice daily dosing regimen [n=18] and the 800 mg tazemetostat twice daily dosing regimen [n=18], as of a September 29, 2021 data cutoff date. Through the September 29, 2021 data cutoff date, the safety profile observed in the patients in the 400 mg, 600 mg and 800 mg dose cohorts was consistent with safety information in the prescribing information for the individual tazemetostat and R2 package inserts, respectively. Additionally, there was no clear dose response for treatment-emergent adverse events, or TEAEs, or dose modifications. Thirty-five (35) of the 40 patients were evaluable for tumor assessments as of the data cutoff date. Thirty-two (32) patients responded to treatment, with 13 patients, or 37.1 percent, having a complete response, and 19 patients, or 54.3 percent, having a partial response, for an overall response rate of 91.4 percent. The duration of response data continue to mature as the Phase 1b safety run-in portion of the trial is ongoing. We continue to follow the 40 patients in the Phase 1b safety run-in portion of the trial and we expect to present follow-up data from the safety run-in portion of the trial at a medical conference later in 2022.

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We expect that the Phase 3 portion of the SYMPHONY-1 trial will be a global, randomized and adaptive confirmatory trial in approximately 500 FL patients, stratified based on their EZH2 mutation status. Based on the Phase 1b safety run-in results, in December 2021 we submitted a protocol amendment to the FDA with 800 mg twice-daily as the recommended tazemetostat dose for the Phase 3 portion of the trial. After completing the 30-day voluntary waiting period following submission of the protocol amendment for the 800 mg RP3D without any objection from the FDA, and as we continue to conduct the Phase 1b safety run-in portion of the trial, we have accelerated global start-up activities and are activating as many study sites as possible, globally, for the Phase 3 portion of the trial. The primary endpoint for the Phase 3 portion of the trial will be based on progression free survival as determined by investigator. Based on discussions with the FDA, this portion of the trial will include two interim analyses, the first of which is for futility only and the second of which will be conducted for futility, and if 65% of progression free survival events have occurred, the trial will also include an efficacy evaluation. In July 2021 China’s Center for Drug Evaluation, or CDE, approved the IND we filed in China for SYMPHONY-1. We are currently screening patients in the Phase 3 portion of this trial and we expect to enroll the first patient in the Phase 3 portion of this trial in the first quarter of 2022.

In addition, we continue to engage with the FDA regarding the conduct of additional post-marketing commitments, including with respect to the design of clinical trials in FL patients with wild-type EZH2 to evaluate tazemetostat as a monotherapy in patients who have been treated with at least one prior systemic treatment, in order to inform the label and potentially expand in the relapsed and refractory setting in the future.

FL Development Expansion: Through our planned development efforts, our intention is to make TAZVERIK available in all lines of treatment for patients with FL. We plan to leverage the confirmatory trial and post-marketing commitments to expand TAZVERIK into the second-line treatment setting.

In collaboration with LYSA and based on clinical activity observed with tazemetostat in a combination Phase 1b/2 study with R-CHOP as a front-line treatment for patients with high risk DLBCL, in the fourth quarter of 2016 LYSA commenced a multi-center Phase 1b/2 trial of tazemetostat in combination with R-CHOP in front-line, elderly high-risk patients with DLBCL. Primary endpoints in the trial include complete response rate, safety and tolerability of the combination. Secondary endpoints include ORR and progression-free survival, or PFS. At ASH 2018, LYSA reported interim data from 17 patients in the trial as of March 2018 showing that the combination of the two agents had been generally well-tolerated and confirming the recommended tazemetostat dose for the combination to be 800 mg twice-daily. Clinical activity was observed, with 87 percent of patients experiencing a metabolic complete response. We agreed in 2020 to expand the trial to also include an expansion cohort for the front-line treatment of high-risk patients with FL. The Phase 1b part of the study has completed. Patient enrollment in the Phase 2 portion of this trial is now nearly complete with 111 patients out of a target of approximately 122 patients in DLBCL and 61 patients out of a target of approximately 62 patients in FL enrolled as of February 23, 2022. We expect that interim results from the Phase 2 portion of this trial will be presented at a medical conference in the second half of 2022.

In addition, we are finalizing plans for investigator-sponsored studies to evaluate tazemetostat in combination with venetoclax or BTK inhibitors for the treatment of patients with FL in the third-line or later treatment settings.

Tazemetostat Life-Cycle Development

Tazemetostat has shown meaningful clinical activity as an investigational monotherapy in multiple cancer indications and has been generally well-tolerated across clinical trials to date. We believe tazemetostat is a “pipeline in a product” opportunity and plan to explore its utility in additional indications and combinations through both Company- and investigator-sponsored studies. There are four areas where we see the greatest potential for tazemetostat, all of which are based on a strong scientific hypothesis and are for patients suffering from diseases that would benefit from a new effective and safe treatment option.

Lymphomas and B-Cell Malignancies

We are developing tazemetostat for lymphomas and B-cell malignancies, including DLBCL, MCL, multiple myeloma and others, because of the role EZH2 plays in B-cell biology. When oncogenic mutations occur, they can “lock” B-cells in the germinal center state, leading to a variety of hematologic cancers. Regardless of the oncogenic mutation, these cancer cells are governed by EZH2 expression, which enables their growth and proliferation. By inhibiting EZH2, we believe we can inhibit tumor proliferation, leading to anti-tumor activity, as seen in FL patients with wild-type EZH2.

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Molecularly Defined Solid Tumors

We are exploring the use of tazemetostat to treat multiple molecularly defined solid tumors, such as chordoma, melanoma, mesothelioma and tumors with a SWI/SNF alteration or other mutations. In these tumors, a loss of certain proteins or the presence of a certain mutation have been shown to result in abnormal EZH2 activity or exaggerated dependence on EZH2, which typically leads to cancer cell growth. By inhibiting EZH2 with tazemetostat, we believe we can inhibit that abnormal function, thereby indirectly restoring cells to their natural state, which we believe has the potential to result in a therapeutic benefit.

PARPi-Resistant Tumors

We are assessing the use of tazemetostat for PARPi-resistant solid tumors that are resistant to chemotherapy or other treatments, such as castration-resistant prostate cancer, small cell lung cancer, and others. EZH2 plays a role in the resistance to poly adenosine diphosphate ribose polymerase, or PARP, inhibitors. When PARP inhibitors are given, DNA is damaged, which leads to increased EZH2 activity and limits the responsiveness to the PARP inhibitor. By blocking EZH2 with tazemetostat, we believe we can also re-sensitize tumors to PARP inhibition treatment.

Castration-Resistant Prostate Cancer: Prostate cancer is the most frequently diagnosed and second most frequent cause of cancer deaths among men in the United States. We believe that treatment with an EZH2 inhibitor after resistance to the standards-of-care may result in recovery of sensitivity to these agents because, based on published literature, EZH2 protein expression has been correlated with progression of metastatic castration-resistant prostate cancer, or mCRPC, and moderate to high EZH2 expression has been associated with worse survival. We are conducting a global, multi-center, randomized Phase 1b/2 trial (EZH-1101, CELLO-1) evaluating tazemetostat in combination with enzalutamide or abiraterone plus prednisone, the standard of care treatments for mCRPC. As of February 2021, we had completed enrollment in the Phase 1b safety run-in portion of CELLO-1 with a total of 21 men with mCRPC. Based on early safety and activity findings observed in the Phase 1b safety run-in portion of CELLO-1, in the first quarter of 2021 we initiated enrollment in the Phase 2 efficacy portion of CELLO-1 evaluating tazemetostat in combination with enzalutamide compared to enzalutamide alone, and we expect to include 80 men with mCRPC in this Phase 2 portion of the trial. The primary endpoint for CELLO-1 is radiographic progression free survival. The Phase 2 efficacy portion of the trial is approximately 75% enrolled toward the target of 80 patients, and we expect to complete enrollment in the Phase 2 portion of the trial in 2022. We plan to provide updated data from the safety run-in portion of the trial as well as interim data from the Phase 2 portion of the trial in the second half of 2022.

In September 2021, at the European Society for Medical Oncology (ESMO) Congress, we announced preliminary data from the Phase 1b safety run-in portion of the trial using a data cutoff date of July 22, 2021. The safety run-in portion of CELLO-1 is being conducted using a standard dose escalation design. Among the 21 patients enrolled in the safety run-in portion, as of the data cutoff date no dose limiting toxicities, or DLTs, were observed at any dose of tazemetostat up to a maximum dose of 1600 mg twice daily for patients receiving tazemetostat plus enzalutamide and 800 mg twice daily for patients receiving tazemetostat plus abiraterone. As of the July 22, 2021 cutoff date, preliminary data from the trial also showed:

Median PFS had not been reached at cutoff for the tazemetostat plus enzalutamide arm; six-month PFS was 61.7%.
11 of 21 patients experienced prostate-specific antigen, or PSA, decline from baseline; seven out of 21 patients had a PSA response of ≥50%; one additional patient had a PSA response of ≥30%.
Six of the PSA50 responses were in the tazemetostat + enzalutamide cohort (n=13) and one was in the tazemetostat + abiraterone/prednisone cohort (n=8).
One patient with a PSA50 response achieved a radiographic partial response.
All PSA50 and PSA30 responses were in ARV7 negative and neuroendocrine subtype negative patients identified using the EPIC platform. Only one ARV7 positive patient was enrolled in the safety run-in portion of the trial.

 

PARP-Resistant Solid Tumors: We are continuing with an ongoing investigator-sponsored trial that is intended to investigate the therapeutic potential of tazemetostat as a combination therapy with a PARP inhibitor for the

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treatment of PARP-resistant tumors. In PARP-resistant cancers, PARP inhibitors have shown modest monotherapy activity, and we continue to believe tazemetostat may have the potential to enhance the clinical response to PARP inhibitors.

Immuno-oncology-sensitive Tumors

We are assessing the use of tazemetostat for immuno-oncology-sensitive tumors, such as small cell lung cancer, prostate cancer and others. We believe tazemetostat has the potential to enhance the antitumor immune response by interfering with multiple EZH2 functions in the cell. EZH2 inhibition results in tumor-intrinsic and tumor-extrinsic effects that reshape the tumor microenvironment to favor antitumor immunity, including increasing antigen presentation, increasing effector T cell trafficking, modulating the adaptive anti-tumor response, impairing regulatory T cells, inducing the expression of tumor antigens and endogenous retroviruses, and increasing NK cell maturation and killing. By inhibiting EZH2, we believe tazemetostat may be able to influence biologic activity in the tumor microenvironment, which could enable tumors to be more sensitive or re-sensitized to immune-oncology therapies.

EZM0414, Our SETD2 Inhibitor Program and SET-101, Our Phase 1/1b Trial of EZM0414

We are developing a novel first-in-class oral inhibitor of SETD2 (EZM0414). SETD2 is an HMT that plays multiple important roles in oncogenesis. We submitted an IND for EZM0414 to the FDA in July 2021 based on the potential of SETD2 inhibition demonstrated in multiple preclinical settings, including multiple myeloma, and in particular high risk t(4;14) multiple myeloma and in other B-cell malignancies such as DLBCL, as well as in combination with existing and emerging therapies including tazemetostat.

We received “study may proceed” from the FDA with respect to our IND for EZM0414 in July 2021. In October 2021, EZM0414 was granted Fast Track designation by the FDA in adult patients with relapsed or refractory DLBCL and in January 2022 we received orphan drug designation from the FDA for EZM0414 for the treatment of multiple myeloma. This trial (SET-101), which we initiated in the fourth quarter of 2021, is a Phase 1/1b trial intended to evaluate the safety and optimize the dose and schedule of EZM0414 in relapsed or refractory multiple myeloma and DLBCL patients. The Phase 1 portion of our SET-101 trial is a 3 + 3 dose escalation design and includes six planned dose levels ranging from 100 mg to 900 mg once daily. Once we have optimized the dose, we then expect to expand the trial to two patient cohorts in multiple myeloma: t(4;14) multiple myeloma and non t(4;14) multiple myeloma. Based on dose optimization data from the trial, we may add a third patient cohort in DLBCL. We are screening patients with one site open for the Phase 1 dose escalation portion of the SET-101 trial, which we expect will enroll between 30-36 patients. We plan to provide updates as the trial reaches key enrollment milestones, along with preliminary data from the trial in 2022.

Our Research Focus

Beyond tazemetostat and EZM0414, we are utilizing our proprietary drug discovery platform to progress preclinical efforts and discover and identify additional product candidates to expand our pipeline of inhibitors against several classes of CMPs, including HMTs, HATs, and helicases. These programs are directed against both hematological malignancies and solid tumors and include biomarker approaches to patient stratification.

Our Epigenetic Approach

Epigenetics refers to a broad regulatory system that controls gene expression without altering the sequence of the genes themselves. Genes are composed of DNA, and in nature, this DNA is wrapped around a core of proteins known as histones. Together, the DNA and histone proteins form a complex known as chromatin that is the basic structural component of chromosomes.

Gene regulation is determined by chromatin structure. The dynamics of chromatin structure are regulated through multiple mechanisms by CMPs. Some CMPs place chemical groups onto specific sites on histones or DNA, some remove these marks in site-specific ways, others recognize the uniquely marked sites on histones and bind to these marked sites, and still other CMPs drive topological changes to histone-DNA interactions within chromatin. Where, when and how such chromatin structure changes occur determines which genes in a cell are turned “on” or “off” at

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any particular time. When the function of these CMPs is altered, the program of gene expression is changed in ways that can lead to disease.

To further support our leadership position in epigenetics, we are discovering and developing inhibitors of CMPs as novel therapeutics for patients with cancer. Our focus is on the discovery, development and commercialization of small molecule inhibitors of CMPs for applications in diseases that are uniquely dependent on the enzyme activity of a specific CMP. Among the CMP target classes, we have had a particular emphasis on the HMTs, which have been shown to play pathogenic roles in a number of human diseases. Today, we have programs in HMTs as well as additional target classes, including HATs, and helicases. We believe that targeting pathogenic CMPs affords us multiple opportunities to create, develop and commercialize novel therapeutics.

Our Collaborations

We have entered into several key strategic collaborations, including therapeutic collaborations and other collaborations. Since our inception, the therapeutic collaborations have provided us with $268.8 million in non-equity funding through December 31, 2021. Key terms of our ongoing collaborations are summarized below.

Eisai

Overview. In March 2015, we entered into an amended and restated collaboration and license agreement with Eisai, under which we reacquired worldwide rights, excluding Japan, to our EZH2 program, including tazemetostat. Under the amended and restated collaboration and license agreement, we will be responsible for global development, manufacturing and commercialization outside of Japan of tazemetostat and any other EZH2 product candidates, with Eisai retaining development and commercialization rights in Japan, as well as a right to elect to manufacture tazemetostat and any other EZH2 product candidates in Japan, including the right of first negotiation for the rest of Asia. Eisai waived its right of first negotiation for the rest of Asia in 2018. Under the original collaboration and license agreement, we had granted Eisai an exclusive worldwide license to our small molecule HMT inhibitors directed to EZH2, including tazemetostat, while retaining an opt-in right to co-develop, co-commercialize and share profits with Eisai as to licensed products in the United States.

Upon the execution of the amended and restated collaboration agreement in March 2015, we agreed to pay Eisai a $40.0 million upfront payment. We also agreed to pay Eisai up to $20.0 million in clinical development milestone payments, including a $10.0 million milestone payment upon the earlier of initiation of a first phase 3 clinical trial of any EZH2 product or the first submission of an NDA or Market Authorization Application, or MAA, and a $10.0 million milestone upon the earlier of initiation of a first phase 3 clinical trial of any EZH2 product or the first submission of an NDA or MAA for a second indication, and up to $50.0 million in regulatory milestone payments, including a $25.0 million milestone payment upon regulatory approval of the first NDA or MAA, and a $25.0 million milestone payment upon regulatory approval of the NDA or MAA for the second indication. We are obligated to pay royalties at a percentage in the mid-teens on worldwide net sales of any EZH2 product, excluding net sales in Japan. In 2019, Eisai sold its rights to these royalties to RPI Finance Trust, which has agreed to certain reductions in these royalties in the event certain net sales thresholds are achieved. We are eligible to receive from Eisai royalties at a percentage in the mid-teens on net sales of any EZH2 product in Japan. In November 2019, we sold our rights to these royalties to RPI Finance Trust. In 2019, we triggered the payment of the two $10.0 million milestone payments upon the submission of the NDAs for accelerated approval of tazemetostat for epithelioid sarcoma and follicular lymphoma. In January 2020, we triggered the payment of the $25.0 million milestone payment upon regulatory approval in the United States of tazemetostat for epithelioid sarcoma and in June 2020 we triggered the payment of an additional $25.0 million milestone payment upon regulatory approval in the United States of tazemetostat for follicular lymphoma.

Under the original agreement, Eisai was solely responsible for funding all research, development and commercialization costs for licensed compounds. Under the amended and restated agreement, we are solely responsible for funding global development, manufacturing and commercialization costs for EZH2 compounds outside of Japan, and Eisai is solely responsible for funding Japan-specific development and commercialization costs for EZH2 compounds. In connection with the amended and restated agreement, we and Eisai agreed to the transition to us of ongoing development and manufacturing activities that were being conducted by or on behalf of Eisai. In January 2017, as part of Eisai’s obligations under the amended and restated collaboration agreement, Eisai

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enrolled and dosed the first patient in a Phase 1 study of tazemetostat in patients with relapsed or refractory B-cell NHL in Japan.

In the event that we are awarded a priority review voucher from the FDA with respect to an EZH2 product, Eisai is entitled to specified compensation if we use the voucher on a non-EZH2 program or sell the voucher to a third party.

Governance. Under the amended and restated collaboration and license agreement, development will be guided by a joint steering committee, with our company retaining final decision-making authority with respect to global development other than with respect to Japan-specific development and commercialization.

Exclusivity Restrictions. Subject to exceptions specified in the agreement, for an exclusivity period extending until eight years after the first commercial sale of a product covered by the agreement, neither we nor Eisai may research, develop or commercialize HMT inhibitors directed to EZH2, other than pursuant to the agreement.

Term and Termination. Our agreement with Eisai will remain in effect until the expiration of all payment obligations under the agreement with respect to all licensed products. The royalty term for each licensed product in each country commences on the first commercial sale of the applicable licensed product in the applicable country and ends on the latest of expiration of specified patent coverage, expiration of specified regulatory exclusivity or ten years following the first commercial sale. We or Eisai may terminate the agreement for convenience as to our respective territories, upon 90 days’ prior written notice. The agreement will also terminate as to our territory if we cease all development and commercialization activities for the United States and specified major countries in Europe and as to Eisai’s territory if Eisai ceases all development and commercialization activities for Japan. The agreement may also be terminated by either party in the event of an uncured material breach by the other party or by us in the event Eisai, or an affiliate or sublicensee, participates or actively assists in an action or proceeding challenging or denying the validity of one of our patents. If we terminate the agreement for our convenience, the agreement terminates as a result of our cessation of development and commercialization activities or Eisai terminates the agreement for our uncured material breach, Eisai may elect to have worldwide development and commercialization rights revert to Eisai, and if Eisai so elects, Eisai will be required to pay us specified royalties on net sales of the licensed products and reimburse certain development expenses incurred by us. If Eisai terminates the agreement for its convenience, the agreement terminates as a result of Eisai’s cessation of development and commercialization activities or we terminate the agreement for Eisai’s uncured material breach or Eisai’s, or its affiliate’s or sublicensee’s, participation in, or assistance with, an action or proceeding challenging or denying the validity of one of our patents, Japanese development and commercialization rights to the licensed products revert to us, and we will be required to pay Eisai specified royalties on net sales of licensed products in Japan.

HutchMed

Overview. In August 2021, we entered into a strategic collaboration pursuant to a license agreement, or the HutchMed License Agreement, with HutchMed for the development, manufacture and commercialization of tazemetostat, either as a monotherapy or as a part of combinations with other therapies, including HutchMed proprietary compounds, agreed by the parties under the HutchMed License Agreement for the treatment of ES, FL, DLBCL in humans, and any additional indications agreed by the parties in accordance with the terms of the HutchMed License Agreement in mainland China, Taiwan, Hong Kong and Macau, each a Jurisdiction and collectively, the HutchMed Territory.

 

We have granted HutchMed licenses under patent rights and know-how that we control to enable HutchMed to develop and commercialize licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory. The licenses granted to HutchMed are co-exclusive with us with respect to the development of licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory and exclusive with respect to the commercialization of licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory. We also granted HutchMed a license under patent rights and know-how controlled that we control to enable HutchMed to manufacture tazemetostat drug substance and drug product for the purpose of developing and commercializing licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory. We retain development and commercialization rights with respect to licensed products in the rest of the world outside of the HutchMed Territory except for Japan. During the term of the

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HutchMed License Agreement, each party and its affiliates is prohibited from developing or commercializing any other compound or product that inhibits, modulates or degrades EZH1, EZH2, or any other member of the polycomb repressive complex 2, including the EED protein for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory, provided that, subject to limitations specified in the HutchMed License Agreement, HutchMed may develop its existing preclinical compound that inhibits EZH1 and EZH2 without the use of know-how or patent rights that we licensed to HutchMed.

 

We have agreed to conduct a technology transfer of manufacturing technology to HutchMed to enable HutchMed to manufacture clinical and commercial quantities of tazemetostat drug substance and drug product to carry out its obligations and exercise its rights under the HutchMed License Agreement. Subject to the execution of a clinical supply agreement or commercial supply agreement, as applicable, and until the completion of the technology transfer to HutchMed, we have agreed to manufacture and supply HutchMed with tazemetostat drug substance and drug product in sufficient quantities for HutchMed’s development or commercialization activities for licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory.

 

HutchMed has agreed to use commercially reasonable efforts to carry out development activities in the HutchMed Territory as agreed by the parties and to seek to obtain and maintain regulatory approval of the licensed products in the HutchMed Territory. HutchMed agreed to use commercially reasonable efforts to commercialize licensed products for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory. HutchMed is responsible for all costs it incurs in developing, obtaining regulatory approval of, and commercializing licensed products in the HutchMed Territory, including costs incurred by HutchMed in conducting clinical trials that only include clinical sites in the HutchMed Territory. For global studies that we conduct and in which HutchMed elects to participate by conducting any such study in the HutchMed Territory, HutchMed will be responsible for enrolling and treating in the HutchMed Territory 20% of the total number of study patients of such global study and will be responsible for costs for those patients enrolled and treated in such trials. HutchMed will also be responsible for 20% of the costs of such global studies that are not specific to any territory and we will be responsible for all other costs of such global studies. HutchMed has agreed to participate in our EZH-301 and EZH-302 global studies, however under certain circumstances where the EZH-302 global study is not considered a confirmatory trial for regulatory approval in China, we shall be responsible for the costs of the trial in the HutchMed Territory.

 

Pursuant to the HutchMed License Agreement, we received a nonrefundable upfront payment of $25.0 million in September 2021. We are also entitled to milestone payments of up to $110.0 million in the aggregate for achievement of specified development and regulatory milestones with respect to licensed products in the HutchMed Territory, and up to $175.0 million in the aggregate for achievement of specified sales milestones in the HutchMed Territory with respect to the licensed products. We will also be entitled to receive tiered royalties, ranging from a mid-teens percentage to a low twenties percentage based on HutchMed’s cumulative annual net sales, if any, of licensed products in the HutchMed Territory. Royalties are payable for each licensed product commencing on the first commercial sale of the applicable licensed product and ending, on a Jurisdiction-by-Jurisdiction basis, on the latest of expiration of specified patent coverage, expiration of specified regulatory exclusivity or a specified period following the first commercial sale in such Jurisdiction and may be reduced in various circumstances.

Under the HutchMed License Agreement, we issued a warrant to HutchMed, or the “HutchMed Warrant, exercisable at any time prior to August 7, 2025 for up to 5,653,000 shares of our common stock at an exercise price of $11.50 per share. On September 21, 2021 we filed with the SEC a registration statement on Form S-3 registering for resale the shares of our common stock issuable upon exercise of the HutchMed Warrant in accordance with the HutchMed Warrant. Such registration statement on Form S-3 was declared effective by the SEC on September 29, 2021.

Term and Termination. Unless earlier terminated, the HutchMed License Agreement will expire upon the expiration of the last royalty term for the last licensed product for the treatment of ES, FL, DLBCL and any additional indications agreed by the parties in the HutchMed Territory. HutchMed may terminate the HutchMed License Agreement in its entirety for any or no reason upon 12 months’ prior written notice to us. Either party may, subject to specified cure periods, terminate the HutchMed License Agreement in the event of the other party’s uncured material breach, and under specified circumstances relating to the other party’s insolvency or if the other party or its

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affiliates challenges the validity, patentability, or enforceability of patent rights that are owned by or licensed to such party or its affiliates and that are subject to the licenses granted in the HutchMed License Agreement.

LYSA

In May 2016, we entered into a collaboration agreement with the Lymphoma Academic Research Organization, or LYSARC, to conduct a combination trial of tazemetostat. LYSARC is the operational arm of LYSA, a premier cooperative group in France dedicated to clinical and translational research for lymphoma. Based on clinical activity observed with tazemetostat in a combination Phase 1b/2 trial with R-CHOP as a front-line treatment for patients with high risk diffuse large B-cell lymphoma, or DLBCL, we agreed in 2020 to expand the trial to also include an expansion cohort for the front-line treatment of high-risk patients with FL. LYSA is conducting the Phase 2 clinical expansion trial and the Phase 1b part of the trial has completed. LYSA is managing the study operations for the trial, and we are recognizing our share of the related expenses as those costs are incurred over the duration of the trial. Primary endpoints in the trial include complete response rate, safety and tolerability of the combination. Secondary endpoints include ORR and PFS. Patient enrollment in the Phase 2 portion of this trial is now nearly complete with 111 patients out of a target of approximately 122 patients in DLBCL and 61 patients out of a target of approximately 62 patients in FL enrolled as of February 23, 2022. We expect that interim results from the Phase 2 portion of this trial will be presented at a medical conference in the second half of 2022.

GSK

On December 16, 2021, we received written notice from Glaxo Group Limited, or GSK, that GSK had elected to terminate the collaboration and license agreement entered into in January 2011, as amended. GSK terminated the agreement without cause, and in accordance with the terms of the agreement and the notice of termination, the termination will be effective on March 16, 2022, or the GSK Agreement Termination Effective Date. The agreement provided that the parties would discover, develop and commercialize novel small molecule histone methyltransferase, or HMT, inhibitors directed to available targets from our product platform. Under the terms of the agreement, we granted GSK exclusive, worldwide license rights to HMT inhibitors directed to three targets. As part of the collaboration, we agreed to provide research and development services related to the licensed targets pursuant to agreed-upon research plans during a research term that ended January 8, 2015. We completed substantially all research obligations under the agreement by the end of the first quarter of 2015 and completed the transfer of the remaining data and material for these programs to GSK in the second quarter of 2015. GSK was then responsible for all future development and commercialization. Subsequent to a GSK strategic portfolio prioritization, we received notice in October 2017 that GSK terminated the agreement with respect to the third target, effective December 31, 2017, which returned all rights to that target to us. The two other targets, PRMT5 and PRMT1, continued to be subject to the agreement and were not impacted by the termination with respect to the third target. As a result of the termination of the agreement, as of the GSK Agreement Termination Effective Date, the license rights granted by us to GSK will terminate, GSK will cease to accrue any financial obligations to us and we will be entitled to pursue the PRMT5 and PRMT1 targets in all fields worldwide without further obligation to GSK.

Companion Diagnostics

Roche Sequencing Solutions

In December 2012, Eisai and we entered into a companion diagnostics agreement with Roche Molecular under which Eisai and we engaged Roche Molecular to develop a companion diagnostic to identify patients who possess certain activating mutations of EZH2. In October 2013, this agreement was amended to include additional mutations in EZH2. The development costs due under the amended agreement with Roche Molecular were the responsibility of Eisai until the execution of the amended and restated collaboration and license agreement with Eisai in March 2015, at which time we assumed responsibility for the remaining development costs due under the agreement. In December 2015, we and Eisai entered into a second amendment to the companion diagnostics agreement with Roche Molecular. The agreement was further amended in March 2018. Under the amended agreement, we were responsible for remaining development costs of $10.4 million due under the agreement as of March 2018 and Eisai agreed to reimburse us $0.9 million of this amount related to a regulatory milestone for Japan, which Eisai paid to us in the fourth quarter of 2020. In July 2019, we entered into a fourth amendment to the companion diagnostics agreement. Under the amended agreement, we and Roche Molecular agreed to divide a $1.0 million regulatory milestone for the United States into two separate milestone payments, of which $0.5 million was paid by us as part of the signed

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amendment, and the remaining $0.5 million was paid by us in December 2019 upon the satisfaction of certain conditions set forth in the fourth amendment to the companion diagnostics agreement. As part of this fourth amendment, Roche Molecular also assigned all of its rights and obligations under the companion diagnostics agreement to Roche Sequencing Solutions, or RSS, effective as of January 1, 2020. As of December 31, 2021, we are responsible for the remaining development costs of $1.0 million due under the agreement. In addition, we paid $1.0 million for the achievement of a development milestone in the fourth quarter of 2020.

Under the agreement with RSS, RSS is obligated to use commercially reasonable efforts to develop and to make commercially available the companion diagnostic kit. RSS has exclusive rights to commercialize the companion diagnostic kit developed pursuant to this agreement. On June 18, 2020 the FDA approved the companion diagnostic kit that is intended to identify FL patients with an EZH2 mutation for treatment with tazemetostat.

The agreement with RSS will expire when we and Eisai are no longer developing or commercializing tazemetostat. We and Eisai may terminate the agreement by giving RSS 90 days’ written notice if we and Eisai discontinue development and commercialization of tazemetostat or determine, in conjunction with RSS, that the companion diagnostic is not needed for use with tazemetostat. Any party may also terminate the agreement in the event of a material breach by any other party, in the event of material changes in circumstances that are contrary to key assumptions specified in the agreement or in the event of specified bankruptcy or similar circumstances. Under specified termination circumstances, RSS may become entitled to specified termination fees.

Intellectual Property

We strive to protect the proprietary compounds and technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the composition of matter of our product candidates, their methods of use, related technologies, diagnostics and other inventions. Our patent portfolio is currently composed of over 300 issued patents and allowed patent applications and over 550 pending patent applications in the major pharmaceutical markets, that we own as well as license from other parties. In addition to patent protection, we also rely on trade secrets and careful monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, maintain our licenses to use intellectual property owned by third parties, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and other proprietary rights of third parties. We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of HMTs, as well as to develop a proprietary position for new target classes, such as HATs and helicases.

We plan to continue to expand our intellectual property estate by filing patent applications directed to dosage forms, methods of treatment and additional CMP and HMT inhibitor compounds and their derivatives, and to other new target classes. Specifically, we seek patent protection in the United States and internationally for novel compositions of matter covering the compounds, the chemistries and processes for manufacturing these compounds and the use of these compounds in a variety of therapies.

The patent portfolios for our most advanced programs are summarized below.

EZH2. Our EZH2 patent portfolio includes U.S. Patent No. 8,410,088 covering the composition of matter of tazemetostat. This patent issued on April 2, 2013 and is expected to expire in 2032, not including extensions. Our EZH2 portfolio also includes 54 additional U.S. patents and more than 250 foreign patents, expected to expire between 2031 and 2037, not including extensions. The claims of these patents cover the composition of matter of EZH2 inhibitor compounds and various methods of their making and use. Patent applications in the same families as these patents are pending in a variety of worldwide jurisdictions, including the United States. The EZH2 program portfolio encompasses more than 40 patent families with pending patent applications relating to compositions of matter and methods of making and use of EZH2 inhibitors. The patent families in this portfolio are in various stages of prosecution and include patent applications filed in a variety of worldwide jurisdictions, including the United States; Patent Cooperation Treaty, or PCT, applications that are eligible for filing in most worldwide jurisdictions,

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including the United States, and at least one U.S. provisional application that may be used as the basis for non-provisional U.S. applications, PCT applications and other national filings worldwide. Our patent applications in the EZH2 portfolio, if issued, would be expected to expire between 2031 and 2041, not including extensions.

SETD2. Our SETD2 patent portfolio includes six patent families directed to various product candidates and methods of use, with applications filed in the United States and internationally. Patents, if issued from currently pending applications in the SETD2 portfolio, are expected to expire between 2038 and 2042, not including extensions.

EHMT2. Our EHMT2 patent portfolio includes more than eight patent families directed to various product candidates and methods of use, with applications filed in the United States and internationally. Patents, if issued from currently pending applications in the EHMT2 portfolio, are expected to expire between 2037 and 2038, not including extensions.

Other Targets. We also have patent portfolios directed to targets other than EZH2, SETD2 and EHMT2, including the HMT targets DOT1L, PRMT1, PRMT3, CARM1 (also known as PRMT4), PRMT5, PRMT6, PRMT8, SMYD2 and SMYD3. These patent portfolios have more than 35 patent families directed to various product candidates with applications filed in the United States, PCT applications that are eligible for filing in most worldwide jurisdictions, including the United States, and U.S. provisional applications that may be used to establish non-provisional U.S. applications, PCT applications and other national filings worldwide. Patents, if issued in these portfolios are expected to expire between 2033 and 2041. We have more than 20 granted U.S. patents that cover PRMT5 inhibitors and their methods of use. These patents are expected to expire in 2033, not including extensions.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other non-United States jurisdictions to extend the term of a patent that covers an approved drug. We have applied for patent term extension on a patent that covers the TAZVERIK drug substance (tazemetostat) based on the regulatory review of TAZVERIK for the treatment of adult and pediatric patients aged 16 years and older with metastatic or locally advanced ES not eligible for complete resection. In the future, if and when any additional pharmaceutical products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We intend to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

We also rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements also provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property.

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Manufacturing

We do not have any manufacturing facilities and currently rely, and expect to continue to rely, on third parties for the manufacture of our development-stage product candidates including EZM0414 as well as our commercial product, tazemetostat. We have entered into clinical and commercial supply agreements with contract manufacturers for the clinical development and commercialization of tazemetostat.

Tazemetostat and EZM0414 are small molecules and are manufactured in third-party facilities that are equipped, staffed, and experienced in the manufacture of such pharmaceutical products. All such facilities have successful track-records manufacturing products for the United States, European Union, and rest of world markets, meeting regulatory and compliance requirements as appropriate.

We expect that any product candidates that we may develop will be small molecules that may be produced cost-effectively at contract manufacturing facilities.

We rely on third parties for the manufacture of any diagnostics we may need or if required and may continue to enter into similar agreements for the manufacture of other diagnostics. We are currently collaborating with RSS for a diagnostic for its use with tazemetostat. As described above, under the agreement with RSS, RSS is obligated to use commercially reasonable efforts to develop and to make commercially available the companion diagnostic kit. In June 2020 the FDA approved the companion diagnostic kit that is intended to identify follicular lymphoma patients with an EZH2 mutation for treatment with tazemetostat.

Commercialization

TAZVERIK is available to eligible patients in the United States via a specialty distribution network. Through this specialty distribution network, we sell TAZVERIK principally to a limited number of specialty pharmacies, which dispense the product directly to patients, and specialty distributors, which in turn sell the product to hospital pharmacies and community practice pharmacies for the treatment of patients. To commercialize TAZVERIK for the ES and FL indications in the United States, we have built a focused field presence and marketing capabilities. This includes an efficiently sized field-based organization focused on Academic Centers of Excellence, Integrated Delivery Networks (IDNs) and targeted community clinics. This includes an efficiently sized field-based organization of approximately 45 individuals.

We are pursuing three strategic commercialization imperatives that we believe are integral to success for TAZVERIK in the United States:

ensure eligible ES and FL patients have access to TAZVERIK by educating healthcare providers, patients and payers on the TAZVERIK data in approved indications,
ensure that TAZVERIK is readily accessible by physicians as an essential treatment option for each labeled indication through incorporation into systems of care, consistent with the label and guidelines, and
ensure our company sponsored programs for patients and healthcare providers (EpizymeNOW and EZH2NowSM) support a positive experience when TAZVERIK is prescribed. EpizymeNOW facilitates patient access to new TAZVERIK prescriptions, and the EZH2Now program provides access to EZH2 testing free of charge to patients with FL for providers who wish to know the mutation status of their patients.
 

Subject to receiving marketing approvals for additional indications or products, we expect to use our existing sales organization in the United States or to seek to expand our sales organization in the United States to sell our products. We believe that such an organization will be able to address the hematologists and oncologists who are the key specialists in treating the patient populations for which tazemetostat is currently approved and for which it is being developed and for which any future product candidates may be developed. Outside the United States, we may choose to enter into distribution and other marketing arrangements with third parties for any of our product candidates that obtain marketing approval, or may choose to commercialize our products in certain markets,

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depending upon many factors, including the target market size, availability of reimbursement, and our financial resources at the time.

We own the global development and commercialization rights to tazemetostat outside of Japan and greater China. Eisai holds the rights to develop and commercialize tazemetostat in Japan. On August 7, 2021, pursuant to a license agreement with HutchMed, we granted a license to HutchMed for the co-exclusive (with us) development and exclusive commercialization of tazemetostat, either as monotherapy or as a part of combinations with other therapies, including HutchMed proprietary compounds, agreed by us and HutchMed for the treatment of ES, FL and DLBCL in humans, and any additional indications agreed to by us and HutchMed in the HutchMed Territory. For other geographies outside the United States, we are evaluating the most efficient path to reaching patients, including through leveraging existing and identifying new strategic collaborations that can contribute to our ability to rapidly develop and commercialize tazemetostat outside of the United States.

We expect that our collaborators for any companion or complementary diagnostics we may develop in the future for use with our therapeutic products will hold the commercial rights to these diagnostic products, as is the case for our collaboration with RSS. We expect to coordinate closely with any diagnostic collaborators in connection with the marketing and sale of any related therapeutic products.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. Companies that are developing new epigenetic treatments for cancer that target histone methyltransferases, or HMTs, and protein arginine methyltransferases, or PRMTs, include GSK, Johnson & Johnson, Pfizer, Inc., Daiichi Sankyo Company Limited, and MorphoSys AG. Further, companies which are known to have EZH2 inhibitor programs or related programs include: Constellation Pharmaceuticals, developing an EZH2 inhibitor CPI-0209, Phase 1/2, solid tumors and lymphoma, including DLBCL, Novartis AG, developing an EED inhibitor which indirectly blocks EZH2 (MAK683, Phase 1/2, advanced malignancies), Daiichi Sankyo, developing a EZH1/EZH2 dual inhibitor (valemetostat, DS-3201, Phase 1, relapsed or refractory non-Hodgkin lymphomas, AML, ALL as well as Phase 2 for small cell lung cancer), and Pfizer, developing EZH2 inhibitor PF-06821497, Phase 1, relapsed or refractory SCLC, castration-resistant prostate cancer, FL and diffuse large B-cell lymphoma. In addition, many companies are developing cancer therapeutics that work by targeting epigenetic mechanisms other than HMTs, and some including Celgene (now part of Bristol-Myers Squibb), Merck & Co., Inc., Secura Bio, Spectrum Pharmaceuticals Otsuka Pharmaceuticals, Foghorn Therapeutics, Forma Therapeutics and CellCentric are now marketing cancer treatments that work by targeting epigenetic mechanisms other than HMTs.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The key competitive factors affecting the success of all of our therapeutic product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of

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related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. Generic products that broadly address these indications are currently on the market for the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our product candidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic products.

The most common methods of treating patients with cancer are surgery, radiation and drug therapy. There are a number of products in late-stage clinical development to treat cancer. These products in development may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain marketing approval.

Tazemetostat. The most common treatments for FL are chemotherapies, usually combined with the monoclonal antibody Rituxan, or Gazyva, which is an antibody that acts against the same target as Rituxan, CD20. While Rituxan and a number of other widely used anti-cancer agents are labeled broadly for follicular lymphoma, no therapies are approved specifically for the treatment of tumors associated with EZH2 activating mutations. There are a number of companies currently evaluating investigational agents in the relapsed and refractory follicular lymphoma patient setting.

In the relapsed and refractory follicular lymphoma patient setting, both current and near-term competition exists. Current competition includes CD20 combinations, several PI3K inhibitors, and CAR-T therapies. However, recently, two companies have announced that there have been voluntary withdrawals of accelerated approvals for FL indications for two PI3K inhibitors, Zydelig (idelalisib), and Copiktra (duvelisib) in the U.S. market. Additionally, parsaclisib’s NDA has been voluntarily withdrawn for the treatment of patients with relapsed/refractory FL. Near-term competition includes companies currently evaluating investigational agents with varying mechanisms of action, with a CAR-T therapy (KYMRIAH) and a PI3K inhibitor/CD20 combination (Aliqopa (copanlisib) + rituximab) currently undergoing review with the FDA. In the first quarter of 2021, Kite Pharma, a subsidiary of Gilead Sciences, received FDA approval for its CAR-T therapy, YESCARTA, for the treatment of relapsed or refractory FL patients. Novartis is also developing its CAR-T therapy, KYMRIAH, for relapsed or refractory FL patients. In the third quarter of 2021 the FDA accepted Novartis’ Supplemental Biologics License Application for KYMRIAH in adult patients with relapsed or refractory FL after two prior lines of treatment. The EMA also accepted Novartis’ Type II Variation for KYMRIAH in adult patients with relapsed or refractory FL after two prior lines of treatment in the third quarter of 2021. KYMRIAH is also undergoing priority review by the FDA for relapsed or refractory FL patients. The bispecific antibody furthest along in development in relapsed or refractory FL is Roche’s CD3/CD20 bispecific mosunetuzumab.

Other than TAZVERIK, there are no therapies which have been approved specifically for the treatment of epithelioid sarcoma. Epithelioid sarcoma, an INI1-negative tumor, is typically treated with surgical resection when it presents as localized disease. When epithelioid sarcoma recurs or metastasizes, it may be treated with systemic chemotherapy or investigational agents because, other than TAZVERIK, there are no approved systemic therapies specifically indicated for this disease. To the best of our knowledge there are no competitive products in development specifically for epithelioid sarcoma. However, we are aware of several clinical trials run by competitors that recruit patients with soft tissue sarcoma, which is inclusive of epithelioid sarcoma.

EZM0414. Our current intention for EZM0414, through our SET-101 clinical trial, is to focus on patients with t(4;14) multiple myeloma and non t(4;14) multiple myeloma once we reach the Phase 1b expansion portion of the trial. However, based on dose optimization data from the multiple myeloma and DLBCL patients in the Phase 1 dose escalation portion of the trial, we may initiate a third patient cohort in DLBCL in the Phase 1b.

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The most common treatments of multiple myeloma include ImiD (include Revlimid (lenalidomide), Pomalyst (pomalidomide), and Thalidomide (thalomid)), proteasome inhibitors (including Velcade (bortezomib), Kyprolis (xarfilzomib), and Ninlaro (ixazomib)), and anti-CD38 mAb (including Darzalex (daratumumab) and Sarclisa (isatuximab-irfc)) combinations. Current therapies for the relapsed or refractory population also include BCMA targeting CAR-Ts and ADCs. The multiple myeloma pipeline is robust, and includes BCMA CAR-T therapies, bispecific antibodies, BiTEs, and CELMoDs. Additionally, there are assets in development for high risk MM and the t(4;14) subpopulation, including K36’s MMSET inhibitor KTX-1001.

For DLBCL, the most common treatments are chemotherapies, often in combination with the monoclonal antibody Rituxan (rituximab) as well as autologous stem cell transplants. In the relapsed or refractory patient setting, current therapies include CAR-T therapies (Kymriah (tisagenlecleucel), Yescarta (axicabtagene ciloleucel), Breyanzi (lisocabtagene maraleucel)), a CD19 mAb (Monjuvi (tafasitamab)), and ADCs (Policy (polatuzumab vedotin) and Zynlonta (loncastuximab tesirine)). DLBCL pipeline therapies include bispecific antibodies, ADCs, and CAR-T therapies.

While there are many assets in development for both multiple myeloma and DLBCL including those with novel mechanisms of action, other than EZM0414, there are no therapies in development that are SETD2 inhibitors.

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and in other countries and foreign jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, packaging, storage, record-keeping, labeling, advertising, promotion, distribution, marketing, pricing, reimbursement, import and export of pharmaceutical products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

United States Government Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. It is the responsibility of the company seeking to market a drug to test it and submit evidence that the drug is safe and effective. Failure to comply with applicable United States regulatory requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of preclinical laboratory tests and animal studies in compliance with the FDA’s good laboratory practice regulations;
design of a clinical protocol and submission to the FDA of an IND which must become effective before human clinical trials may begin;
manufacture of drug substance and drug product to support clinical trials in compliance with FDA’s cGMP regulations;
approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
performance of human clinical trials, including adequate and well-controlled clinical trials, in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication;

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submission to the FDA of an NDA or sNDA requesting marketing approval for one or more proposed indications;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
satisfactory completion of an FDA inspection of selected clinical sites and/or clinical CROs to determine GCP compliance and the integrity of the clinical data submitted in support of the application;
satisfactory completion of an FDA inspection of the NDA sponsor to assess compliance with GxPs;
payment of user fees per published Prescription Drug User Fee Act, or PDUFA, guidelines for that year, if applicable;
FDA review and approval of the NDA or sNDA; and
commitment to comply with any post-approval requirements, including the potential requirements, to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

Preclinical Studies and an IND. Before an applicant begins testing a compound with potential therapeutic value in humans, the product candidate enters the preclinical testing stage. Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess its potential safety and effectiveness. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including Good Laboratory Practices regulations and standards and the United States Department of Agriculture’s Animal Welfare Act, if applicable.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. An IND automatically becomes effective 30 days after submission and receipt by the FDA unless, before that time, the FDA either provides a “safe to proceed” letter or raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold or partial hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing a clinical trial to commence. Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on a trial.

Clinical Trials. Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated, if appropriate. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the protocol for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, often known as a data safety monitoring board or committee, or DSMB.

Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined. In Phase 1, the candidate drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of its effectiveness. In Phase 2, the investigational drug typically is administered to 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 and optimal dosage. In Phase 3, the

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candidate drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product. In Phase 4, post-approval studies may be conducted to gain additional experience from the treatment of patients in the intended therapeutic indication. A clinical trial may combine the elements of more than one phase and a company’s designation of a clinical trial as a particular phase is not necessarily indicative that the study will be sufficient to satisfy FDA requirements.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

In general, the FDA accepts foreign safety and efficacy studies that were not conducted under an IND provided that they are well designed, well conducted, performed by qualified investigators, and conducted in accordance with ethical principles acceptable to the international community. The conduct of these studies must meet at least minimum standards for assuring human subject protection. Therefore, for studies submitted in support of an NDA that were conducted outside the United States and not under an IND, the agency requires demonstration that such studies were conducted in accordance with GCP, including receiving approval by an independent ethics committee, or IEC, and seeking and receiving informed consent from subjects.

In August 2018, the FDA released a draft guidance entitled “Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how sponsors can utilize an adaptive trial design in the early stages of oncology product development (i.e., the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial. Information to support the design of individual expansion cohorts are included in IND applications and assessed by the FDA. Expansion cohort trials can potentially bring efficiency to product development and reduce developmental costs and time.

Sponsors of clinical trials are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the U.S. National Institutes of Health, or NIH. Both NIH and the FDA have recently signaled the government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors.

Expanded Access to an Investigational Drug for Treatment Use.

Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access to investigational drugs for patients who may benefit from investigational therapies who do not otherwise qualify for an ongoing clinical trial. FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND Application.

When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment

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will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.

There is no obligation for a sponsor to make its investigational products available for expanded access, but sponsors are required to make their expanded access policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.

In addition to and separate from expanded access, 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 1 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 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.

Pediatric Studies. Under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug 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, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. The FDA maintains a list of diseases that are exempt from PREA requirements due to low prevalence of disease in the pediatric population. Congress amended the FDA Reauthorization Act of 2017, or FDARA. Previously, drugs that had been granted orphan drug designation were exempt from the requirements of the Pediatric Research Equity Act. Under the amended section 505B, beginning on August 18, 2020, the submission of a pediatric assessment, waiver or deferral will be required for certain molecularly targeted cancer indications with the submission of an NDA application or supplement to an NDA application. FL qualifies for an automatic full pediatric waiver by the FDA because it rarely or never occurs in pediatric patients.

The FDA requires that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-phase 2 meeting or as may be agreed between the sponsor and FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, or other clinical development programs.

Submission and Filing of an NDA. Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is subject to an application user fee, which for federal fiscal year 2022 is $3,117,218 for an application requiring clinical data. The sponsor of an approved NDA is also subject to an annual program fee, which for fiscal year 2022 is $369,413. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan drug designation and a waiver for certain small businesses.

The FDA also may require submission of a REMS plan to mitigate any identified or suspected serious risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.

Under PDUFA guidelines that are currently in effect, the FDA has agreed to certain performance goals regarding the timing of its review and disposition of an application. The FDA conducts a preliminary review of all NDAs within

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the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA must inform the sponsor at that time or before whether the application is sufficiently complete to permit substantive review. In the event that the FDA determines that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the applicant. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.

If the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review.” The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission. Despite these review goals, it is not uncommon for FDA review of an application to extend beyond the PDUFA goal date.

In connection with its review of an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications. Additionally, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCPs, may inspect the clinical CRO(s) to assure compliance with GCPs, and the FDA may also perform a sponsor inspection.

The FDA has the option to refer questions regarding their review of a marketing application for a New Molecular Entity, or NME, to an external advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA uses approximately 50 advisory committees and panels to obtain independent expert advice on scientific, technical, and policy matters. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Decisions on an NDA

The FDA reviews an application to determine, among other things, whether the product is safe and whether it is effective for its intended use(s), with the latter determination being made on the basis of substantial evidence.
The FDA has interpreted this evidentiary standard to require at least two adequate and well-controlled clinical investigations to establish effectiveness of a new product. Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional information may satisfy this standard. Ultimately, the FDA will determine whether the expected benefits of the drug product outweigh its potential risks to patients.

After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue a complete response letter or an approval letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms under a REMS

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which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug (including a biologic) 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 available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA or biologics license application, or BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

Orphan drug designation qualifies the sponsor of the drug for various development incentives. For example, a marketing application for a prescription drug product that has received orphan drug designation is not subject to a prescription drug user fee unless the application includes an indication other than for the rare disease or condition for which the drug was designated. Furthermore, federal law establishes certain tax credits designed to encourage the development of orphan drugs. With passage of the Tax Cuts and Jobs Act of 2017, that tax credit was halved from 50% to 25%. The granting of an orphan drug designation request does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and effectiveness of a drug must be established through adequate and well-controlled studies.

Special FDA Expedited Review and Approval Programs. The FDA has various programs, including Fast Track Designation, Accelerated Approval, Priority Review and Breakthrough Therapy Designation, that are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. None of these expedited programs changes the standards for approval but they may help expedite the development or approval process of product candidates.

Breakthrough Therapy Designation. Under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can request designation of a product candidate as a “breakthrough therapy.” The FDA may grant breakthrough therapy designation to a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy. For drugs and biologics 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. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

Fast Track Designation. To be eligible for a Fast Track Designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. For Fast Track products, sponsors may have greater interactions with the FDA regarding drug development and may submit sections of a Fast Track product’s NDA on a rolling basis before the entire application is complete.

Priority Review. The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review

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an application is six months, rather than the standard review of ten months under current PDUFA guidelines. These six- and ten-month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission. Most products that are eligible for Fast Track designation are also likely to be considered appropriate to receive a priority review.

Accelerated Approval. In addition, 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 and may be approved on the basis of well-conducted clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA may require a sponsor to perform post-marketing confirmatory study(ies) to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoints, and the drug may be subject to accelerated withdrawal procedures. Although a drug may be designated as “breakthrough” or “fast track”, the determination of accelerated approval is based on the clinical endpoint and not on the expeditious manner in which it is being developed.

FDA Regulation of Companion Diagnostics. Safe and effective use of a drug may rely upon an in vitro companion diagnostic for use in selecting the patients that will be more likely to respond to the treatment. FDA officials have issued guidance that addresses issues critical to developing in vitro companion diagnostics, such as when the FDA will require that the diagnostic and the drug be approved simultaneously. The guidance issued in August 2014 states that if safe and effective use of a therapeutic product depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of the diagnostic at the same time that the FDA approves the therapeutic product. In April 2020, the FDA issued additional guidance which describes considerations for the development and labeling of companion diagnostic devices to support the indicated uses of multiple drug or biological oncology products, when appropriate.

Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. The FDA generally requires that devices, or in vitro companion diagnostics, intended to select the patients who will respond to the cancer treatment to obtain Pre-Market Approval, or PMA, simultaneously with approval of the drug. Based on the guidance, and the FDA’s past treatment of companion diagnostics, the FDA will typically require PMA approval of one or more in vitro companion diagnostics to identify patient populations suitable for these cancer therapies.

The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to an application fee. For federal fiscal year 2021, the standard fee is $374,858 and the small business fee is $93,714.

After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also establish registration and device listings with the FDA. A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the Quality System Regulation, or QSR, which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. The FDA also may inspect foreign facilities that export products to the U.S.

Post-Approval Commitments and Requirements. Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual

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user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability. If a company is found to have promoted off label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a drug product.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

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Federal and State Fraud and Abuse and Data Privacy and Security Laws and Regulations. In addition to FDA restrictions on marketing of pharmaceutical products, federal and state fraud and abuse laws restrict business practices in the biopharmaceutical industry. These laws include anti-kickback and false claims laws and regulations as well as data privacy and security laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution, the exemptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.

The reach of the Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively PPACA, which, among other things, amended the intent requirement of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. PPACA also created new federal requirements for reporting, by applicable manufacturers of covered drugs, payments and other transfers of value to physicians and teaching hospitals.

The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-reimbursable, uses. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security

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of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

In addition, federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, require certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment interests held by physicians, other healthcare providers and their immediate family members. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments and other transfers of value to physicians and other health care providers, and restrict marketing practices or require disclosure of marketing expenditures.

To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

Coverage and Reimbursement. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish corresponding reimbursement levels. In particular, in the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such treatments. In the United States, the European Union and other potentially significant markets for our product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be. Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.

Third-party payors are increasingly imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products. For example, federal and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and product candidates or exclusion of our products and product candidates from coverage. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our product candidates in whole or in part.

Impact of Healthcare Reform on Coverage, Reimbursement, and Pricing. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, imposed new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs. Part D plans include both standalone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of

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prescription drugs may increase demand for any products for which we receive marketing approval. However, any negotiated prices for our future products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from Medicare Part D may result in a similar reduction in payments from non-governmental payors.

The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates. If third-party payors do not consider our product candidates to be cost-effective compared to other available therapies, they may not cover our product candidates, once approved, as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

The United States and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives, including, most recently, PPACA, which became law in March 2010 and substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the Affordable Care Act of importance to potential product candidates are:

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments

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for prescription drugs. However, the IPAB implementation has not been clearly defined. PPACA provided that under certain circumstances, IPAB recommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings; and
established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.

 

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. For example, 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 2012 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 up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2031, pursuant to the Coronavirus Aid, Relief and Economic Security Act. These Medicare sequester reductions have been suspended through the end of March 2022. From April 2022 through June 2022 a 1% sequester cut will be in effect, with the full 2% cut resuming thereafter. Further, in January 2013, the American Taxpayer Relief Act of 2012 became law, which, among other things, further reduced Medicare payments to several 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.

These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price for any approved product and/or the level of reimbursement physicians receive for administering any approved product. Reductions in reimbursement levels may negatively impact the prices or the frequency with which products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Since enactment of the PPACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law.

Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, among other things, amended the PPACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”

Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, or the Tax Act, which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the PPACA is an essential and inseverable feature of the PPACA, and therefore because the mandate was repealed as part of the Tax Act, the remaining provisions of the PPACA are invalid as well. The U.S. Supreme Court heard this case on November 10, 2020 and, on June 17, 2021, dismissed this action after finding that the plaintiffs do not have standing to challenge the constitutionality of the ACA. Litigation and legislation over the PPACA are likely to continue, with unpredictable and uncertain results.

The Trump Administration also took executive actions to undermine or delay implementation of the PPACA, including directing federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or

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regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28, 2021, however, President Biden rescinded those orders and issued a new executive order that directs federal agencies to reconsider rules and other policies that limit access to healthcare, and consider actions that will protect and strengthen that access. Under this order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing conditions, including complications related to COVID‑19; demonstrations and waivers under Medicaid and the PPACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and under the PPACA; and policies that reduce affordability of coverage or financial assistance, including for dependents.

The costs of prescription pharmaceuticals have also been the subject of considerable discussion in the United States To date, there have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. In 2020, President Trump issued several executive orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations. These regulations include an interim final rule implementing a most favored nation model for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021. That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries’ access to evidence-based care.

In addition, in October 2020, the Department of Health and Human Services, or HHS, and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. The final rule is currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada with the intent of developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS finalized 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 implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed by the Biden administration until January 1, 2023.

 

On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals. The order directs HHS to create a plan within 45 days to combat “excessive pricing of prescription pharmaceuticals and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such pharmaceuticals, and to address the recurrent problem of price gouging.” On September 9, 2021, HHS released its plan to reduce pharmaceutical prices. The key features of that plan are to: (a) make pharmaceutical prices more affordable and equitable for all consumers and throughout the health care system by supporting pharmaceutical price negotiations with manufacturers; (b) improve and promote competition throughout the prescription pharmaceutical industry by supporting market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific innovation to promote better healthcare and improve health by supporting public and private research and making sure that market incentives promote discovery of valuable and accessible new treatments.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. A number of states, for example, require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit managers, wholesale distributors, to disclose information about pricing of pharmaceuticals. In addition, regional healthcare organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription pharmaceutical and other

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healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Exclusivity and Approval of Competing Products

Patent Term Restoration and Extension. A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The United States Patent and Trademark Office, or USPTO, reviews and approves the application for any patent term extension or restoration in consultation with the FDA.

Hatch-Waxman Patent Exclusivity. In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s product or a method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA, or 505(b)(2) NDA. The FDA’s regulations governing patient listings were largely codified into law with enactment of the Orange Book Modernization Act in January 2021.

Generally, an ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths, dosage form and route of administration as the listed drug and has been shown to be bioequivalent through in vitro or in vivo testing or otherwise to the listed drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug product, other than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.

A 505(b)(2) application applies to a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.” As with an ANDA, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. 505(b)(2) NDAs generally are submitted for changes to a previously approved drug product, such as a new dosage form or indication.

The ANDA or 505(b)(2) NDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that:

the required patent information has not been filed;
the listed patent has expired;
the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
the listed patent is invalid, unenforceable, or will not be infringed by the new product.

Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except when the ANDA or 505(b)(2) NDA applicant challenges a listed drug. A certification that the proposed product will not

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infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all the listed patents claiming the referenced product have expired.

If the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the application has been accepted for filing by the FDA. The NDA and patent holders may then initiate patent infringement litigation in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of notice of the Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

Hatch-Waxman Non-Patent Exclusivity. Market and data exclusivity provisions under the FDCA also can delay the submission or the approval of ANDAs and 505(b)(2) NDAs for competing products. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the activity of the drug substance. This interpretation was confirmed with enactment of the Ensuring Innovation Act in April 2021. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a certification of patent invalidity or non-infringement.

The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA or 505(b)(2) NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application or supplement. Three-year exclusivity may be awarded for changes to a previously approved drug product, such as new indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight months for a drug that has three or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’s drug shortage list. The new legislation also authorizes FDA to expedite review of ‘‘competitor generic therapies’’ or drugs with inadequate generic competition, including holding meetings with or providing advice to the drug sponsor prior to submission of the application.

Orphan Drug Exclusivity. Under the Orphan Drug Act, a drug that is approved for the orphan drug designated indication is granted seven years of orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve another sponsor’s marketing application for the same drug for the same indication for seven years, except in certain limited circumstances. Orphan exclusivity does not block the approval of a different product for the same rare disease or condition, nor does it block the approval of the same product for different indications. If a drug or biologic designated as an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.

Orphan drug exclusivity will also not bar approval of another product under certain circumstances, including if a subsequent product with the same drug or biologic for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. This is the case despite an earlier court opinion holding that the Orphan Drug Act unambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.

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In September 2021, the Court of Appeals for the 11th Circuit held that, for the purpose of determining the scope of market exclusivity, the term “same disease or condition” in the statute means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” It is unclear how this court decision will be implemented by the FDA.

Pediatric Exclusivity. Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan drug exclusivity periods described above, and any listed patent. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or Orange Book listed patent protection cover the drug are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve an ANDA or 505(b)(2) application owing to regulatory exclusivity or listed patents. When any of our products is approved, we anticipate seeking pediatric exclusivity when it is appropriate.

European Union Drug Approval Process

In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

Clinical Trial Approval in the EU. On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the European Union and replaced the prior Clinical Trials Directive 2001/20/EC. The new regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials in the European Union. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one Member State of the European Union, or EU Member State, will only be required to submit a single application for approval. The submission will be made through the Clinical Trials Information System, a new clinical trials portal overseen by the European Medicines Agency, or the EMA, and available to clinical trial sponsors, competent authorities of the EU Member States and the public.

The new regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted. If the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the sponsor may only start a clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion. As in the United States, information about certain clinical trials must be submitted within specific timeframes to the European Union (EudraCT) website: https://eudract.ema.europa.eu/ and other countries.

Marketing Authorization. To obtain marketing approval of a drug under European Union regulatory systems, we may submit marketing authorization applications, or MAAs, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU member states. The centralized procedure is compulsory for medicines produced by specified biotechnological processes, products designated as orphan medicinal products, and products with a new active substance indicated for the treatment of specified diseases, and optional for those products that are highly innovative or for which a centralized process is in the interest of patients. Under the centralized procedure in the European Union, the maximum

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timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Scientific Advice Working Party of the Committee of Medicinal Products for Human Use, or the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, defined by three cumulative criteria: the seriousness of the disease, such as heavy disabling or life-threatening diseases, to be treated; the absence or insufficiency of an appropriate alternative therapeutic approach; and anticipation of high therapeutic benefit. In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days.

The decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an application performed by one-member state, known as the reference member state. Under this procedure, an applicant submits an application, or dossier, and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report, each concerned member state must decide whether to approve the assessment report and related materials. If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points may eventually be referred to the European Commission, whose decision is binding on all member states. For the EMA, an agreed Pediatric Investigation Plan, which could include a request for waiver or deferral, is required prior to submitting an MAA for use for drugs in pediatric populations.

Priority Medicines, or PRIME, Drug Designation. The EMA may grant PRIME drug designation to medicine developers to treat an unmet medical need upon selection. Medicines eligible for PRIME must address an unmet medical need, have data available showing the potential to address this need and bring a major therapeutic advantage to patients. PRIME designation provides early and enhanced support from the EMA to optimize the development of eligible medicines, speeds up their evaluation, and contributes to timely patients’ access. Once a candidate is selected for PRIME designation, the EMA will provide scientific advice at key development milestones and confirm potential for accelerated assessment at the time of an application for marketing authorization. These medicines are considered priority medicines by the EMA.

Data and Market Exclusivity. In the European Union, new chemical entities qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. This data exclusivity, if granted, prevents regulatory authorities in the European Union from assessing a generic (abbreviated) application for eight years, after which generic marketing authorization can be submitted but not approved for two years. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity and the sponsor is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the drug if such company can complete a full MAA with a complete human clinical trial database and obtain marketing approval of its product.

Orphan Drug Exclusivity. The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for life-threatening or chronically debilitating conditions affecting not more than five in 10,000 people in the European Union. In addition, orphan drug designation can be granted if the drug is intended for a life threatening, seriously debilitating or serious and chronic condition in the European Union and without incentives it is unlikely that sales of the drug in the European Union would be sufficient to justify developing the drug. Orphan drug designation is only available if there is no other satisfactory method approved in the European Union of diagnosing, preventing or treating the condition, or if such a method exists, the proposed orphan drug will be of significant benefit to patients. Orphan drug designation provides opportunities for free protocol assistance, fee reductions for access to the centralized regulatory procedures before and during the first year after marketing authorization and 10 years of market exclusivity of the designated indication following drug approval. Fee reductions are not limited to the first year after authorization for small and medium enterprises. The exclusivity period may be reduced to six years if the designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

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Approval of Companion Diagnostic Devices. In the European Union, medical devices such as companion diagnostics must comply with the General Safety and Performance Requirements, or SPRs, detailed in Annex I of the EU Medical Devices Regulation (Regulation (EU) 2017/745), or MDR which came into force on May 26, 2021 and replaced the previously applicable EU Medical Devices Directive (Council Directive 93/42/EEC). Compliance with SPRs and additional requirements applicable to companion medical devices is a prerequisite to be able to affix the CE Mark of Conformity to medical devices, without which they cannot be marketed or sold. To demonstrate compliance with the SPRs, a manufacturer must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. The MDR is meant to establish a uniform, transparent, predictable, and sustainable regulatory framework across the EU for medical devices.

Separately, the regulatory authorities in the EU also adopted a new In Vitro Diagnostic Regulation, or IVDR, (EU) 2017/746, which will become effective in May 2022. The new regulation will replace the In Vitro Diagnostics Directive (IVDD) 98/79/EC. Manufacturers wishing to apply to a notified body for a conformity assessment of their in vitro diagnostic medical device have until May 2022 to update their Technical Documentation to meet the requirements and comply with the new, more stringent Regulation. Once applicable, the regulation will, among other things: strengthen the rules on placing devices on the market and reinforce surveillance once they are available; establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance, and safety of devices placed on the market; improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.

Reimbursement and Pricing of Prescription Pharmaceuticals. In the EU, similar political, economic and regulatory developments to those in the United States may affect our ability to profitably commercialize our product candidates, if approved. In markets outside of the U.S. and the EU, reimbursement and healthcare payment systems vary significantly by country and many countries have instituted price ceilings on specific products and therapies. In many countries, including those of the EU, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, 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, pharmaceutical firms may be required to conduct a clinical trial that compares the cost-effectiveness of the product to other available therapies.

General Data Protection Regulation. The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance.

Compliance with the GDPR is a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance. In July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States. The CJEU decision also drew into question the long-term viability of an alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EEA to the United States.

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Brexit and the Regulatory Framework in the United Kingdom.

The United Kingdom’s withdrawal from the EU took place on January 31, 2020. The EU and the U.K. reached an agreement on their new partnership in the Trade and Cooperation Agreement, or the Brexit Agreement, which was applied provisionally beginning on January 1, 2021 and which entered into force on May 1, 2021. The Brexit Agreement focuses primarily on free trade by ensuring no tariffs or quotas on trade in goods, including healthcare products such as medicinal products. Thereafter, the EU and the U.K. will form two separate markets governed by two distinct regulatory and legal regimes. As such, the Brexit Agreement seeks to minimize barriers to trade in goods while accepting that border checks will become inevitable as a consequence that the U.K. is no longer part of the single market. As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law whereas Northern Ireland continues to be subject to EU rules under the Northern Ireland Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR has incorporated into the domestic law the body of EU law instruments governing medicinal products that pre-existed prior to the U.K.’s withdrawal from the EU.

Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and complements the European Union’s General Data Protection Regulation, or GDPR, has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the European Economic Area, or EEA, to the United Kingdom will remain lawful under GDPR. The Brexit Agreement provides for a transitional period during which the United Kingdom will be treated like an European Union member state in relation to processing and transfers of personal data for four months from January 1, 2021. This may be extended by two further months. After such period, the United Kingdom will be a “third country” under the GDPR unless the European Commission adopts an adequacy decision in respect of transfers of personal data to the United Kingdom. The United Kingdom has already determined that it considers all of the EU 27 and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the EU/EEA remain unaffected.

Employees and Human Capital Resources

As of March 1, 2022, we had approximately 250 full-time and part-time employees. After taking into account the cross-functional headcount reduction announced on March 1, 2022, we expect that we will have approximately 215 full-time and part-time employees, approximately 95 of whom will be primarily engaged in research and development activities. To provide us with flexibility in meeting varying workflow demands, we also engage temporary workers and consultants when needed.

Our human capital is integral in helping us achieve our mission to rewrite treatment for cancer through novel epigenetic medicines. We believe that we have built a culture of community, along with our EpiExcellence cultural attributes, and many of these qualities are foundational. ​Our EpiExcellence cultural attributes include:

Camaraderie: connectedness, humor, liking each other, fun, in it together, mutual respect
Collaboration: integrated decision-making, teamwork, internal/external partnerships, interdependent, “right people, right time, right involvement”
Discipline: execution, prioritization, focus, accountability, consistency, quality
Innovation: risk-tolerant, creativity, evidence-based, curiosity, continuous learning
Openness: honesty, constructive dissent, transparency, courageous conversations, assumption of good intent, trust
Patient-focus: shared purpose, inspired, passionate, motivated, sense of urgency
Resilience: nimble, optimistic, embracing change, evolutionary, adaptable

We have been intentional in ensuring that we are creating a culture and company that offers a vibrant community to our employees where we can fully be ourselves at work. We strive to ensure that Epizyme is a place where all

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people experience equality, where we value diversity in all its forms, and that we are modeling these behaviors in the world outside Epizyme as corporate citizens.

Information about our Executive Officers

The following table sets forth the name, age and position of each of our executive officers as of February 25, 2022.

 

Name

 

Age

 

Position

Grant Bogle

 

64

 

President, Chief Executive Officer and Director

Shefali Agarwal

 

48

 

Executive Vice President, Chief Medical and Development Officer

Jeffery L. Kutok

 

55

 

Chief Scientific Officer

 

 

 

 

 

 

Grant Bogle has served as a director since September 2019 and our President and Chief Executive Officer since August 2021. Mr. Bogle served as Senior Vice President and Chief Commercial Officer for Tesaro, Inc, a biopharmaceutical company, or Tesaro, from July 2015 to June 2019. Prior to joining Tesaro, Mr. Bogle served as Senior Vice President, Pharmaceutical and Biotech Solutions at McKesson Specialty Health (formerly U.S. Oncology) from July 2007 to June 2015. Previously, he was Senior Vice President of Sales and Marketing for Millennium Pharmaceuticals. Mr. Bogle holds a B.A. in economics from Dartmouth College, an M.B.A. from Columbia University and is a Senior Fellow of the Advanced Leadership Initiative at Harvard University.

 

Dr. Shefali Agarwal has served as our Executive Vice President, Chief Medical and Development Officer since February 2021 and served as our Chief Medical Officer from June 2018 to February 2021. Prior to joining us, Dr. Agarwal held leadership positions across medical research, clinical development, clinical operations and medical affairs. She most recently served as chief medical officer at SQZ Biotech, a biotechnology company developing cell therapies for patients with a wide range of diseases, from July 2017 to May 2018 and as a non-executive advisor from May 2018 to July 2018, where she built and led the clinical development organization, which included clinical research operations and the regulatory function. Before SQZ Biotech, Dr. Agarwal also held leadership positions at Curis, Inc. a biotechnology company developing therapeutics for the treatment of cancer, from July 2016 to July 2017 and Tesaro from July 2013 to July 2017. Dr. Agarwal also held positions of increasing responsibility at AVEO Pharmaceuticals, Inc., a biopharmaceutical company, from December 2011 to July 2013, Covidien, a medical devices and health care products company, from April 2010 to December 2011, and Pfizer Inc., a pharmaceutical company with a wide range of treatments, from June 2005 to April 2010. She has served as a member of the board of directors of Gritstone bio, Inc., a publicly traded clinical-stage biotechnology company, since June 2021; Fate Therapeutics, Inc., a publicly traded clinical-stage biopharmaceutical company, since July 2019; and Onxeo SA, a publicly traded clinical-stage biopharmaceutical company, since April 2021. Dr. Agarwal received her MBBS medical degree from Karnataka University’s Mahadevappa Rampure Medical School in India, Master’s Degree in Public Health from Johns Hopkins University, where she led clinical research in the Department of Anesthesiology and Critical Care Medicine, and a Master of Science degree in Business from the University of Baltimore’s Merrick School of Business.

 

Jeffery L. Kutok, M.D., Ph.D., has served as our Chief Scientific Officer since joining us in April 2020. Dr. Kutok previously served as Chief Scientific Officer of Infinity Pharmaceuticals, Inc., or Infinity, a biotechnology company that develops cancer medication, from February 2017 to March 2020. Dr. Kutok previously served as Infinity’s Vice President of Biology and Translational Science from August 2013 to February 2017, and in other roles with increasing responsibility from January 2011 to August 2013. Prior to joining Infinity, Dr. Kutok was an associate professor of pathology at Harvard Medical School and Brigham and Women’s Hospital. Dr. Kutok’s laboratory focused on translational medicine research and biomarker identification in cancer, and he is an author on over 200 journal articles, reviews and book chapters. Dr. Kutok is board certified in Anatomic Pathology and Hematology and had clinical duties in Hematopathology and Molecular Diagnostics at Brigham and Women’s Hospital. Dr. Kutok received his B.S. in biology and his M.D., Ph.D. in medicine and molecular pathology from the State University of New York at Stony Brook. He was also a post-doctoral fellow at Harvard University in the laboratory of Dr. Gary Gilliland, M.D., Ph.D.

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Our Corporate Information

We were incorporated under the laws of the state of Delaware on November 1, 2007 under the name Epizyme, Inc. Our principal executive offices are located at 400 Technology Square, 4th Floor, Cambridge, Massachusetts 02139. Our telephone number is (617) 229-5872, and our website is located at www.epizyme.com. References to our website are inactive textual references only and the content of our website should not be deemed incorporated by reference into this Annual Report on Form 10-K.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge on our website located at www.epizyme.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. These reports are also available at the SEC’s Internet website at www.sec.gov.

A copy of our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the Audit Committee, Organizational Health and Compensation Committee, and Nominating and Corporate Governance Committee are posted on our website, www.epizyme.com, under “Investors & Media” and are available in print to any person who requests copies by contacting Epizyme by calling (617) 229-5872 or by writing to Epizyme, Inc., 400 Technology Square, 4th Floor, Cambridge, Massachusetts 02139.

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Item 1A. Risk Factors

Risk Factors

Careful consideration should be given to the following risk factors, in addition to the other information set forth in this Annual Report on Form 10-K and in other documents that we file with the SEC, in evaluating our company and our business. Investing in our common stock involves a high degree of risk. If any of the following risks and uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks described below are not intended to be exhaustive and are not the only risks facing our company. New risk factors can emerge from time to time, and it is not possible to predict the impact that any factor or combination of factors may have on our business, prospects, financial condition and results of operations.

In addition, the COVID-19 pandemic has impacted, continues to impact and in the future may exacerbate or further impact risks discussed in this Annual Report on Form 10-K, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise.

Risks Related to Product Development and Commercialization

We are dependent on the successful development and commercialization of tazemetostat. If we do not successfully commercialize TAZVERIK for the indications for which TAZVERIK is approved or are unable to develop, obtain marketing approval of, and commercialize tazemetostat for additional indications, either alone or through a collaboration, or if we experience significant delays in doing so, our business could be harmed.

Our EZH2 inhibitor, TAZVERIK, is approved in the United States for the treatment of epithelioid sarcoma, or ES, and for follicular lymphoma, or FL. We have no other products approved for sale. We are investing a significant portion of our efforts and financial resources to fund the development and commercialization of tazemetostat. Commercial sales of TAZVERIK for the treatment of ES commenced in the first quarter of 2020 and commercial sales of TAZVERIK for the treatment of FL commenced near the end of the second quarter of 2020.

In connection with the accelerated approval of our ES new drug application, or NDA and our FL supplemental NDA, or sNDA, continued approval is contingent upon verification and description of clinical benefit in a confirmatory program in each indication. We are conducting Phase 1b/3 trials to assess TAZVERIK in combination with doxorubicin compared with doxorubicin plus placebo as a front-line treatment for ES and to evaluate the combination of TAZVERIK with “R2” (Revlimid plus rituximab), an approved chemotherapy-free treatment regimen, for FL patients in the second-line or later treatment setting. These trials are expensive and time-consuming and may not confirm such benefit and subject the NDAs to withdrawal. If a confirmatory program does not verify clinical benefit for an indication, we may have to withdraw our accelerated approval for that indication. If any of these outcomes occurs, either to TAZVERIK or to any future product candidate for which we may seek marketing approval, we may be forced to abandon our development efforts for tazemetostat or such future product candidates, which could significantly harm our business.

We and our collaborators are conducting clinical trials of tazemetostat in other indications and in combination with other products. Our EZM0414 product candidate is in early clinical development and all of our product candidates are still in preclinical development. As a result, our prospects are substantially dependent on our ability, or the ability of any future collaborator, to successfully commercialize tazemetostat for ES and FL in the approved indications and to develop, obtain marketing approval for and successfully commercialize tazemetostat in one or more additional disease indications.

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The success of tazemetostat will depend on several factors, including the following:

success of the ongoing commercialization of TAZVERIK for ES and FL in the approved indications, whether alone or in combination with other products;
successful confirmatory trials of TAZVERIK in the approved indications that are satisfactory to the FDA and maintenance of the continued acceptable safety profiles of the products following approval;
continued implementation and maintenance of effective sales, marketing and distribution capabilities and strategies for commercialization of TAZVERIK;
acceptance of TAZVERIK for ES, FL, and any other indication for which it may be approved by physicians, patients, third-party payors and others in the medical community;
timely submission of a marketing authorization application to and timely receipt of marketing approval from the European Medicines Agency, or EMA, for ES, FL or any future indications;
the extent of any required post-marketing approval commitments to applicable regulatory authorities;
successful enrollment in and completion of clinical trials for the treatment of additional indications;
safety, tolerability and efficacy profiles that are satisfactory to the FDA, the EMA, or any comparable foreign regulatory authority for marketing approval for additional indications and maintenance of continued acceptable safety profile following approval;
effectively competing with other therapies;
obtaining and maintaining healthcare insurance coverage and adequate reimbursement;
making arrangements with third-party manufacturers for, or establishing, clinical and commercial manufacturing capabilities;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our products and product candidates;
protecting our rights in our intellectual property portfolio; and
effectively and successfully navigating the commercial and operational challenges and impacts resulting from the COVID-19 pandemic.

 

Many of these factors are beyond our control, including clinical development, the regulatory review process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any collaborator. If any of these factors adversely affects the development or commercialization of tazemetostat, we may not be able to successfully develop or commercialize tazemetostat on a timely basis or at all, which would materially harm our business.

 

The COVID-19 pandemic has impacted and may continue to impact our commercial launch efforts for TAZVERIK in FL and ES and has led to some delays in clinical trial startup, and may affect our ability to initiate and complete preclinical studies and our ongoing and planned clinical trials, disrupt regulatory activities, further disrupt commercialization of TAZVERIK, or have other adverse effects on our business and operations. In addition, the COVID-19 pandemic has caused substantial disruption in the global financial markets, global supply chains and may adversely impact economies worldwide, which could result in adverse effects on our business and operations.

 

The COVID-19 pandemic, which began in late 2019 and has spread worldwide, is causing many governments to implement measures intended to slow the spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny, and other measures. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities have been disrupted and production has been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain.

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We and our contract manufacturing organizations, or CMOs, and contract research organizations, or CROs, may face disruptions that may affect our ability to initiate and conduct preclinical studies and our planned and ongoing clinical trials, including disruptions in procuring items that are essential for our research and development activities, such as access to raw materials used in the manufacture of tazemetostat, EZM0414 and/or our future product candidates, laboratory supplies used in our preclinical studies and ongoing clinical trials, or animals that are used for preclinical testing for which there are shortages because of ongoing efforts to address the outbreak, and resulting disruptions to many global supply chains. We and our CROs and CMOs, as well as clinical trial sites, may face disruptions related to the conduct of our ongoing clinical trials, planned clinical trials or future clinical trials arising from manufacturing disruptions, staffing disruptions and limitations in regard to our internal activities and the activities of our CROs and CMOs, and delays in the ability to obtain necessary institutional review board or other necessary site approvals or delays in site initiations or site monitoring visits, as well as other delays at clinical trial sites. We may also face limitations on enrollment and patients withdrawing from our clinical trials or not complying with the protocol procedures, which could delay completion of our clinical trials or adversely affect the data generated by our clinical trials. For example, we have experienced some delays in clinical trial startup activities due to what we believe to be mostly related to COVID-19 related capacity constraints and resulting delays in the packaging and labeling of clinical drug supply at a third-party manufacturer. The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that could adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.

 

We commenced commercial sales of TAZVERIK in January 2020, and the pandemic and related government imposed measures have limited our ability to readily access accounts and healthcare professionals, in person or at all, to provide medical information in support of TAZVERIK utilization. For example, the COVID-19 pandemic has negatively impacted ES and FL patient visits to physicians, new patient starts across all lines of treatment as well as the ability of our field-based teams to fully access ES and FL prescribers. While our field-based teams continue to use virtual formats as well as in-person interactions, where possible, to allow us to serve the needs of healthcare providers, patients and other stakeholders, access to prescribers remains restrictive, and we expect these challenges to continue through the first half of 2022. Additionally, we expect that some of these challenges posed by some of the changes brought about by the COVID-19 pandemic, such as ongoing restrictions to access prescribers by traditional sales personnel, will likely persist even after the resolution of the pandemic. The pandemic has significantly impacted economies worldwide, which could result in adverse effects on our business and operations. Moreover, the pandemic has caused substantial disruption in the global financial markets and supply chains and may continue to adversely impact economies worldwide, which could result in adverse effects on our business and operations as well as the volatility of our stock price and trading in our stock.

 

We are implementing a multi-stage return to office plan based on guidance from federal, state and local government authorities, and in October 2021 we opened our facilities to all employees who expressed interest in participating in a return-to-office pilot program. In the meantime, many of our employees continue to work in a remote operating model. Our laboratory scientists who engage in bench research activities now have full access to our laboratories. We are using our pilot program to further evaluate this hybrid model and will use that evaluation to formulate how we will move forward. We expect that some form of a hybrid model will continue to exist for us in the future. Changes in guidance from federal, state and local government authorities could impact our return to office plan, and require us to increasingly rely on personnel working remotely. For example, changes to guidance from federal, state and local government authorities to restrict or limit in-person interactions could result in our laboratory staff that is presently engaged in research and development activities to have restricted access to laboratories. Such restricted access could delay timely completion of preclinical activities and the initiation of additional clinical trials for other of our development programs.

 

A remote or hybrid operating model may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, this could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business

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operations or delay necessary interactions with state, local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors, including our CROs and CMOs.

Due to the evolving and uncertain global impacts of the COVID-19 pandemic, we cannot precisely determine or quantify the impact that the COVID-19 pandemic has had or will have on our business, financial condition, results of operations, and prospects for the fiscal year ending December 31, 2022 and beyond.

 

Tazemetostat, EZM0414 or any other product candidate that we develop may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

Tazemetostat, EZM0414 or any other product candidates that we develop may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If tazemetostat, EZM0414 or any other such product candidate that we develop does not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of tazemetostat, EZM0414 or any other product candidates that we develop will depend on a number of factors, including:

the efficacy and potential advantages compared to alternative treatments;
our ability to offer our products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the patient population to try new therapies and of physicians to prescribe these therapies;
the strength of marketing and distribution support;
the availability of third-party coverage and adequate reimbursement;
the prevalence and severity of any side effects;
any safety events that may have occurred in connection with the development of the product candidate; and
any restrictions on the use of our products together with other medications.

In addition, the potential market opportunity for tazemetostat is difficult to precisely estimate. Our estimates of the potential market opportunity for tazemetostat include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions. If any of these assumptions proves to be inaccurate, then the actual market for tazemetostat could be smaller than our estimates of our potential market opportunity. If the actual market for tazemetostat, EZM0414 or any other product candidate is smaller than we expect, our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

If we are unable to maintain effective sales, marketing and distribution capabilities, we may not be successful in commercializing tazemetostat or any other product candidates that we may develop if and when such product candidate is approved.

To achieve commercial success for any product for which we obtain marketing approval, we will need to maintain an effective sales and marketing organization.

We have established, and plan to continue to build and refine, the infrastructure that we believe is necessary and appropriate to support the ongoing commercialization and marketing of TAZVERIK for the approved indications in the United States and the successful commercial launch and marketing of tazemetostat for other indications and in other jurisdictions and of other product candidates and future product candidates that may receive marketing approval. There are risks involved with maintaining our own sales, marketing and distribution capabilities. For example, recruiting, training and retaining a sales force is expensive and time consuming and any failure to do so successfully could negatively affect sales or any commercial launch of a product. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur

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for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to successfully commercialize our products on our own include:

our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any current or future products;
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to effectively maintain our own sales, marketing and distribution capabilities and as a result we determine to enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, could be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may determine to seek to enter into arrangements with third parties to perform these services in certain geographies outside the United States or for additional indications. However, we may not be successful in entering into arrangements with third parties to sell, market and distribute TAZVERIK or any current or future product candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell, market or distribute our products effectively. If we do not establish and maximize sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing TAZVERIK or any current or future product candidates.

Our changes to our commercial strategy and organization, adjustments to our operating plans, including operating expense reductions, prioritization of development activities and leadership transitions may not be successful, may not result in accelerated commercial adoption of TAZVERIK and greater product revenues or anticipated savings, could result in total costs and expenses that are greater than expected, could result in us forgoing business opportunities and could disrupt our business.

In August 2021, we announced changes to our leadership team with the resignation of our President and Chief Executive Officer, Robert Bazemore, and the appointment of Grant Bogle, a member of our board of directors since September 2019, as President and Chief Executive Officer, each effective as of August 9, 2021. In addition, in August 2021, we made the decision to eliminate the Chief Commercial Officer position, effective at the end of October 2021, and in October 2021 we announced the elimination of the role and departure of our now-former Executive Vice President, Chief Strategy and Business Officer.

In addition, in August 2021, we announced changes to our commercial strategy and organization in an effort to accelerate commercial adoption of TAZVERIK as well as a broader operational cost reduction plan. As part of our cost reduction plan, we implemented a cross-functional reduction of approximately 11% of our then-current workforce.

In March 2022, we announced the implementation of a further reduction of operating expenses, including additional workforce reductions and changes to our broader organization, as well as the re-prioritization of our pipeline and investment of company resources. We further reduced our workforce by approximately 12% of our then-current employees under these March 2022 expense reductions. We plan to continue to implement our broader operational expense reduction effort, and to monitor and seek opportunities to further reduce our operating expenses.

We may not realize, in full or in part, the anticipated benefits, savings and improvements from these changes or from any future changes we may decide to make. For instance, the changes to our commercial strategy and organization may not result in accelerated commercial adoption of TAZVERIK or greater product revenues. We believe that the commercial launch has been adversely affected by the COVID-19 pandemic and may continue to be

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adversely affected by the pandemic. In addition, market acceptance of TAZVERIK and product revenues have been adversely impacted by other factors, including competitive therapies and the use of our patient assistance program, which our changes may not address. The reduction in the size of our field organization and the prior departure of our Chief Commercial Officer may also limit the success of our refined strategy.

Our organizational changes, operating plan adjustments and operating expense reductions also may not be successful. If we are unable to realize the expected operational efficiencies and cost savings from these changes, our operating results and financial condition would be adversely affected. We also cannot ensure that we will not have to undertake additional workforce reductions or other cost-cutting measures in the future. Furthermore, these changes as well as the leadership transitions, pipeline reprioritization, and any future additional workforce reductions or other cost-cutting measures may be disruptive to our operations. For example, our workforce reductions, leadership changes and pipeline reprioritization could yield unanticipated consequences, such as attrition beyond planned staff reductions and negative impact on employee morale or could make it more difficult to fulfill our day-to-day operations. Our workforce reductions, leadership changes and pipeline reprioritization could also harm our ability to attract and retain qualified management, scientific, clinical, manufacturing and sales and marketing personnel who are critical to our business. In 2021, our annualized turnover rate was higher than in prior years and these changes could further or exacerbate that trend. Any failure to attract or retain qualified personnel could prevent us from successfully commercializing TAZVERIK, developing tazemetostat and discovering and developing EZM0414 and any future product candidates.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to tazemetostat, and will likely face competition with respect to our EZM0414 product candidate or any other product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of many of the indications for which we are selling TAZVERIK and for which we are developing tazemetostat. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization of pharmaceutical products that may compete with our products or product candidates. Tazemetostat, EZM0414 and any future product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

In the relapsed and refractory FL patient setting, both current and near-term competition for tazemetostat exists. The most common current treatments for FL are chemotherapies, usually combined with the CD-20 antibodies Rituxan or Gazyva. Multiple PI3K therapies, such as copanlisib (ALIQOPA) and umbralisib (UKONIQ) are approved for patients with relapsed/refractory FL. These therapies are utilized predominantly in the third line or later treatment. Recently, two companies have announced that there have been voluntary withdrawals of accelerated approvals for FL indications for two PI3K inhibitors, idelalisib (ZYDELIG) and duvelisib (COPIKTRA) in the U.S. market. Additionally, parsaclisib’s NDA has been voluntarily withdrawn for the treatment of patients with relapsed/refractory FL. The CAR-T therapy YESCARTA is also approved for the treatment of patients with relapsed/refractory FL. While CD20, PI3K and CAR-T therapies are approved in FL, there are no therapies that are approved specifically for the treatment of tumors associated with EZH2 activating mutations. There are a number of companies currently evaluating investigational agents in the relapsed and refractory follicular lymphoma patient setting including the development of additional PI3K inhibitors, CAR-T therapies and bispecific monoclonal antibodies. Zandelisib is in development by MEI Pharma for FL patients that are refractory to treatment or relapsed after two prior lines of therapy. Novartis is also developing its CAR-T therapy, KYMRIAH, for the treatment of relapsed or refractory FL patients and is undergoing priority review by the FDA. The EMA also accepted Novartis’ Type II Variation for KYMRIAH in adult patients with relapsed or refractory FL after two prior lines of treatment in the third quarter of 2021. The bispecific antibody furthest along in development in relapsed or refractory FL is Roche’s CD3/CD20 bispecific mosunetuzumab.

In the ES patient setting, there are no therapies approved specifically for epithelioid sarcoma, other than TAZVERIK. Most of the approved therapies utilized in ES are more broadly approved for soft tissue sarcoma in

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general. Furthermore, the only therapies in late stage clinical trials are being developed for the treatment of soft tissue sarcoma as well.

In the multiple myeloma patient setting, the most common treatments, which compete with EZM0414, include IMiD (include Revlimid (lenalidomide), Pomalyst (pomalidomide), and Thalidomide (thalomid)), proteasome inhibitors (including Velcade (bortezomib), Kyprolis (xarfilzomib), and Ninlaro (ixazomib)), and anti-CD38 mAb (including Darzalex (daratumumab) and Sarclisa (isatuximab-irfc)) combinations. Current therapies for the relapsed or refractory population also include BCMA targeting CAR-Ts and ADCs. The multiple myeloma pipeline is robust, and includes BCMA CAR-T therapies, bispecific antibodies, BiTEs, and CELMoDs. Additionally, there are assets in development for high risk MM and the t(4;14) subpopulation, including K36’s MMSET inhibitor KTX-1001.

For DLBCL, the most common treatments are chemotherapies, often in combination with the monoclonal antibody Rituxan (rituximab) as well as autologous stem cell transplants. In the relapsed or refractory patient setting, current therapies include CAR-T therapies (Kymriah (tisagenlecleucel), Yescarta (axicabtagene ciloleucel), Breyanzi (lisocabtagene maraleucel)), a CD19 mAb (Monjuvi (tafasitamab)), and ADCs (Policy (polatuzumab vedotin) and Zynlonta (loncastuximab tesirine)). DLBCL pipeline therapies include bispecific antibodies, ADCs, and CAR-T therapies.

While there are many assets in development for both multiple myeloma and DLBCL including those with novel mechanisms of action, other than our EZM0414 product candidate which is in early clinical development, there are no therapies in clinical development that are SETD2 inhibitors.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. Companies that are developing new epigenetic treatments for cancer that target histone methyltransferases, or HMTs, and protein arginine methyltransferases, or PRMTs, include GlaxoSmithKline plc, or GSK, Johnson & Johnson, Pfizer, Inc., Daiichi Sankyo Company Limited, and Constellation Pharmaceuticals. Further, companies which are known to have EZH2 inhibitor programs or related programs include: Constellation Pharmaceuticals, developing an EZH2 inhibitor (CPI-0209, Phase 1/2 for solid tumors and lymphomas including DLBCL); Novartis AG, developing an EED inhibitor which indirectly blocks EZH2 (MAK683, Phase 1/2, advanced malignancies); Daiichi Sankyo, developing a EZH1/EZH2 dual inhibitor (valemetostat, DS-3201, Phase 1, relapsed or refractory non-Hodgkin lymphomas, AML, ALL as well as Phase 2 for small cell lung cancer); Pfizer, developing an EZH2 inhibitor (PF-06821497, Phase 1, relapsed or refractory small cell lung cancer, castration-resistant prostate cancer and FL); and Jiangsu Hengrui Pharmaceutical, developing an EZH2 inhibitor (SHR2554, Phase 2 for B-cell malignancies) in China. In addition, many companies are developing cancer therapeutics that work by targeting epigenetic mechanisms other than HMTs, including Celgene Corporation (now part of Bristol-Myers Squibb), or Celgene, Merck & Co., Inc., Secura Bio, Spectrum Pharmaceuticals, Otsuka Pharmaceuticals Co., Ltd, Foghorn Therapeutics, Forma Therapeutics and CellCentric, which are marketing cancer treatments that work by targeting epigenetic mechanisms other than HMTs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than tazemetostat for ES, FL or any other indication for which we may develop tazemetostat or any other products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for tazemetostat for any future indication for which we may develop tazemetostat or any other product we may develop, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. Generic products are currently on the market for many of the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. We expect that tazemetostat will continue to be priced at a significant premium over competitive generic products.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

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Tazemetostat, EZM0414 and any other future product candidate that we commercialize may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could harm our business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future 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 commercial launch and market acceptance of the product, possibly for lengthy time periods, and negatively impact the revenues 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 our product candidates obtain marketing approval.

Our ability to successfully commercialize tazemetostat, EZM0414 or any future product candidates that we develop successfully also will depend in part on the extent to which insurance coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish corresponding reimbursement levels. A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors continue to attempt to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory to recoup our investment. Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the intended use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

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Clinical drug development is a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of tazemetostat, EZM0414 and any future product candidates.

We are conducting multiple clinical trials of tazemetostat. In addition, we have initiated a first-in-human study of EZM0414 for the treatment of adult patients with relapsed or refractory multiple myeloma or relapsed or refractory DLBCL. The risk of failure is high. It is impossible to predict when or if any product candidates that we may develop will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development, manufacture, and then conduct extensive clinical trials to demonstrate the safety and efficacy of any product candidates in humans.

Product candidates are subject to preclinical safety studies, which may be conducted prior to or concurrently with clinical testing, as well as continued clinical safety assessment throughout clinical testing. The outcomes of these safety studies or assessments may delay the launch of or patient enrollment in clinical studies. For example, in the course of our preclinical safety studies of tazemetostat, we observed the development of lymphoma in Sprague-Dawley rats. As a result of these findings, coupled with our limited clinical experience in FL, at the time of the Investigational New Drug Application submission in December 2015, we were unable to conduct our Phase 2 trial of tazemetostat in FL patients in the United States until the beginning of 2017. In addition, in the second quarter of 2018, following a safety report of a pediatric patient who developed a secondary T-cell lymphoma in our ongoing Phase 1 clinical trial of tazemetostat in pediatric patients, the FDA, the French National Agency for Medicines and Health Products Safety and Germany’s Federal Institute for Drugs and Medical Devices each placed a partial clinical hold on new patient enrollment in our ongoing clinical trials of tazemetostat. That partial clinical hold was lifted in September 2018 by the FDA, in November 2018 by Germany’s Federal Institute for Drugs and Medical Devices, and in January 2019 by the French National Agency for Medicines and Health Products Safety. In pharmaceutical development, many compounds that initially show promise in early-stage testing for treating cancer are later found to cause side effects that prevent further development of the compound. If we or our collaborators are unable to fully and adequately address matters such as these when they arise, we may be unable to conduct clinical trials of tazemetostat, EZM0414 or any future product candidates, our trials may be limited to certain patient populations or our ability to conduct other trials in the United States or in other countries may be delayed.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize tazemetostat, EZM0414 or any future product candidates, including:

regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
preclinical testing may produce results based on which we may decide, or regulators may require us, to conduct additional preclinical studies before we proceed with certain clinical trials, limit the scope of our clinical trials, halt ongoing clinical trials or abandon product development programs;

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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or patients may drop out of these clinical trials at a higher rate than we anticipate;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
we may have to limit the scope of, suspend or terminate clinical trials of our product candidates for various reasons, including as a result of a finding that the patients are being exposed to unacceptable health risks;
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the patients are being exposed to unacceptable health risks;
the cost of clinical trials of our product candidates may be greater than we anticipate;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or delayed, including as a result of ongoing impacts of the COVID-19 pandemic; and
our product candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.

We and our CROs and CMOs, as well as clinical trial sites, may face disruptions related to our ongoing clinical trials, planned clinical trials or future clinical trials arising from manufacturing disruptions, staffing disruptions and limitations on our activities and the activities of our CROs and CMOs, and delays in the ability to obtain necessary institutional review board or other necessary site approvals, as well as other delays at clinical trial sites. We may also face limitations on enrollment and patients withdrawing from our clinical trials or not complying with the protocols, which could delay completion of our clinical trials or adversely affect the data generated by our clinical trials. The impact of these disruptions on our clinical development activities and plans is uncertain and may depend on the length of the disruptions.

If we are required to conduct additional clinical trials or other testing of tazemetostat, EZM0414 or any future product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of tazemetostat, EZM0414 or any future product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling or a risk evaluation mitigation strategy that includes significant use or distribution restrictions or safety warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.

Our product development costs may also increase if we experience delays in clinical testing or in obtaining marketing approvals such as the delays caused by the partial clinical holds in the United States, France and Germany. We do not know whether any of our preclinical studies or clinical trials will continue or begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

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If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for tazemetostat, EZM0414 or any future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside of the United States. In particular, if our product candidates are focused on specific patient populations, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate. For instance, our ongoing clinical trials of tazemetostat in adult and pediatric patients with INI1-negative tumors are targeting rare patient populations. In addition, some of our competitors have ongoing clinical trials, and may in the future initiate new clinical trials, for product candidates being developed for the same or similar diseases or indications as tazemetostat, EZM0414 or any future product candidates or that may treat the broader patient populations within which tazemetostat, EZM0414 or any future product candidates are being or may be developed for the treatment of a subset of identifiable patients with cancer, which could adversely affect enrollment in our trials, particularly in trials for rare disease indications, as patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. We have experienced some delays in clinical trial startup as a result of the COVID-19 pandemic, and as the COVID-19 pandemic continues, patient recruitment and enrollment in our clinical trials may be adversely affected, delayed or interrupted. Patients may choose to withdraw from our studies or we may choose to or be required to pause enrollment and or patient dosing in our ongoing clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue.

Patient enrollment may be affected by other factors including:

the severity of the disease under investigation;
the rarity of the disease under investigation;
the eligibility criteria for the trial in question;
the perceived risks and benefits of the product candidate under trial;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment;
the proximity and availability of clinical trial sites for prospective patients;
the potential costs to be incurred by prospective patients in order to participate, such as travel, missed work, and/or childcare;
the lack of scientific interest in the study; and
the ability to identify specific patient populations for molecularly defined study cohorts.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for tazemetostat, EZM0414 or any future product candidates and could delay or prevent our ability to obtain marketing approval, which may cause the value of our company to decline and limit our ability to obtain additional financing.

Our research and development is focused on the creation of novel epigenetic therapies for patients with cancer, which is a rapidly evolving area of science, and the approach we are taking to discover and develop drugs is novel.

The discovery of novel epigenetic therapies for patients with cancer is an emerging field, and the scientific discoveries that form the basis for our efforts to discover and develop tazemetostat and any future product candidates are relatively new. Although epigenetic regulation of gene expression plays an essential role in biological function, few drugs premised on epigenetics have been discovered. Moreover, those drugs based on an epigenetic mechanism that have received marketing approval, other than TAZVERIK, are in different target classes than the

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chromatin modifying protein, or CMP, inhibitors where our research and development is principally focused. Although preclinical studies suggest that genetic alterations can result in changes to the activity of CMPs making them oncogenic, and although the FDA has granted accelerated approval for TAZVERIK in ES and FL with continued approval contingent upon verification and description of clinical benefit in a confirmatory trial for each of the ES and FL indications, to date no company has translated broad biological observations regarding CMP inhibitors into systematic drug discovery, development and commercialization. We believe our early inhibitors of HMTs in clinical trials were the first molecules against these targets to enter clinical development. Therefore, we do not know if our approach of inhibiting HMTs or other CMPs to treat patients with cancer will be successful.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on tazemetostat, EZM0414 and any future product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and on tazemetostat, EZM0414 and any future product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for tazemetostat, EZM0414 or a particular future product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

If we are required to develop a companion or complementary diagnostic and if we or our collaborators are unable to successfully develop diagnostics for tazemetostat, EZM0414 or any future therapeutic product candidates when needed, or experience significant delays in doing so, we may not achieve marketing approval or realize the full commercial potential of our therapeutic product candidates.

We may develop, or we may work with collaborators, to develop diagnostics for tazemetostat, EZM0414 or any future therapeutic product candidates to identify patients for our clinical trials who have the specific cancers that we are seeking to treat as appropriate and when existing, available technology may not be sufficient to identify those patients. We do not have experience or capabilities in developing or commercializing diagnostics and plan to rely in large part on third parties to perform these functions. For example, we have entered into an agreement with Roche Sequencing Solutions, or Roche Sequencing, to develop and commercialize a companion diagnostic for use with tazemetostat for non-Hodgkin lymphoma, or NHL, patients with EZH2 activating mutations. Companion or complementary diagnostics are subject to regulation by the FDA and similar regulatory authorities outside of the United States as medical devices and require separate regulatory approval prior to commercialization. If any third parties that we engage to assist us are unable to successfully develop companion or complementary diagnostics that are needed for our therapeutic product candidates, or experience delays in doing so:

the development of our therapeutic product candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our clinical trials;
our therapeutic product candidates may not receive marketing approval if their safe and effective use depends on a companion or complementary diagnostic; and
we may not realize the full commercial potential of any therapeutic product candidates that receive marketing approval if, among other reasons, we are unable to appropriately identify patients with the specific genetic alterations targeted by our therapeutic product candidates.

If any of these events were to occur, our business would be harmed, possibly materially.

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We may not be successful in our efforts to use and expand our proprietary drug discovery platform to build a pipeline of product candidates.

A key element of our strategy is to utilize our drug discovery platform to progress preclinical efforts and pursue additional product candidates to expand our pipeline of inhibitors against CMPs for the treatment of a variety of different types of cancer. We may not be able to develop product candidates that are safe and effective CMP inhibitors. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our technological approach, we will not be able to obtain product revenues for additional products in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing and utilization of tazemetostat in connection with the clinical testing and commercial use of tazemetostat and with respect to any other product candidates that we develop or commercialize. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants or patients;
significant costs to defend any related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop.

We currently hold $30.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $30.0 million, which may not be adequate to cover all liabilities that we may incur. We will need to increase our insurance coverage as we expand our clinical trials and as we continue to commercialize TAZVERIK, or any other product candidate that we develop. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

 

Enhanced governmental and private scrutiny over, or investigations or litigation involving, pharmaceutical manufacturer donations to patient assistance programs offered by charitable foundations may require us to modify our patient support programs and could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses.

 

To help patients afford tazemetostat, we have implemented a patient assistance program. These types of programs, designed to assist patients in affording pharmaceuticals, have become the subject of scrutiny. In recent years, some pharmaceutical manufacturers were named in class action lawsuits challenging the legality of components of their patient assistance programs and their support of independent charitable foundations in connection with such programs under a variety of federal and state laws. Our patient assistance program could become the target of similar litigation. In addition, certain state and federal enforcement authorities and members of Congress have initiated inquiries about co-pay assistance programs. Some state legislatures have also been considering proposals that would restrict or ban co-pay coupons.

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Further, numerous organizations, including pharmaceutical manufacturers, have received subpoenas from the U.S. Department of Justice, or DOJ, and other enforcement authorities seeking information related to their patient assistance programs and support, and certain of these organizations have entered into, or have otherwise agreed to, significant civil settlements with applicable enforcement authorities. In connection with these civil settlements, the U.S. government has and may in the future require the affected companies to enter into complex corporate integrity agreements that impose significant reporting and other requirements on those companies. We cannot ensure that our compliance controls, policies and procedures will be sufficient to protect against acts of our employees, business partners or vendors that may potentially violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government investigation could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses.

 

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net loss was $251.1 million for the year ended December 31, 2021, $231.7 million for the year ended December 31, 2020, and $170.3 million for the year ended December 31, 2019. As of December 31, 2021, we had an accumulated deficit of $1,239.8 million. To date, we have generated only limited revenue from sales of TAZVERIK and have not obtained marketing approval of any other product. We have financed our operations primarily through our collaborations, our public offerings, private placements of our common and preferred stock, our loan facility with BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership and BioPharma Credit PLC, and other funding transactions. We have devoted substantially all of our financial resources and efforts to research and development, including clinical and preclinical studies, seeking marketing approval for product candidates and building our commercial organization with respect to TAZVERIK in the indications for which we have received accelerated approval from the FDA. We are continuing to develop tazemetostat for additional indications and to seek to discover and develop EZM0414 and other product candidates. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year.

We anticipate that we will continue to incur significant expenses if and as we:

continue to build and refine our sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to support the ongoing commercialization of TAZVERIK and the commercial launch of any other product candidate that is approved;
grow our medical affairs organization to provide medical support for tazemetostat and any other product candidate that is approved;
conduct our Phase 1b/3 confirmatory trials in ES and FL;
design and conduct new and ongoing monotherapy and combination trials of tazemetostat in FL;
conduct clinical trials or support investigator-sponsored trials to evaluate tazemetostat as a monotherapy or in combinations in additional indications;
conduct our Phase 1/1b clinical trial of EZM0414 for the treatment of R/R multiple myeloma and DLBCL patients;
pay any milestone payments provided for and achieved under the amended and restated collaboration and license agreement with Eisai Co Ltd, or Eisai;
pay interest and principal associated with our amended and restated loan agreement with BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership and BioPharma Credit PLC, or the Amended and Restated Loan Agreement;
continue the research and development of our other product candidates;
seek to discover and develop additional product candidates or to expand our product candidates into additional lines of treatment;

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prepare NDA submissions as we seek regulatory approvals for any product candidates that successfully complete clinical trials;
maintain, expand and protect our intellectual property portfolio;
hire additional clinical, quality control, manufacturing and scientific personnel; and
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

To become and remain profitable, we must generate significant revenue. The ability to generate this revenue requires us to successfully commercialize TAZVERIK in ES and FL and in additional indications for which we may develop and obtain approval for tazemetostat, which requires us to be effective in a range of challenging activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with the development and commercialization of pharmaceutical products, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Even 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 depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could cause our stockholders to lose all or part of their investment in our company.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution. In addition, we expect our expenses to increase as we fund our tazemetostat development program; make any milestone and royalty payments provided for and achieved under the amended and restated collaboration and license agreement with Eisai; pay interest and principal associated with the Amended and Restated Loan Agreement; and continue research and development and initiate clinical trials of, and seek regulatory approval for, EZM0414 or any future product candidates. Accordingly, we may need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.

Based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities as of December 31, 2021, together with the $79.5 million in net proceeds raised from the common stock offering in January 2022, and expected cash generated from product sales, will be sufficient to fund planned operating expenses and capital expenditure requirements and pay debt service obligations as they become due, into the third quarter of 2023, without incorporating potential milestone payments, expense reimbursements from existing collaboration agreements or any future business development activities. We have based these expectations on assumptions that may prove to be wrong, such as the revenue that we expect to generate from the sale of our products, and we could use our capital resources sooner than we expect. Our future capital requirements will depend on many factors, including the following, as well as the uncertain impact of the COVID-19 pandemic on these factors:

the costs of commercialization activities, including product manufacturing, marketing, sales and distribution and patient support programs for tazemetostat or any of our product candidates;
revenue received from commercial sales of TAZVERIK;
the progress and results of our ongoing and planned clinical trials of tazemetostat;
the number and development requirements of additional indications for tazemetostat and other product candidates that we determine to pursue, including the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for such product candidates;

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the costs, timing and outcome of regulatory review of tazemetostat and other product candidates we may pursue;
royalties payable by us on sales of TAZVERIK under our amended and restated collaboration and license agreement with Eisai;
milestones, option exercise fees, license fees, and other revenues, if any, we may receive under collaboration agreements;
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights, defending any intellectual property-related claims, and challenging the intellectual property rights of others;
the extent to which we acquire or in-license other products and technologies; and
interest and principal payments under the Amended and Restated Loan Agreement.

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 even if regulatory approval is obtained, we may never achieve commercial success. Accordingly, we may 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. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings and license and development agreements with collaboration partners. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. We may be limited in our ability to raise additional capital through the sale of equity as we have a limited number of authorized shares that are not issued and outstanding or reserved for future issuance. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our existing indebtedness and the pledge of our assets as collateral limit our ability to obtain additional debt financing.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our indebtedness resulting from our Amended and Restated Loan Agreement could adversely affect our financial condition or restrict our future operations.

In November 2019, we entered into the Loan Agreement with BioPharma Credit PLC, or the Collateral Agent, and BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership (as transferee of BioPharma Credit Investments V (Master) LP’s interest as a lender), or the Lenders, providing for up to $70.0 million in secured term loans to be advanced in up to three tranches, or the Loan Agreement, of which $25.0 million was drawn by us in

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November 2019, $25.0 million was drawn by us in March 2020, and $20.0 million was drawn by us in June 2020. The maturity date of the first three tranches is November 18, 2024, unless paid earlier.

In November 2020, we entered into an Amended and Restated Loan Agreement with the Collateral Agent and the Lenders, amending and restating the Loan Agreement to provide for, among other things, an additional secured term loan facility of $150.0 million, or the Tranche D Loan. In November 2020, we drew the $150.0 million Tranche D Loan. The maturity date of the Tranche D Loan is November 18, 2026, unless terminated earlier.

Subject to customary exceptions and exclusions, all obligations under the Amended and Restated Loan Agreement are secured pursuant to the terms of the Amended and Restated Loan Agreement, a guaranty and security agreement between us, certain of our subsidiaries, and the Collateral Agent, or the Pledge Agreement, and intellectual property and security agreements between us and Collateral Agent, or the IP Security Agreements. Under the Amended and Restated Loan Agreement, the Pledge Agreement, and the IP Security Agreements, we provided to the Lenders a perfected, first-priority security interest in all of our personal property and a perfected, first-priority security interest in substantially all of our intellectual property related to tazemetostat.

A failure to comply with the conditions of the Amended and Restated Loan Agreement could result in an event of default. An event of default under the term loan facility includes, among other things, a failure to pay any amount due under the Amended and Restated Loan Agreement as well as the occurrence of events that could reasonably be expected to result in a material adverse change. In the event of an acceleration of amounts due under the Amended and Restated Loan Agreement as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay the term loans or to make any accelerated payments.

Risks Related to Our Dependence on Third Parties

Our existing therapeutic collaborations are important to our business, and future collaborations may also be important to us. If we are unable to maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.

Our resources for drug development are limited and we continue to build our sales, marketing, medical affairs and supply chain infrastructure. Accordingly, we have entered into therapeutic collaborations with other companies that we believe can contribute to our ability to rapidly develop and commercialize TAZVERIK and any product candidates we may identify and develop, including our license agreement with HutchMed. Our collaborations have provided us with important funding for our development programs and product platform and we expect to receive additional funding under these collaborations in the future. Our existing therapeutic collaborations, and any future collaborations we enter into, may pose a number of risks, including the following:

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;
collaborators may not have the ability or the development capabilities to perform their obligations as expected, including as a result of the impact of the COVID-19 pandemic on our collaborators’ operations or business;
collaborators may not pursue commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that may divert resources or create competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, not initiate or delay initiation of clinical trials, pause or stop enrollment in a clinical trial, terminate an ongoing clinical trial, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products and product candidates if the collaborators believe that the competitive

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products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
a collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product;
a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and
collaborations may be terminated for the convenience of the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

If our therapeutic collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its collaboration with us, we may not receive the funding under the collaboration that we anticipated. If we do not receive the funding we expect under these agreements, our development of our product platform and product candidates could be delayed and we may need additional resources to develop product candidates and our product platform. All of the risks relating to product development, regulatory approval and commercialization described in this Annual Report on Form 10-K also apply to the activities of our therapeutic collaborators.

Our existing therapeutic collaborations contain restrictions on our ability to engage in activities that are the subject of the collaboration with third parties for specified periods of time. These restrictions may have the effect of preventing us from undertaking development and other efforts that may appear to be attractive to us.

Additionally, subject to its contractual obligations to us, if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected. In the fourth quarter of 2021, Glaxo Group Limited, an affiliate of GSK, terminated its collaboration with us without cause, effective March 16, 2022.

For some of our product candidates or for some CMP targets, we may in the future collaborate with pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to increase our expenditures and undertake development or commercialization activities for the product candidate or program on our own or at our own expense or curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities. If we elect to fund and undertake

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development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform and our business may be materially and adversely affected.

Failure of our third-party collaborators to successfully commercialize diagnostics, developed for use with our therapeutic product candidates, if and when needed, could harm our ability to commercialize these product candidates.

We do not plan to develop diagnostics internally and, as a result, if diagnostics are needed, we will be dependent on the efforts of our third-party collaborators to successfully commercialize diagnostics when existing, available technology may not be sufficient to identify patients for treatment with our therapeutic product candidates. For example, Roche Sequencing has developed a companion diagnostic kit for detecting activating mutations in EZH2 in the tazemetostat NHL program. Our collaborators:

may not perform their obligations as expected or have difficulty responding to accelerated approval timelines alongside the therapeutic product development;
may encounter production difficulties that could constrain the supply of the diagnostics;
may encounter delays or have difficulty obtaining regulatory approval for the diagnostic in target markets;
may have difficulties gaining acceptance of the use of the diagnostics in the clinical community;
may not pursue commercialization of any diagnostics that achieve regulatory approval;
may elect not to continue or renew commercialization programs based on changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition, that divert resources or create competing priorities;
may not commit sufficient resources to the marketing and distribution of such product or products; and
may terminate their relationship with us.

If required diagnostics for use with our therapeutic product candidates fail to gain market acceptance, our ability to derive revenues from sales of our therapeutic product candidates could be harmed. If our collaborators fail to commercialize these diagnostics, we may not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use in connection with our therapeutic product candidates or do so on commercially reasonable terms, which could adversely affect and delay the development or commercialization of our therapeutic product candidates.

We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We currently rely on third-party clinical research organizations to conduct our ongoing clinical trials. We do not plan to independently conduct clinical trials of tazemetostat, EZM0414 or any future product candidates. We expect to continue to rely on third parties, such as clinical research organizations, research collaborative groups, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. These agreements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities might be delayed.

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 responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants or patients are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a

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government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

We also expect to continue to rely on other third parties to store and distribute drug supply for our clinical trials and our commercial operations. Any performance failure on the part of any such distributor could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We contract with third parties for the manufacture of tazemetostat for commercialization and clinical testing and EZM0414 for clinical testing, and expect to contract with third parties for the manufacture of any other product candidates that we develop for preclinical and clinical testing and for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities and rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture of tazemetostat and any other product candidates we develop that receive marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of tazemetostat, EZM0414 or any other product candidate or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We may be unable to establish any agreements with third-party manufacturers or to do so on a timely basis or on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on such third-party manufacturers entails additional risks, including:

reliance on the third-party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

Tazemetostat, EZM0414 and any other product candidate that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future manufacturers could delay clinical development, or marketing approval, and could adversely impact our ability to sell our approved products. We have already built additional redundancy in our supply chain and have plans to continue to qualify additional raw material manufacturers in our TAZVERIK supply chain. If our current contract manufacturers cannot perform as agreed, we

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may be required to replace such manufacturers. We expect that we would incur added costs and delays in identifying and qualifying any such replacement.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain and enforce patent protection for our technology, products and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology, products or product candidates similar or identical to ours, and our ability to successfully develop and commercialize our technology, products or product candidates may be impaired.

Our success depends in large part on our ability to obtain, maintain and enforce patent protection in the United States and foreign jurisdictions with respect to our proprietary technology, products and product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technology, products and product candidates.

The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute or maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do 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. Therefore, these in-licensed patents and applications may not be prepared, filed, prosecuted or maintained in a manner consistent with the best interests of our business.

Although we enter into non-disclosure and confidentiality agreements with parties who may have access to confidential or patentable aspects of our research and development output, such as our employees, collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby potentially jeopardizing our ability to seek patent protection.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the scope of our patent protection outside of the United States is uncertain, and laws of foreign jurisdictions may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. With respect to our patent rights, we cannot predict whether the patent applications we and/or our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and foreign jurisdictions are typically not published until 18 months after filing, or in some cases at all. Therefore, neither we nor our licensors can know with certainty whether we were the first to make the inventions claimed in the patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology, products or product candidates, in whole or in part, or which effectively prevent others from developing or commercializing competitive technologies, products and product candidates. Changes in either the patent laws or interpretation of the patent laws in the United States and foreign jurisdictions may diminish the value of our patent rights or narrow the scope of our patent protection.

Moreover, we may be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. For example, we are

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involved in an opposition proceeding against one of our European patents, the claims of which cover a method for determining whether a cancer patient is a candidate for treatment with an EZH2 inhibitor based on their EZH2 mutation status. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize our technology or products without infringing, misappropriating or otherwise violating third-party patent rights. In addition, if the breadth or strength of protection provided by our owned and/or in-licensed patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize our technology, products or product candidates. Furthermore, such proceedings also may result in substantial cost and divert the time and attention of our management and employees, even if the eventual outcome is favorable to us.

In addition, the coverage claimed in a patent application may be significantly reduced before the patent is issued, and its scope may be reinterpreted after issuance. Even if our owned and/or in-licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and/or in-licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Such proceedings also may result in substantial cost and divert the time and attention of our management and employees, even if the eventual outcome is favorable to us. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Furthermore, our competitors may be able to circumvent our owned and/or in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner. As a result, our owned and/or in-licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing technology and/or products similar or identical to any of our technology and products.

Moreover, some of our owned and/or in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing technology and products. In addition, we may need the cooperation of any such co-owner of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us.

If we do not obtain patent term extension for our products, our business may be materially harmed.

In the United States, depending upon the timing, duration and specifics of any FDA marketing approval of a product candidate, the patent term of a patent that covers an FDA-approved product may be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent for those claims covering the approved product, a method for using it or a method for manufacturing such product. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. We have applied for patent term extension on a patent that covers the TAZVERIK drug substance based on the regulatory review of TAZVERIK for the treatment of adult and pediatric patients aged 16 years and older with metastatic or locally advanced ES not eligible for complete resection. In the future, if and when any additional product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those approved products. Similarly, in foreign jurisdictions where we have obtained regulatory approval, we intend to seek patent term extensions for any applicable issued patent rights if such extensions are available, however there is no guarantee that the applicable authorities will agree with our assessment of whether such extensions should be granted, and even if granted, the length of any such extensions. We may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of the relevant patent(s), or otherwise failing to satisfy applicable requirements. If we are unable to obtain any patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following

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the expiration of our patent rights, and our business, financial condition, results of operations and commercial prospects could be materially harmed.

Changes to patent laws in the United States and foreign jurisdictions could significantly diminish the value of patents in general, thereby impairing our ability to protect our technology, products and product candidates.

Changes in either the patent laws or interpretation of patent laws in the United States by the United States Congress, the federal courts, or the USPTO, including patent reform legislation such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, or similar changes in other jurisdictions whether by governments, courts or regulators, could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our issued patent rights. For example, the Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent at USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. Assuming that other statutory requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. Accordingly, changes in either the patent laws or interpretation of patent laws in the United States or in foreign jurisdictions and their implementation could increase the uncertainties and costs surrounding the prosecution of our owned and/or in-licensed patent applications and the enforcement or defense of our issued patent rights, which could have a material adverse effect on our business and financial condition.

We may become involved in lawsuits or other legal proceedings to protect or enforce our patent or other intellectual property rights, which could be expensive, time consuming and unsuccessful.

Competitors may infringe, misappropriate or otherwise violate our patent or other intellectual property rights. As a result, we may need to file infringement, misappropriation or other intellectual property claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property rights. Such parties could also counterclaim that the patent rights we have asserted are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information, or made a misleading statement, during prosecution. Moreover, third parties may institute such claims before administrative bodies in the United States or abroad, and within or outside of the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).

An adverse result in any such proceeding could put one or more of our patent rights at risk of being invalidated or interpreted narrowly, and could put one or more of our owned and/or in-licensed patent applications at risk of being found unpatentable. Any of the foregoing could limit our ability to limit our competitors’ ability to develop and commercialize competing technologies and products and could have a material adverse impact on our business, financial condition, results of operations and prospects.

We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.

A third party may hold intellectual property rights, including patent rights, that are important or necessary to the development of our technology or product candidates or commercialization of our technology or products. It may be necessary for us to use the patented or proprietary technology of third parties to develop our technology or product candidates or commercialize our technology or products, in which case we may be required to obtain a license from

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these third parties. Such licenses may not be available on commercially reasonable terms, or at all, or may only be available on a non-exclusive basis, any of which could have a material adverse impact on our business, financial condition, results of operations and prospects.

Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our current and future products and use our proprietary technology without infringing, misappropriating or otherwise violating the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened with, litigation or administrative proceedings regarding intellectual property rights with respect to our technology, products and product candidates, including interference proceedings, post grant review, inter partes review and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions such as oppositions before the European Patent Office.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of merit. For example, with respect to tazemetostat, we are aware of a U.S. patent held by a third party, which could be construed to cover the use of tazemetostat in certain clinical indications. We have preemptively requested inter partes review at the USPTO challenging the validity of that patent. In the event that an owner of this patent were to bring an infringement action against us, we believe we have defenses that we could assert in such event, and additionally in the USPTO, including the invalidity of the relevant claims of such patents. However, we may not be successful in asserting these defenses, including proving invalidity, and could be found to infringe this third-party patent.

We may not be aware of all intellectual property rights potentially relating to our technology, products and product candidates and their potential uses. Thus, we do not know with certainty that our technology, products and product candidates or our development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third party’s intellectual property.

Even if we believe that third party intellectual property claims are without merit, there is no assurance that a court or other judicial or regulatory body would find in our favor on questions of misappropriation, infringement, validity, enforceability or priority. A court of competent jurisdiction or other applicable regulatory body could disregard any claims that we make and hold that third-party patents are valid, enforceable and infringed. In order to successfully challenge the validity of any U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and marketing our technology, products and product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make substantial licensing and/or royalty payments. We could be forced, including by court order, to cease developing, manufacturing and/or commercializing the infringing technology, product candidates or products. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent or other intellectual property right and could be forced to indemnify our customers or collaborators. A finding of infringement could prevent us from commercializing our technology, product candidates or products and/or could force us to cease some of our business operations, which could materially harm our business. Additionally, we could be forced to redesign our products or product candidates, seek new regulatory approvals or indemnify third parties pursuant to contractual agreements. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

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Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance, renewal and annuity fees and various other governmental fees on any issued patent and pending patent application must be paid to the USPTO and foreign patent agencies in several stages or annually over the lifetime of our owned and/or in-licensed patents and patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In certain circumstances, we rely on our licensing partners to pay these fees to, or comply with the procedural and documentary rules of, the relevant patent agency. With respect to our patent rights, we employ reputable law firms and other professionals to help us comply, and we rely on an annuity service to remind us of the due dates and to make payment after we instruct them to do so. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules, however the ability to cure may not be possible in some cases or may be subject to certain deadlines or other restrictions that may not be practicable to satisfy. While to date we have not experienced any material abandonment, lapse or loss of patent rights that was not able to be cured, there could be situations in which non-compliance could result in material abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we or our licensors fail to maintain the patents and patent applications covering our technology, products or product candidates, potential competitors might be able to enter the market with similar or identical technology, products or product candidates, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.

We are party to license and research agreements that impose, and we may enter into additional licensing and funding arrangements with third parties that may impose, on us diligence, development and commercialization timelines, milestone payment, royalty, insurance and other obligations. Under our existing licensing and funding agreements, we are obligated to pay royalties on net product sales of products or related technologies to the extent they are covered by the agreements. If we fail to comply with our obligations under current or future license and funding agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or commercialize any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially adversely affect the value of the products or product candidates being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be subject to claims by third parties asserting that our employees, consultants, contractors or we have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting that we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our employees, consultants and contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees, consultants and contractors or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.

In addition, while it is our policy to require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops or has developed intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be

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breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our competitive business position and prospects. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to develop and/or commercialize our technology, product candidates, and/or products, which license may not be available on commercially reasonable terms, or at all, or such license may be non-exclusive. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and employees.

Intellectual property litigation or other legal proceedings relating to intellectual property could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and may also have an advantage in such proceedings due to their more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent or other intellectual property litigation or other proceedings could compromise our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology, products and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees, consultants and contractors. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside of the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position could be harmed.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

The marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize tazemetostat for other indications or any other of our product candidates that we develop, and our ability to generate revenue will be materially impaired.

Our product and product candidates, including tazemetostat, and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage,

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approval, advertising, promotion, sale and distribution, export and import are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by the EMA and similar regulatory authorities outside of the United States.

Failure to obtain marketing approval for tazemetostat for any potential indication or of any other product candidate will prevent us from commercializing tazemetostat for that indication or the product candidate. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and rely on third-party clinical research organizations to assist us in this process. Securing marketing approval requires the submission of extensive preclinical, clinical and manufacturing data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety, efficacy and quality. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates for which we seek approval may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. New cancer drugs frequently are indicated only for patient populations that have not responded to an existing therapy or have relapsed.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies, or additional manufacturing data. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate on an accelerated basis or at all. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

We received accelerated approval of TAZVERIK in patients with ES and in patients with relapsed or refractory FL. In order to obtain accelerated approval for future indications in tazemetostat or any other product candidate, we must demonstrate that our product candidate provides meaningful therapeutic benefit over existing treatments. In addition, as a condition of accelerated approval of TAZVERIK in ES and FL, continued approval for these indications is contingent upon verification and description of clinical benefit in post-marketing confirmatory trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit, and if the studies are unsuccessful for a given indication, TAZVERIK in ES or FL may be subject to withdrawal procedures.

Additionally, the FDA and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor our future applications for accelerated approval or our ongoing clinical trials due to the COVID-19 pandemic and, as a result, review, inspection, and other timelines may be materially delayed. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

 

We may not be able to obtain, or may be delayed in obtaining, orphan drug exclusivity for our product candidates and, even if we do, that exclusivity may not prevent the FDA or the EMA from approving other competing products.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States.

We have obtained orphan drug designations in the United States for tazemetostat for the treatment of patients with FL, chordoma, malignant rhabdoid tumors, or MRT, soft tissue sarcoma, or STS, and mesothelioma. The orphan

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drug designation for the treatment of MRT applies to INI1-negative MRT as well as SMARCA4-negative malignant rhabdoid tumor of ovary, or MRTO. We have also obtained orphan drug designations for tazemetostat for the treatment of patients with FL, DLBCL and malignant mesothelioma in Europe.

We have also received orphan drug designation from the FDA for EZM0414 for the treatment of multiple myeloma. We may not receive orphan drug designation for tazemetostat or for EZM0414 for other indications, or for any other future clinical candidates we may develop.

We have also obtained marketing exclusivity designations for tazemetostat for the treatment of patients with ES and FL. Generally, if a product with an orphan drug designation subsequently 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 EMA or the FDA from approving another marketing application for the same drug for the same indication for that time period. The applicable period is seven years in the United States and ten years in Europe. The exclusivity period in Europe can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. In addition, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

On August 18, 2017, Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. Under Omnibus legislation signed by President Trump on December 27, 2020, the requirement for a product to show clinical superiority applies to drugs and biologics that received orphan drug designation before enactment of FDARA in 2017 but has not yet been approved or licensed by the FDA.

The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” The court concluded that orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use”. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

In addition, FDARA amended section 505B “Research into pediatric uses for drugs and biological products” of the Federal Food, Drug and Cosmetic Act (21 U.S.C. Section 355c). Previously, drugs that had been granted orphan drug designation were exempt from the requirements of the Pediatric Research Equity Act. Under the amended section 505B, beginning on August 18, 2020, the submission of a pediatric assessment, waiver or deferral will be required for certain molecularly targeted cancer indications with the submission of an NDA application or supplement to an NDA application. Under FDARA, products with orphan drug designation that fall under this category will no longer be exempt from the pediatric research requirement. In December 2019, the FDA issued draft guidance interpreting and implementing these provisions. FL qualifies for an automatic full pediatric waiver by the FDA because it rarely or never occurs in pediatric patients. However, our other indications in development or future product candidates may require a pediatric assessment, which could result in delays in obtaining orphan drug exclusivity and increased costs and delays in obtaining regulatory approval.

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We may seek certain designations for our product candidates, including Fast Track and Breakthrough Therapy, designations, but we might not receive such designations, and even if we do, such designations may not lead to a faster development or regulatory review or approval process.

We may seek certain designations for one or more of our product candidates that could expedite review and approval by the FDA. For example, if a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast Track designation. Drugs that have received Fast Track designation from the FDA are eligible for expedited development and priority review, and the opportunity for a rolling review, under certain circumstances.

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs and biologics 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. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

We have received Fast Track designation from the FDA for tazemetostat for patients with relapsed or refractory FL, relapsed or refractory DLBCL with EZH2 activating mutations, and metastatic or locally advanced ES who have progressed on or following an anthracycline-based treatment regimen. We have also received Fast Track design