Vaccinex(VCNX) - 2021 Q4 - Annual Report

Part I Business Vaccinex is a clinical-stage biotechnology company developing biotherapeutics for cancer and neurodegenerative/autoimmune diseases, leveraging its SEMA4D and ActivMAb® platforms - Vaccinex is a clinical-stage biotechnology company focused on discovering and developing biotherapeutics for cancer, neurodegenerative diseases, and autoimmune disorders[17] - The company's lead product candidate is pepinemab, a SEMA4D-targeting antibody for HNSCC, Huntington's disease, and Alzheimer's disease[17] - Vaccinex utilizes two primary proprietary platform technologies: the SEMA4D antibody platform and the ActivMAb® antibody discovery platform[18][19] - As of December 31, 2021, the company had 39 full-time and two part-time employees[237] Product Pipeline - Pepinemab, a humanized monoclonal antibody blocking SEMA4D signaling, has treated or enrolled 528 patients across ten clinical trials as of December 31, 2021[22] - In 2021, the company initiated the KEYNOTE-B84 trial, a Phase 1b/2 study of pepinemab with Keytruda® for front-line recurrent or metastatic head and neck cancer (R/M HNSCC)[21][26] - The SIGNAL-AD trial, a Phase 1b study of pepinemab in Alzheimer's disease, initiated in late 2020, is supported by grants from the Alzheimer's Association and the Alzheimer's Drug Discovery Foundation[28] - VX5, a human antibody to CXCL13 discovered via the ActivMAb platform, is in preclinical development for Multiple Sclerosis (MS) and other autoimmune disorders[29] Our Strategy - Develop pepinemab in combination with checkpoint inhibitors for cancer, with an ongoing study in HNSCC in collaboration with Merck[32] - Develop pepinemab as a therapy for Huntington's disease, with plans for a potential pivotal Phase 3 study, possibly with a partner[33] - Develop pepinemab for Alzheimer's disease, with the SIGNAL-AD trial initiated in 2021 and topline data expected in 2023[33] - Leverage the ActivMAb® platform to identify human antibodies for internal pipeline development and strategic collaborations, particularly against difficult multi-pass membrane targets[33] Manufacturing and Commercialization - The company relies on third-party contract manufacturing organizations (CMOs) like Catalent for pepinemab production, as it does not own manufacturing facilities[156] - The company plans to commercialize pepinemab for Huntington's Disease in the U.S. itself if approved, but will seek partners for other indications and international markets, lacking established sales operations[158] Intellectual Property - The SEMA4D antibody platform and pepinemab patent portfolio includes issued and pending patents in the U.S. and foreign countries, expiring between 2030 and 2038[169][170] - The ActivMAb platform is protected by wholly-owned and exclusively licensed patents from the University of Rochester, expiring between 2025 and 2041[176][178][179][180] - The VX5 patent portfolio includes a family licensed from the University of Rochester and three wholly-owned families, expiring between 2025 and 2034[181][182] Government Regulation - Product candidates are regulated as biologics by the FDA, requiring rigorous preclinical testing, IND effectiveness, and adequate clinical trials before BLA submission and approval[187][192] - The FDA offers expedited programs like Priority Review, Fast Track, Breakthrough Therapy, and Accelerated Approval for serious conditions, potentially applicable to the company's product candidates[203] - Post-approval, products are subject to ongoing regulation, including cGMP for manufacturing, postmarketing commitments, and advertising and promotion rules[210][211][212] - Sales depend on coverage and reimbursement from third-party payors like Medicare and Medicaid, requiring participation in government programs for federal funding[217][218][219] Risk Factors The company faces significant financial, operational, and third-party dependence risks, including recurring losses, clinical trial uncertainties, and reliance on external manufacturing and intellectual property protection - The company has a history of net losses, with $22.4 million in 2021 and $28.9 million in 2020, and an accumulated deficit of $299.9 million as of December 31, 2021, with no product revenue to date[252] - There is substantial doubt about the company's ability to continue as a going concern, requiring additional capital that may not be available on acceptable terms[257] - The business heavily depends on the success of its lead product candidate, pepinemab, with the Phase 2 SIGNAL trial for Huntington's Disease not meeting its primary endpoints, creating uncertainty[272][278] - The COVID-19 pandemic has adversely impacted the business, causing delays in clinical trial enrollment and affecting capital raising ability[269] - The company relies on third parties like Catalent for manufacturing and CROs for clinical trials, making it vulnerable to delays and performance issues[331][332][333] - As of December 31, 2021, executive officers, directors, and their affiliates beneficially owned approximately 44.7% of the company's common stock, allowing significant control[369] Unresolved Staff Comments The company reports no unresolved staff comments - None[380] Properties The company's principal executive office is approximately 31,180 square feet of leased office and laboratory space in Rochester, New York - The company leases approximately 31,180 square feet of office and laboratory space in Rochester, New York[381] Legal Proceedings The company is not currently a party to any material legal proceedings that would adversely affect its business, financial condition, or operations - The company is not presently a party to any material legal proceedings[382] Mine Safety Disclosures This item is not applicable to the company - Not applicable[383] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Capital Market under 'VCNX', with 143 holders of record as of March 25, 2022, and no repurchases in Q4 2021 - Common stock trades on the Nasdaq Capital Market under the symbol 'VCNX'[386] - As of March 25, 2022, there were 143 holders of record of the company's common stock[386] - No shares were repurchased during the fourth quarter of the year ended December 31, 2021[387] Management's Discussion and Analysis of Financial Condition and Results of Operations Vaccinex reported a net loss of $22.4 million in 2021, a decrease from $28.9 million in 2020, driven by reduced R&D and G&A expenses, but faces substantial doubt about its going concern ability with $8.6 million cash at year-end 2021 Results of Operations (in thousands) | | Year Ended December 31, | | | :--- | :--- | :--- | | | 2021 | 2020 | | Revenue | $ 900 | $ 625 | | Research and development | 17,160 | 21,549 | | General and administrative | 6,230 | 7,405 | | Loss from operations | (22,490) | (28,331) | | Net loss | (22,380) | (28,851) | | Net loss per share | (0.78) | (1.54) | - Research and development expenses decreased by $4.4 million (20%) in 2021 compared to 2020, mainly due to the completion of major clinical trials[410] - General and administrative expenses decreased by $1.2 million (16%) in 2021 compared to 2020, due to planned cost control measures[411] - The company's recurring net losses and negative cash flows raise substantial doubt about its ability to continue as a going concern, with cash and cash equivalents at $8.6 million as of December 31, 2021[395][420] Cash Flows (in thousands) | | Year Ended December 31, | | | :--- | :--- | :--- | | | 2021 | 2020 | | Cash used in operating activities | $ (25,298) | $ (28,647) | | Cash used in investing activities | (32) | (290) | | Cash provided by financing activities | 23,323 | 36,757 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on cash and equivalents, with immaterial impact due to short-term nature, and minor unhedged foreign currency exposure - Primary market risk is interest rate sensitivity on cash and cash equivalents ($8.6 million as of December 31, 2021), with an immaterial expected impact due to the portfolio's short-term nature[435] - The company has some foreign currency risk from payments to certain suppliers and service providers, but resulting gains and losses have not been significant to date[436][437] Financial Statements and Supplementary Data The consolidated financial statements are included, with the auditor's report from Deloitte & Touche LLP highlighting a 'Going Concern' paragraph due to recurring losses and negative cash flows - The auditor's report includes a paragraph expressing substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows from operations[529] Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $9,843 | $11,702 | | Cash and cash equivalents | $8,589 | $10,596 | | Total current assets | $9,405 | $11,286 | | Total Liabilities | $2,431 | $14,314 | | Total current liabilities | $2,256 | $13,180 | | Total Stockholders' Equity (Deficit) | $7,412 | $(2,612) | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Revenue | $900 | $625 | | R&D Expenses | $17,160 | $21,549 | | G&A Expenses | $6,230 | $7,405 | | Net Loss | $(22,380) | $(28,851) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[439] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes reported in Q4 2021 - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[444] - Based on an assessment using the COSO framework (2013), management concluded that internal control over financial reporting was effective as of December 31, 2021[441][442] - As an emerging growth company, this report does not include an attestation report from the independent registered public accounting firm regarding internal control over financial reporting[443] Part III Directors, Executive Officers and Corporate Governance This section details biographical information for directors and executive officers, including key figures, the independent audit committee, and the adopted code of business conduct and ethics - The board of directors includes Chairman Albert D. Friedberg and President/CEO Maurice Zauderer, Ph.D[449][456] - The Audit Committee members are Gerald E. Van Strydonck (Chair), Jacob B. Frieberg, and Dr. Bala S. Manian, all independent directors[465] - The board has determined that Mr. Van Strydonck qualifies as an 'audit committee financial expert'[465] Executive Compensation Executive compensation for 2021 included base salaries and stock option awards for named officers, with a severance plan for change in control and annual cash retainers and stock options for non-employee directors 2021 Summary Compensation Table | Name and Principal Position | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Maurice Zauderer, President and CEO | 374,901 | 26,600 | 401,501 | | Ernest S. Smith, SVP, Research and CSO | 264,739 | 19,000 | 283,789 | | Scott E. Royer, CFO | 242,151 | 11,400 | 253,551 | - In April 2021, the named executive officers received incentive stock option grants under the 2018 Omnibus Incentive Plan[471] - The company has a Severance Pay Plan providing a lump sum cash payment (six months' salary for executive officers) for involuntary severance following a change in control[484] - Non-employee directors receive a $35,000 annual cash retainer, additional retainers for committee chair positions, and annual stock option awards valued at approximately $40,000[489][490] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 25, 2022, directors and executive officers as a group beneficially owned 47.6% of common stock, with Albert D. Friedberg as the largest individual owner, and the company maintains the 2018 Omnibus Incentive Plan Security Ownership of Major Holders (as of March 25, 2022) | Name of Beneficial Owner | Percentage of Shares Beneficially Owned | | :--- | :--- | | Albert D. Friedberg (Chairman) | 36.5% | | FCMI Parent Co., et al | 27.1% | | Maurice Zauderer (CEO) | 8.4% | | Friedberg Global-Macro Hedge Fund Ltd. | 8.2% | | Vaccinex (Rochester), L.L.C. | 6.8% | | All directors and executive officers as a group (12 persons) | 47.6% | Equity Compensation Plan Information (as of December 31, 2021) | | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Total | 1,154,563 | $5.55 | 396,324 | Certain Relationships and Related Transactions, and Director Independence The company discloses related-party transactions, including headquarters lease from an affiliate of Chairman Friedberg and a research collaboration with Surface Oncology, Inc., while five directors are deemed independent - The company leases its headquarters from 1895 Management, Ltd., an indirect subsidiary of FCMI Parent, affiliated with Chairman Albert D. Friedberg, with rent expense of $174,000 in 2021[505] - A research collaboration and license agreement with Surface Oncology, Inc., where director J. Jeffrey Goater is CEO, generated $850,000 for a product license and $50,000 in maintenance fees for Vaccinex in 2021[506][611] - The Board of Directors has determined that Messrs. Frieberg and Van Strydonck, Dr. Manian, and Mses. Yanni and Bedrij Stecyk are independent directors[508] Principal Accounting Fees and Services The company paid Deloitte & Touche LLP $290,000 in 2021 and $565,500 in 2020 for pre-approved audit services, including annual financial statements and quarterly report reviews Fees Paid to Deloitte & Touche LLP | | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | Audit Fees | $ 290,000 | $ 565,500 | | Audit-Related Fees | $ — | $ — | | Tax Fees | $ — | $ — | | All Other Fees | $ — | $ — | | Total | $ 290,000 | $ 565,500 | - The audit committee pre-approved all audit and non-audit services provided by Deloitte & Touche LLP[512] Part IV Exhibits, Financial Statement Schedules This section lists consolidated financial statements and all exhibits filed with or incorporated by reference into the Form 10-K, including corporate documents and material contracts - This item contains the index to the consolidated financial statements and a list of all exhibits filed with the report[516] Form 10-K Summary The company reports no Form 10-K summary - None[518]