Genocea Biosciences
GENOCEA BIOSCIENCES, INC. (Form: 10-Q, Received: 11/04/2016 08:13:54)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
(Mark One)
x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
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: 001-36289
 _______________________________________________________
Genocea Biosciences, Inc.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________________
Delaware
 
51-0596811
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
100 Acorn Park Drive
 
 
Cambridge, Massachusetts
 
02140
(Address of Principal Executive Offices)
 
(Zip Code)
(617) 876-8191
(Registrant’s Telephone Number, Including Area Code)
_______________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   x   No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
 
 
 
Accelerated filer
x
Non-accelerated filer
¨
 
(Do not check if a smaller reporting company)
 
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   ¨   No   x
As of November 2, 2016 , there were 28,381,959 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
 




FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
 
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K and other filings with the Securities Exchange Commission (the “SEC”), including the following:

the timing of results of our ongoing and planned clinical trials;
our planned clinical trials for GEN-003;
our estimates regarding the amount of funds we require to complete our clinical trials for GEN-003 and to continue our investments in immuno-oncology;
our estimate for when we will require additional funding;
our plans to commercialize GEN-003 and our other vaccine candidates;
the timing of, and our ability to, obtain and maintain regulatory approvals for our product candidates;
the rate and degree of market acceptance and clinical utility of any approved product candidate;
  the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;
our ability to quickly and efficiently identify and develop product candidates;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position; and
our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing.
 
Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
 
Information in this Quarterly Report on Form 10-Q that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained any industry, business, market or other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.


2



Genocea Biosciences, Inc.
Form 10-Q
For the Quarter Ended September 30, 2016
 
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3



PART I. FINANCIAL INFORMATION
Item 1.                   Financial Statements
 
Genocea Biosciences, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
 
 
September 30, 2016
 
December 31, 2015
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
26,417

 
$
17,259

Investments, current portion
49,044

 
77,069

Prepaid expenses and other current assets
950

 
865

Total current assets
76,411

 
95,193

Property and equipment, net
5,034

 
4,083

Restricted cash
316

 
316

Investments, net of current portion

 
12,104

Other non-current assets
1,108

 
446

Total assets
$
82,869

 
$
112,142




 


Liabilities and stockholders’ equity


 
 

Current liabilities:


 
 

Accounts payable
$
1,888

 
$
1,757

Accrued expenses and other current liabilities
3,641

 
3,975

Deferred revenue

 
235

Current portion of long-term debt
1,559

 

Total current liabilities
7,088

 
5,967

Non-current liabilities:
 

 
 

Long-term debt
15,274

 
16,477

Other non-current liabilities
158

 
37

Total liabilities
22,520

 
22,481

Commitments and contingencies (Note 5)


 


Stockholders’ equity:


 


Preferred stock

 

Common stock
28

 
28

Additional paid-in-capital
251,762

 
247,550

Accumulated other comprehensive income (loss)
8

 
(7
)
Accumulated deficit
(191,449
)
 
(157,910
)
Total stockholders’ equity
60,349

 
89,661

Total liabilities and stockholders’ equity
$
82,869

 
$
112,142

 
See accompanying notes to unaudited condensed consolidated financial statements.

4



Genocea Biosciences, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Grant revenue
$

 
$
213

 
$
235

 
$
449

 
 
 
 
 
 
 
 
Operating expenses:


 


 


 


Research and development
8,811

 
6,058

 
22,821

 
21,536

General and administrative
3,619

 
3,645

 
11,569

 
10,206

Refund of research and development expense

 

 
(1,592
)
 

Total operating expenses
12,430

 
9,703

 
32,798

 
31,742

Loss from operations
(12,430
)
 
(9,490
)
 
(32,563
)
 
(31,293
)
Other income and expense:


 


 


 


Interest income
103

 
39

 
323

 
70

Interest expense
(438
)
 
(320
)
 
(1,299
)
 
(946
)
Total other income and expense
(335
)
 
(281
)
 
(976
)
 
(876
)
Net loss
$
(12,765
)
 
$
(9,771
)
 
$
(33,539
)
 
$
(32,169
)
Other comprehensive income (loss):


 


 


 


Unrealized (loss) gain on available-for-sale securities
(9
)
 
10

 
15

 
24

Comprehensive loss
$
(12,774
)
 
$
(9,761
)
 
$
(33,524
)
 
$
(32,145
)
Net loss per share - basic and diluted
$
(0.45
)
 
$
(0.37
)
 
$
(1.18
)
 
$
(1.38
)
Weighted-average number of common shares used in computing net loss per share
28,370

 
26,610

 
28,267

 
23,228

 
See accompanying notes to unaudited condensed consolidated financial statements.



5



Genocea Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
Nine Months Ended September 30,
 
2016
 
2015
Operating activities
 

 
 

Net loss
$
(33,539
)
 
$
(32,169
)
Adjustments to reconcile net loss to net cash used in operating activities


 
 

Depreciation and amortization
1,309

 
661

Stock-based compensation
3,113

 
2,824

Net amortization of premium on investments

 
25

Non-cash interest expense
356

 
269

Changes in operating assets and liabilities
(1,342
)
 
17

Net cash used in operating activities
(30,103
)
 
(28,373
)
Investing activities


 
 

Purchases of property and equipment
(1,968
)
 
(1,849
)
Proceeds from maturities of investments
58,891

 
16,000

Purchases of investments
(18,755
)
 
(58,698
)
Net cash provided by (used in) investing activities
38,168

 
(44,547
)
Financing activities
 

 
 

Proceeds from equity offerings, net of issuance costs
815

 
95,216

Proceeds from exercise of stock options
166

 
354

Proceeds from the issuance of common stock under ESPP
112

 
119

Net cash provided by financing activities
1,093

 
95,689

Net increase in cash and cash equivalents
$
9,158

 
$
22,769

Cash and cash equivalents at beginning of period
17,259

 
20,058

Cash and cash equivalents at end of period
$
26,417

 
$
42,827

Supplemental cash flow information
 

 
 

Cash paid for interest
$
943

 
$
661

Property and equipment included in accounts payable and accrued expenses
$
293

 
$
531

 
See accompanying notes to unaudited condensed consolidated financial statements.


6



Genocea Biosciences, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
1. Organization and operations
 
The Company
 
Genocea Biosciences, Inc. (the “Company”) is a biopharmaceutical company that was incorporated in Delaware on August 16, 2006 and has a principal place of business in Cambridge, Massachusetts. The Company seeks to discover and develop novel vaccines and immunotherapies to address diseases with significant unmet needs. The Company’s development pipeline consists of candidates discovered using ATLAS TM , a proprietary discovery platform which enables the identification of clinically relevant T cell antigens for novel vaccines and immunotherapies targeting infectious disease and oncology applications. ATLAS is used to rapidly design vaccines and immunotherapies that act, in part, through T cell (or cellular) immune responses, in contrast to approved vaccines and immunotherapies, which are designed to act primarily through B cell (or antibody) immune responses. The Company believes that by harnessing T cells, first-in-class vaccines and immunotherapies can be developed to address diseases where T cells are central to the control of the disease.

The Company has one product candidate in active Phase 2 clinical development, GEN-003, an immunotherapy for the treatment of genital herpes. The Company also has, in GEN-004, a Phase 2-ready universal vaccine for the prevention of pneumococcal infections. Although internal development of GEN-004 has been suspended, the Company is currently seeking partners to advance GEN-004 into a Phase 1/2 clinical trial targeting toddler and infant populations. In November 2016, the Company announced its intention to focus all near-term research and pre-clinical resources to accelerate its progress in immuno-oncology, specifically cancer vaccines. As a result of this decision, it has paused all work on early stage infectious disease programs in genital herpes, chlamydia, and malaria. Progress made and data generated to date in these infectious disease research programs remains valuable to Genocea for the future.

The Company is devoting substantially all of its efforts to product research and development, initial market development, and raising capital. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other clinical stage companies, including dependence on key individuals, competition from other companies, the need for and related uncertainty associated with the development of commercially viable products, and the need to obtain adequate additional financing to fund the development of its product candidates. The Company is also subject to a number of risks similar to other companies in the life sciences industry, including regulatory approval of products, uncertainty of market acceptance of products, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability, and dependence on key individuals.

Liquidity

As of September 30, 2016 , the Company had an accumulated deficit of approximately $191.4 million . The Company had cash, cash equivalents and investments of $75.5 million at September 30, 2016 . On the basis of current operating plans, including the plan to focus research investments on immuno-oncology and the planned commencement of Phase 3 trials for GEN-003 in the second half of 2017, it expects that these funds will be sufficient to fund operating expenses and capital expenditure requirements into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships, equity financings or debt drawdowns.

At-the-market equity offering program
 
On March 2, 2015, the Company entered into a Sales Agreement with Cowen and Company, LLC (the "Sales Agreement") to establish an at-the-market equity offering program (“ATM”) pursuant to which it was able to offer and sell up to $40 million of its Common Stock at prevailing market prices from time to time. On May 8, 2015, the Sales Agreement was amended to increase the offering amount under the ATM to $50 million of its Common Stock. In April 2016, the Company sold 136 thousand shares and received $0.8 million in net proceeds after deducting commissions. For the three months ended September 30, 2016 , there were no additional ATM sales.
 
2. Summary of significant accounting policies
 
Basis of presentation and use of estimates
 

7



The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions of Form 10-Q and Article 10 of Regulation S-X. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These interim condensed financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of September 30, 2016 and results of operations for the three and nine months ended September 30, 2016 and 2015 .
 
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2015 and the notes thereto which are included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 17, 2016.
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to prepaid and accrued research and development expenses, stock-based compensation expense and reported amounts of revenues and expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Cash, cash equivalents and investments
    
The Company determines the appropriate classification of its investments at the time of purchase. All liquid investments with original maturities of three months or less from the purchase date are considered to be cash equivalents. The Company’s current and non-current investments are comprised of certificates of deposit and government agency securities that are classified as available-for-sale in accordance with ASC 320, Investments—Debt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its balance sheets. Investments are classified as non-current assets on the balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.
    
Available-for-sale investments are recorded at fair value, with unrealized gains or losses included in Accumulated other comprehensive income (loss) on the Company’s balance sheets. Realized gains and losses are determined using the specific identification method and are included as a component of Interest income or Interest expense, respectively. There were no realized gains or losses recognized for the nine months ended September 30, 2016 and 2015 .
    
The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, the severity and the duration of the impairment and changes in value subsequent to period end. As of September 30, 2016 , there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.
        
Fair value of financial instruments
 
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC Topic 820, Fair Value Measurement and Disclosures , established a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the financial instrument and are developed based on the best information available under the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed fair value of the financial instruments and is not a measure of the investment credit quality. Fair value measurements are classified and disclosed in one of the following three categories:
 

8



Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
Financial instruments measured at fair value on a recurring basis include cash equivalents and investments (Note 3). The Company is also required to disclose the fair value of financial instruments not carried at fair value. The fair value of the Company’s debt (Note 4) is determined using current applicable rates for similar instruments as of the balance sheet dates and an assessment of the credit rating of the Company. The carrying value of the Company’s debt approximates fair value because the Company’s interest rate yield is near current market rates for comparable debt instruments. The Company’s debt is considered a Level 3 liability within the fair value hierarchy.

For the nine months ended September 30, 2016 , there were no transfers among Level 1, Level 2, or Level 3 categories. Additionally, there were no changes to the valuation methods utilized by the Company during the nine months ended September 30, 2016 .
 
Recently adopted accounting standards
Standard
 
Description
 
Effect on the financial statements
ASU 2016-09,
Compensation — Stock Compensation (Topic 718)
 
In March 2016, the FASB issued ASU 2016-09, which provides for improvements to employee share-based payment accounting. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.

 
The Company early adopted ASU 2016-09 as of June 30, 2016. In connection with the early adoption, the Company elected an accounting policy to record forfeitures as they occur. There was no financial statement impact upon adoption as the Company had estimated a forfeiture rate of zero given that most options awards vest on a monthly basis. ASU 2016-09 also provides that companies no longer record excess tax benefits or certain tax deficiencies in additional paid-in capital (APIC). Instead, all excess tax benefits and tax deficiencies are recorded as income tax expense or benefit in the income statement. There was no financial statement impact of adopting this provision of the ASU as the Company is in a net operating loss (NOL) position and all excess tax benefits that exist from options previously exercised require a full valuation allowance. As such, the adoption of this standard did not have a material impact on the financial statements.

For the nine month period ending September 30, 2016, the Company did not record an income statement benefit for excess tax benefits as a valuation allowance is also required on these amounts.



9



Recently issued accounting standards
 
Standard
 
Description
 
Effect on the financial statements
ASU 2014-09,
  Revenue from Contracts with Customers (Topic 606)


 
The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.

In July 2015, the FASB affirmed its proposal to defer the effective date of the new revenue standard for all entities by one year. As a result, public business entities will be required to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. The standard will become effective for us on January 1, 2018 (the first quarter of our 2018 fiscal year).
 
At this time, the Company has not decided on which method it will use to adopt the new standard, nor has it determined the effects of the new guidelines on its results of operations and financial position as the Company does not currently have any arrangements that would be impacted by the new standard. As a result, the Company is continuing to evaluate the method of adoption and the impact of this standard on its consolidated financial statements.
ASU 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40)
 
In August 2014, the FASB issued ASU 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The standard requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued.

ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.

 
Management has evaluated ASU 2014-15 and believes it could have an impact on the Company’s financial statement disclosures in future reporting periods.  Refer to the Liquidity section in Footnote 1 for further details regarding the Company’s liquidity.
ASU 2016-02,
 Leases (Topic 842)

 
In February 2016, the FASB issued ASU 2016-02, which replaces the existing lease accounting standards.

The new standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance (also referred to as capital) leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases the lessee would recognize straight-line total lease expense.

ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.

 
The Company generally does not finance purchases of equipment but it does lease office and lab facilities. The Company is in the process of evaluating the effect that this ASU will have on its consolidated financial statements and related disclosures.



3. Cash, cash equivalents and investments
 
As of September 30, 2016 and December 31, 2015 , cash, cash equivalents, and investments comprised funds in depository, money market accounts, U.S. treasuries, and FDIC insured certificates of deposit.
 
The following table presents the cash equivalents and investments carried at fair value in accordance with the hierarchy defined in Note 2 (in thousands): 

10



 
 
 
 
Quoted prices in active markets
 
Significant other observable inputs
 
Significant unobservable inputs

Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
September 30, 2016

 

 

 

Money market funds, included in cash equivalents
$
24,460

 
$
24,460

 
$

 
$

Investments - U.S treasuries
16,523

 
16,523

 

 

Investments - certificates of deposit
32,521

 

 
32,521

 

Total
$
73,504

 
$
40,983

 
$
32,521

 
$



 

 

 

December 31, 2015

 

 

 

Money market funds, included in cash equivalents
$
14,207

 
$
14,207

 
$

 
$

U.S treasuries, included in cash equivalents
2,203

 
2,203

 

 

Investments - U.S. treasuries
27,924

 
27,924

 

 

Investments - certificates of deposit
61,249

 

 
61,249

 

Total
$
105,583

 
$
44,334

 
$
61,249

 
$

 

Cash equivalents and investments are valued using third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches and observable market inputs to determine value.
 
Investments at September 30, 2016 consist of the following (in thousands):

 
Contracted
Maturity
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
U.S. Treasuries
123-273 days
 
$
16,515

 
$
8

 
$

 
$
16,523

Certificates of deposit
3-182 days
 
32,521

 

 

 
32,521

Total
 
 
$
49,036

 
$
8

 
$

 
$
49,044

 
4.  Long-term debt

On November 20, 2014 (the "Closing Date"), the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Technology Growth Capital, Inc. (“Hercules”), which provided up to  $27.0 million  in debt financing in  three  separate tranches (the “2014 Term Loan”). The first tranche of  $17.0 million  was available through June 30, 2015, of which  $12.0 million  was drawn down at loan inception and for which approximately  $9.8 million  of the proceeds were used to repay all outstanding indebtedness under the previously existing  $10.0 million  loan agreement (the "2013 Term Loan"). The option to draw down the remaining  $5.0 million  under the first tranche expired unused on June 30, 2015. The second tranche of  $5.0 million  was subject to certain eligibility requirements which were achieved as of June 30, 2015 and the Company had the option to draw down the second tranche on or prior to December 15, 2015. The second tranche expired unused on December 15, 2015. The Company was not eligible to draw down the third tranche of  $5.0 million  because the Company did not achieve positive results in its Phase 2a human challenge study of GEN-004.

In December 2015, the Company amended the Loan Agreement (the "First Amendment") with Hercules. The First Amendment required the Company to draw an additional  $5.0 million  and permits the Company to draw  two  additional $5.0 million tranches. One  $5.0 million  tranche is immediately available to draw through December 15, 2016 and a second  $5.0 million  tranche is available to draw through December 15, 2016, subject to the Company demonstrating sufficient evidence of continued clinical progression of its GEN-003 product candidate and making favorable progress in applying its proprietary technology platform toward the development of novel immunotherapies with application in oncology. As of September 30, 2016 , the second $5.0 million tranche is not yet available to the Company. At September 30, 2016 $17.0 million  was outstanding under the amended 2014 Term Loan.


11



2014 Term Loan

The 2014 Term Loan had an original maturity of July 1, 2018. The eligibility requirements for the second tranche also contained an election for the Company to extend the maturity date to January 1, 2019. During the second quarter of 2015, the Company elected to extend the maturity date of the 2014 Term Loan. The maturity date of January 1, 2019 remained unchanged by the First Amendment.

Each advance accrues interest at a floating rate per annum equal to the greater of (i)  7.25%  or (ii) the sum of  7.25%  plus the prime rate minus  5.0% . The 2014 Term Loan provided for interest-only payments until December 31, 2015, which was extended by the Company for a  six -month period as the eligibility requirements for the second tranche were met during the second quarter of 2015. The First Amendment subsequently extended the interest-only period through June 30, 2017. Thereafter, beginning July 1, 2017, principal and interest payments will be made monthly for  18  months with a payoff schedule based upon a  30 -month amortization schedule, the original amortization term of the 2014 Term Loan. The remaining unpaid principal is due on January 1, 2019.

The 2014 Term Loan may be prepaid in whole or in part upon  seven  business days’ prior written notice to Hercules.  Prepayments will be subject to a charge of  3.0%  if an advance is prepaid within 12 months following the Closing Date,  2.0% , if an advance is prepaid between 12 and 24 months following the Closing Date, and  1.0% thereafter. Amounts outstanding at the time of an event of default shall be payable on demand and shall accrue interest at an additional rate of  5.0%  per annum on any outstanding amounts past due. The Company is also obligated to pay an end of term charge of  4.95%  (the "End of Term Charge") of the balance drawn when the advances are repaid.

The 2014 Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property.  The Loan Agreement contains non-financial covenants and representations, including a financial reporting covenant, and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. There are no financial covenants.

Under the provisions of the 2014 Term Loan, the Company has also entered into account control agreements ("ACAs") with Hercules and certain of the Company's financial institutions in which cash, cash equivalents, and investments are held. These ACAs grant Hercules a perfected first priority security interest in the subject accounts. The ACAs do not restrict the Company's ability to utilize cash, cash equivalents, or investments to fund operations and capital expenditures unless there is an event of default and Hercules activates its rights under the ACAs.

The Loan Agreement contains a material adverse effect provision ("Material Adverse Effect") that requires all material adverse effects to be reported under the financial reporting covenant. Loan advances are subject to a representation that no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing. Under the Loan Agreement, a Material Adverse Effect means a material adverse effect upon: (i) the business, operations, properties, assets or condition (financial or otherwise) of the Company; or (ii) the ability of the Company to perform the secured obligations in accordance with the terms of the Loan Agreements, or the ability of agent or lender to enforce any of its rights or remedies with respect to the secured obligations; or (iii) the collateral or agent’s liens on the collateral or the priority of such liens. Any event that has or would reasonably be expected to have a Material Adverse Effect is an event of default under the Loan Agreement and repayment of amounts due under the Loan Agreement may be accelerated by Hercules under the same terms as an event of default.

Events of default under the Loan Agreement include failure to make any payments of principal or interest as due on any outstanding indebtedness, breach of any covenant, any false or misleading representations or warranties, insolvency or bankruptcy, any attachment or judgment on the Company’s assets of at least  $100  thousand, or the occurrence of any material default of the Company involving indebtedness in excess of  $100  thousand. If an event of default occurs, repayment of all amounts due under the Loan Agreement may be accelerated by Hercules, including the applicable prepayment charge.

The 2014 Term Loan is automatically accelerated upon a change in control wherein the Company must prepay the outstanding principal and any accrued and unpaid interest through the prepayment date, including any unpaid agent’s and lender’s fees and expenses accrued to the date of the repayment, the End of Term Charge, and a prepayment charge. If a change in control occurs, repayment of amounts due under the Loan Agreement may be accelerated by Hercules. The Company believes acceleration of the repayment of amounts outstanding under the loan is remote.
In connection with the 2014 Term Loan, the Company issued a common stock warrant to Hercules on November 20, 2014. The warrant is exercisable for  73,725  shares of the Company’s Common Stock (equal to  $607,500  divided by the

12



exercise price of  $8.24 per share). The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of Common Stock, subdivision or combination of the shares of Common Stock or certain dividends payments. The warrant is exercisable until November 20, 2019 and will be exercised automatically on a net issuance basis if not exercised prior to the expiration date and if the then-current fair market value of one share of Common Stock is greater than the exercise price then in effect. The warrant has been classified as equity for all periods it has been outstanding.
Contemporaneously with the 2014 Term Loan, the Company also entered into an equity rights letter agreement on November 20, 2014 (the “Equity Rights Letter Agreement”). Pursuant to the Equity Rights Letter Agreement, the Company issued to Hercules  223,463  shares of the Company’s Common Stock for an aggregate purchase price of approximately  $2.0 million  at a price per share equal to the closing price of the Company’s Common Stock as reported on The NASDAQ Global Market on November 19, 2014.  The shares will be subject to resale limitations and may be resold only pursuant to an effective registration statement or an exemption from registration.

Additionally, under the Equity Rights Letter Agreement, Hercules has the right to participate in any one or more subsequent private placement equity financings of up to  $2.0 million  on the same terms and conditions as purchases by the other investors in each subsequent equity financing. The Equity Rights Letter Agreement, and all rights and obligations thereunder, will terminate upon the earlier of (1) such time when Hercules has purchased  $2.0 million  of subsequent equity financing securities in the aggregate and (2) the later of (a) the repayment of all indebtedness under the Loan Agreement and (b) the expiration or termination of the exercise period for the warrant issued in connection with the Loan Agreement. The Company allocated  $36 thousand of financing costs to additional paid-in capital for issuance fees that were reimbursed to Hercules.
The Company incurred  $280 thousand  in debt financing costs related to the First Amendment, which was recorded as a debt discount and will be amortized over the remaining loan term. In connection with the issuance of the 2014 Term Loan, the Company incurred  $103 thousand  of financing costs and also reimbursed Hercules  $210 thousand  for debt financing costs, which has been recorded as a debt discount and will be amortized over the remaining loan term. The End of Term Charge is amortized ratably over the term loan period based upon the outstanding debt amount. The increase in the End of Term Charge due to the additional borrowing from the First Amendment is being amortized from the First Amendment date through maturity. The debt discount is being amortized to interest expense over the life of the 2014 Term Loan using the effective interest method. At September 30, 2016 , the 2014 Term Loan bears an effective interest rate of  10.2% .

As of both September 30, 2016 and December 31, 2015, the Company had outstanding borrowings under the 2014 Term Loan of  $17.0 million . Interest expense related to the 2014 Term Loan was  $0.4 million and $1.3 million for the three and nine months ended September 30, 2016 , respectively, and  $0.3 million and $0.9 million for the three and nine months ended September 30, 2015 , respectively.

Future principal payments, including the End of Term Charge, on the 2014 Term Loan are as follows (in thousands):

 
 
September 30,
2016
2016
$

2017
3,149

2018
6,659

2019
8,034

Total
$
17,842



5. Commitments and contingencies
 
Lease commitments

In May 2016, the Company entered into a lease amendment (the "2016 Lease") for office and laboratory space currently occupied under an original lease that commenced in March 2014 and was set to expire in February 2017 (the "2014 Lease"). The 2016 Lease extends the 2014 Lease by an additional three years through February 2020. In June 2015, the Company signed a second operating lease (the "2015 Lease") for office space in the same building as the 2014 Lease. In August 2016, the Company exercised a three -year renewal option extending the 2015 Lease to February 2020.


13



The minimum future lease payments under both the 2016 Lease and the 2015 Lease are as follows (in thousands):

 
September 30, 2016
2016
$
316

2017
1,550

2018
1,607

2019
1,637

2020
274

Total
$
5,384


At September 30, 2016 and December 31, 2015 , the Company has an outstanding letter of credit of $316 thousand with a financial institution related to a security deposit for the 2016 Lease, which is secured by cash on deposit and expires on February 29, 2020. An additional unsecured deposit was required for the 2015 Lease.

Significant Contracts and Agreements

In addition to lease commitments, the Company enters into contractual arrangements that obligate it to make payments to the contractual counterparties upon the occurrence of future events. In the normal course of operations, the Company enters into license and other agreements and intends to continue to seek additional rights related to compounds or technologies in connection with its discovery, manufacturing and development programs. These agreements may require payments to be made by the Company upon the occurrence of certain development milestones and certain commercialization milestones for each distinct product covered by the licensed patents (in addition to certain royalties to be paid on marketed products or sublicense income) contingent upon the occurrence of future events that cannot be reasonably estimated.
 
In March 2014, the Company announced a joint research collaboration with Dana-Farber Cancer Institute to characterize anti-tumor T cell responses in melanoma patients. This collaboration extends the use of the Company's proprietary ATLAS platform for the rapid discovery of T cell antigens to cancer immunotherapy approaches. In September 2014, the Company received $1.2 million in the form of a grant entered into with the Bill & Melinda Gates Foundation for the identification of protective T-cell antigens for malaria vaccines. This grant provided for the continued expansion of the Company’s malaria antigen library to aid in the identification of novel protein antigens to facilitate the development of highly efficacious anti-infection malarial vaccines. The Company recognized revenue under these agreements of $213 thousand and $449 thousand for the three and nine months ended September 30, 2015, respectively. The Company recognized revenue of no ne and $235 thousand for the three and nine months ended September 30, 2016 , respectively.
 
The Company relies on research institutions, contract research organizations, clinical investigators as well as clinical and commercial material manufacturers of our product candidates. Under the terms of these agreements, the Company is obligated to make milestone payments upon the achievement of manufacturing or clinical milestones defined in the contracts. In some cases, monthly service fees for project management services are charged over the duration of the arrangement. In addition, clinical and manufacturing contracts generally require reimbursement to suppliers for certain set-up, production, travel, and other related costs as they are incurred. In some manufacturing contracts, the Company also may be responsible for the payment of a reservation fee, which will equal a percentage of the expected production fees, to reserve manufacturing slots in the production timeframe. Generally, the Company is liable for actual effort expended by these organizations at any point in time during the contract through the notice period. To the extent amounts paid to a supplier exceed the milestones achieved, the Company records a prepaid asset, and to the extent milestones achieved exceed amounts billed or billable under a contract, an accrual for the estimate of services rendered is recorded.

In February 2014, the Company entered into a supply agreement with FUJIFILM Diosynth Biotechnologies U.S.A., Inc. (“Fujifilm”) for the manufacture and supply of antigens for future GEN-003 clinical trials. Under the agreement, the Company is obligated to pay Fujifilm manufacturing milestones, in addition to reimbursement of certain material production related costs. In June and September 2016, the Company entered into new statements of work under the agreement with Fujifilm for the manufacture and supply of antigens for the Company's Phase 3 clinical trials. The Company incurred expenses under the agreement of $0.4 million and $3.9 million for the three and nine months ended September 30, 2015, respectively. The Company incurred expenses under the agreement of $0.5 million and $0.8 million for the three and nine months ended September 30, 2016 , respectively.


14



Litigation
 
The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

Refund of research and development expense

In August 2009, the Company entered into an exclusive license and collaboration agreement (the “Novavax Agreement”) with Isconova AB, a Swedish company which subsequently was acquired by Novavax, Inc. ("Novavax"). Pursuant to the agreement, Novavax granted the Company a worldwide, sublicensable, exclusive license to two patent families, to import, make, have made, use, sell, offer for sale and otherwise exploit licensed vaccine products containing an adjuvant which incorporates or is developed from Matrix-A, Matrix-C and/or Matrix-M technology, in the fields of HSV and chlamydia. Matrix-M is the adjuvant used in GEN-003.

The Novavax Agreement includes a research funding clause for which the Company made monthly payments to Novavax between August 2009 and March 2012 of approximately $1.6 million . All amounts of research funding provided were to be refunded by Novavax. After December 31, 2015, any amounts remaining due from Novavax, including accrued interest, could be received in cash upon 30 -day written notice provided by the Company. The Company provided this notice in January 2016.

The Company provided the research funding solely to benefit the supply plan for the Matrix-M adjuvant to the point that a Phase 1 clinical trial could be initiated. Because of the benefit received from the research funding payments, an assessment of Novavax's financial ability to repay the research funding at the time of the payments, along with the duration of which amounts could be outstanding, the Company concluded the initial research funding should be recorded as research and development expense at the time of payment. In February 2016, upon receipt of the $1.6 million refund including accrued interest, the Company recorded a gain within operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss.


6. Equity and net loss per share
 
At September 30, 2016 , the Company has authorized 25,000,000 shares of preferred stock at $0.001 par value per share. As of September 30, 2016 and December 31, 2015 , there were no shares of preferred stock issued or outstanding.
 
At September 30, 2016 , the Company has authorized 175,000,000 shares of Common Stock at $0.001 par value per share. As of September 30, 2016 and December 31, 2015 , there were 28,384,548 and 28,161,313 shares, respectively, of Common Stock issued. As of September 30, 2016 and December 31, 2015 , there were 28,380,663 and 28,151,596 shares, respectively, of Common Stock outstanding.

The Company computes basic and diluted earnings (loss) per share using a methodology that gives effect to the impact of outstanding participating securities (the “two-class method”). As the three and nine months ended for both September 30, 2016 and 2015 resulted in net losses, there is no income allocation required under the two-class method or dilution attributed to weighted average shares outstanding in the calculation of diluted loss per share.

As of September 30, 2016 and December 31, 2015 , the Company had warrants outstanding that represent the right to acquire 77,603 shares of Common Stock, of which 73,725 represented warrants issued to Hercules and 3,878 represented warrants to purchase Common Stock issued in periods prior to the Company's initial public offering ("IPO").

The following common stock equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect (in thousands):
 
 
Nine Months Ended September 30,
 
2016
 
2015
Warrants
78

 
78

Outstanding options
3,794

 
2,716

Outstanding ESPP
21

 
13

Total
3,893

 
2,807


15



 
Restricted stock
 
During 2013, a Company director exercised stock options and received 31,092 shares of Common Stock that were subject to a Stock Restriction and Repurchase Agreement with the Company. Under the terms of the agreement, shares of Common Stock issued are subject to a vesting schedule and unvested shares are subject to repurchase by the Company. Vesting occurs periodically at specified time intervals and specified percentages. All shares of Common Stock become fully vested within four years of the date of grant.

As of both September 30, 2016 and December 31, 2015 , the Company had issued 35,964 shares of restricted Common Stock. The Company had 3,885 and 9,717 shares of nonvested restricted stock that were subject to repurchase by the Company as of September 30, 2016 and December 31, 2015 , respectively.
 
7. Stock and employee benefit plans
 
Stock-based compensation expense
 
Total stock-based compensation expense is recognized for stock options granted to employees and non-employees and has been reported in the Company’s statements of operations as follows (in thousands):
 

Three Months Ended September 30,
 
Nine Months Ended September 30,

2016
 
2015
 
2016
 
2015
Research and development
$
428

 
$
380

 
$
1,234

 
$
1,245

General and administrative
691

 
498

 
1,879

 
1,579

Total
$
1,119

 
$
878

 
$
3,113

 
$
2,824


Stock options
 
The following table summarizes stock option activity for employees and nonemployees (shares in thousands):
 
 
Shares
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2015
2,723

 
$
7.60

 
7.61
 
$
2,840

Granted
1,472

 
$
3.51

 
 
 
 

Exercised
(56
)
 
$
2.96

 
 
 
 

Canceled
(345
)
 
$
8.46

 
 
 
 

Outstanding at September 30, 2016
3,794

 
$
6.01

 
7.74
 
$
4,708

Exercisable at September 30, 2016
1,763

 
$
6.09

 
6.47
 
$
2,627

Vested or expected to vest at September 30, 2016
3,794

 
$
6.01

 
7.74
 
$
4,708

 
Performance-based stock options
 
The Company granted stock options to certain employees, executive officers and consultants, which contain performance-based vesting criteria. Milestone events are specific to the Company’s corporate goals, which include, but are not limited to, certain clinical development milestones, business development agreements and capital fundraising events. Stock-based compensation expense associated with these performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates. The Company determined that none of the performance-based milestones were probable of achievement during the three and nine months ended September 30, 2016 , and accordingly did not recognize stock-based compensation expense for these periods. As of September 30, 2016 , there are 56,336 performance-based common stock options outstanding for which the probability of achievement was not deemed probable.
 

16



Employee stock purchase plan
 
In connection with the completion of the Company's IPO on February 10, 2014, the Company’s Board of Directors adopted the 2014 Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP authorizes the initial issuance of up to a total of 200,776 shares of Common Stock to participating eligible employees. The 2014 ESPP provides for six -month option periods commencing on January 1 and ending June 30 and commencing July 1 and ending December 31 of each calendar year. As of September 30, 2016 , 112,073 shares remain for future issuance under the plan. The Company incurred stock-based compensation expense related to the 2014 ESPP of $45 thousand and $110 thousand for the three and nine months ended September 30, 2016 , respectively, and $30 thousand and $83 thousand for the three and nine months ended September 30, 2015 , respectively.
 

17



Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q. The following disclosure contains forward-looking statements that involve risk and uncertainties. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in our Annual Report on Form 10-K.
 
Overview
 
We are a biopharmaceutical company that discovers and develops novel vaccines and immunotherapies to address diseases with significant unmet needs. We use our proprietary discovery platform, ATLAS, to rapidly design vaccines and immunotherapies that act, in part, through T cell (or cellular) immune responses, in contrast to approved vaccines and immunotherapies, which are designed to act primarily through B cell (or antibody) immune responses. We believe that by harnessing T cells we can develop first-in-class vaccines and immunotherapies to address diseases where T cells are central to the control of the disease.
 
The Company has one product candidate in active Phase 2 clinical development, GEN-003, an immunotherapy for the treatment of genital herpes. The Company also has, in GEN-004, a Phase 2-ready universal vaccine for the prevention of pneumococcal infections. Although internal development of GEN-004 has been suspended, the Company is currently seeking partners to advance GEN-004 into a Phase 1/2 clinical trial targeting toddler and infant populations. In November 2016, the Company announced its intention to focus all near-term research and pre-clinical resources to accelerate its progress in immuno-oncology, specifically cancer vaccines. As a result of this decision, it has paused all work on early stage infectious disease programs in genital herpes, chlamydia, and malaria. Progress made and data generated to date in these infectious disease research programs remains valuable to Genocea for the future.
 
GEN-003 — Phase 2 immunotherapy for genital herpes
 
Our lead program is GEN-003, a Phase 2 candidate therapeutic vaccine, or immunotherapy, that we are developing to treat genital herpes infections. We have completed two positive clinical trials and have a third trial currently underway. Key data from those trials is described below.
Phase 1/2 Trial
 
Final analysis of the data from the Phase 1/2a trial showed that, for the best performing 30µg dose group, there was a sustained reduction in the viral shedding rate. After completion of dosing for this group, the viral shedding rate was reduced by 52% versus baseline and, at six months after the final dose, the shedding rate remained at 40% below baseline. The reduction in the genital lesion rate after completion of the third dose was greatest for the 30µg dose group at 48%. After six months, the reduction from baseline in genital lesion rate for this dose group was 65% and, after 12 months, the genital lesion rate was 42% lower than baseline. GEN-003 was safe and well tolerated over the 12 months of this trial.
 
Phase 2 Dose Optimization Trial

A 310-subject Phase 2 dose optimization trial was completed in March 2016. The objective of this trial was to confirm the results of the Phase 1/2a trial and to test six combinations of proteins and adjuvant to determine the optimal dose for future trials and potentially improve on the profile of GEN-003. Subjects were randomized to one of six dosing groups of either 30μg or 60μg per protein paired with one of three adjuvant doses (25μg, 50μg, or 75μg). A seventh group received placebo. Subjects received three doses of GEN-003 or placebo at 21-day intervals. Baseline viral shedding and genital lesion rates were established for each subject in a 28-day observation period prior to the commencement of dosing by collecting 56 genital swab samples (two per day), which were analyzed for the presence of HSV-2 DNA, and by recording the days on which genital lesions were present. This 28-day observation period was repeated immediately after the completion of dosing, and at six and twelve months following dosing. No maintenance doses were given. After the 28-day observation period immediately after dosing, patients in the placebo arm were rolled over across the 6 active combinations of GEN-003 and Matrix-M2 under a separate protocol.
    
The primary endpoint of the trial was the reduction in viral shedding rate versus baseline, a measure of anti-viral activity. A number of exploratory secondary endpoints were also studied, including the percent of patients who were recurrence free from lesions up to six and 12 months after dosing, the time to first recurrence of lesions after dosing and the reduction in genital lesion rates. The two most promising doses from this dose optimization study were 60 µg per protein combined with

18



either 50 or 75 µg of Matrix-M2 adjuvant. The efficacy of GEN-003 at these two dose levels over the course of the Phase 2 dose optimization trial is as follows:
    
 
Placebo
60 µg per protein /
50 µg of Matrix-M2
60 µg per protein /
75 µg of Matrix-M2
Endpoint
Post dose 3
Post dose 3
6 months
12 months
Post dose 3
6 months
12 months
Viral shedding rate reduction (1)
-4%
41%
47%
66%
55%
58%
55%
Poisson mixed effect model (Old Model) (2)
 
 
 
 
 
 
 
   p-value vs baseline
0.48
<0.0001
<0.0001
<0.0001
<0.0001
<0.0001
<0.0001
   p-value vs placebo
NA
<0.0001
NA
NA
<0.0001
NA
NA
Poisson mixed effect model with Empirical Variance
(New Model) (3)
 
 
 
 
 
 
 
   p-value vs baseline
0.88
0.01
0.0004
<0.0001
0.006
<0.0001
0.01
   p-value vs placebo
NA
0.04
NA
NA
0.01
NA
NA
% patients lesion free
NA
68%
36%
30%
68%
30%
21%
Genital lesion rate reduction (1)
60%
69%
50%
65%
60%
43%
47%
Poisson mixed effect model (Old Model) (2)
 
 
 
 
 
 
 
   p-value vs baseline
<0.0001
<0.0001
<0.0001
<0.0001
<0.0001
<0.0001
<0.0001
   p-value vs placebo
NA
0.3
NA
NA
0.79
NA
NA
Poisson mixed effect model with Empirical Variance
(New Model)
(3)
 
 
 
 
 
 
 
   p-value vs baseline
0.0002
0.0005
0.01
0.003
0.02
0.03
0.02
   p-value vs placebo
NA
0.59
NA
NA
0.85
NA
NA
(1) Rate reduction vs. pre-dosing levels.
(2) Generalized Linear Model with “Standard” Poisson distribution as pre-specified in the Phase 2 trial statistical analysis plan, formerly a widely adopted model developed by the University of Washington (“UW”) and which was used in both the GEN-003 Phase 1/2 and Phase 2 trials (the “Old Model”).
(3) Statistical analysis performed using a modified Poisson model (the “New Model”) reflecting advances in the field since the start of the Phase 2 dose optimization trial: Magaret, Amalia, "Models for HSV shedding must account for two levels of overdispersion" ((January 2016). UW Biostatistics Working Paper Series. Working Paper 410). UW developed the New Model as clinical trial data which accumulated over the years indicated that the Old Model assumptions around the distribution of data did not fit this actual genital herpes clinical trial data. The New Model corrects the assumption of data distribution by an empiric variance method which better reflects this clinical trial experience. Critically, the results of the GEN-003 clinical trials analyzed with the New Model remain statistically significant and the estimated magnitude of the effect, confidence intervals around that effect and durability of effect are unchanged.
Genocea considers it important to reflect advances in the field of genital herpes research in its approach to the conduct of clinical trials and the analysis of clinical trial data and adopted the New Model as the primary statistical model for the viral shedding rate and genital lesion rate data in its ongoing Phase 2b trial. Results shown above from the Phase 2 trial using the New Model are provided for comparative purposes, but were not part of the original pre-specified statistical analysis plan for this trial.

Phase 2b Trial

In December 2015, a Phase 2b trial was initiated as our first study testing potential Phase 3 endpoints with a Phase 3-ready formulation of GEN-003, one manufactured with commercially-scalable processes. The trial enrolled 131 subjects that were randomized to one of three dose groups - placebo, 60 µg per protein / 50 µg of Matrix-M2 (the "60/50 Dose") and 60 µg per protein / 75 µg of Matrix-M2 (the "60/75 Dose"). All subjects received three injections at 21-day intervals.

In September 2016, we announced positive viral shedding rate reductions from the ongoing Phase 2b study. The study achieved its primary endpoint, with GEN-003 demonstrating a statistically significant (versus placebo and baseline) 40%

19



reduction in the viral shedding rate compared to baseline immediately after dosing in the 60/50 Dose group, using a new Phase 3-ready formulation. This result was consistent with a statistically significant (versus placebo and baseline) viral shedding rate reduction of 41% at this same dose and time point in a prior Phase 2 trial. In addition, the reactogenicity profile of this dose, an indication of the strength of the immune response to GEN-003, was consistent between the trials. This same dose in the prior Phase 2 trial subsequently demonstrated virologic and clinical efficacy durable through at least one year after dosing.

The 60/75 Dose group reduced the viral shedding rate by 27%, lower than that observed in the prior trial, and also showed a less acceptable reactogenicity profile than the prior trial. We believe that the increase in reactogenicity of this dose indicates an overstimulation of the T cell immune system leading to the reduced efficacy with this dose in this trial, as would be expected with the known bell-shaped T cell dose response curve. The likely driver of this effect is a more potent adjuvant formulation following customary manufacturing process changes to prepare for Phase 3 trials and commercialization.

The top-line viral shedding rate reductions for all of the dose groups in the trial are summarized in the following table:

 
Placebo
60/50 Dose
60/75 Dose
Viral shedding rate reduction (1)
6%
-40%
-27%
Poisson mixed effect model with Empirical Variance
(New Model)
(2)(3)
 
 
 
   p-value vs. baseline
0.76
0.03
0.16
   p-value vs. placebo
NA
0.05
0.20
(1) Rate reduction vs. pre-dosing levels.
(2) The New Model (see note above under “Phase 2 Dose Optimization Trial”), as pre-specified in the Phase 2b statistical analysis plan.
(3) Under the Old Model (see note above under “Phase 2 Dose Optimization Trial”), p-values for the 60/50 Dose were <0.0001 vs. both baseline and placebo and for the 60/75 Dose were 0.001 vs. baseline and 0.004 vs. placebo.

The trial will also compare GEN-003 efficacy to placebo for the clinical endpoints of: the proportion of patients who are lesion recurrence free at six and 12 months after dosing; the time to first lesion recurrence after dosing; and, the impact on percentage of days with genital herpes lesions at six and 12 months after dosing. All subjects will be followed for 12 months after the last dose. The clinical efficacy data versus placebo against potential Phase 3 endpoints at six-months post dosing is expected in January 2017. The viral shedding rate reduction data at six-months post dosing is expected in the first half of 2017.

Safety in the trial was continuously reviewed by an independent Data Safety Monitoring Board. There was no grade 4 reactogenicity or related serious adverse events and discontinuations due to adverse events were low and similarly distributed across active dose groups and placebo.

We intend to conduct an end-of-Phase 2 meeting with the FDA in early 2017. We now plan to conduct a clinical trial exploring the potential additive effects of GEN-003 on top of daily administration of VALTREX ® , an oral antiviral therapy, as part of the GEN-003 Phase 3 program. We believe that this will increase the chances that positive results in this trial could be included in GEN-003’s label, if approved. We retain all rights to GEN-003 and plan to advance this program through regulatory approval and, if approved, commercialize this vaccine through a focused commercial effort in the United States. We intend to evaluate partnerships for the future development and commercialization of GEN-003.

If GEN-003 successfully completes clinical development and is approved, we believe it would represent an important new treatment option for patients with genital herpes.

GEN-004 — Universal vaccine for the prevention of pneumococcal infections
 
We also have a second product, GEN-004, a potential universal  Streptococcus pneumoniae , or pneumococcus, vaccine to protect against a leading cause of infectious disease mortality worldwide. GEN-004 is designed to stimulate T helper 17 (Th17) cells, a rare cell type that provides immunity at epithelial and mucosal surfaces, in the nasopharynx to prevent colonization by pneumococcus.

In October 2015, we announced that top-line results from the Phase 2a clinical trial for GEN-004 showed consistent reductions versus placebo in the pre-specified endpoints of the rate and density of upper airway colonization in a human challenge model, but that neither of the endpoints achieved statistical significance. GEN-004 was safe and well tolerated by

20



subjects. Although we did not achieve statistical significance in this study, the consistent apparent effect gives us confidence in the vaccine concept and in the potential for GEN-004. While internal development of GEN-004 has been suspended, we continue to seek partners to advance GEN-004 into a Phase 1/2 clinical trial targeting toddler and infant populations.

Research and non-clinical development in oncology
 
We announced a research collaboration with the Dana-Farber Cancer Institute ("DFCI") in 2014 to apply the ATLAS platform in immuno-oncology. This collaboration centered on ATLAS's potential to identify patterns of T cell response in melanoma patients receiving checkpoint inhibitor ("CPI") therapy. By analyzing the immune responses of both responders and non-responders to CPI therapy, ATLAS successfully identified the cancer antigens to which either (or both) CD4+ or CD8+ T cells became activated. Although this research was not powered to draw firm conclusions, the analysis of T cell responses in patients receiving CPI therapy revealed a pattern indicating a greater breadth of T cell activation for responders than non-responders. The study also revealed preliminary evidence that different characteristics of T cell responses emerge when comparing patients who respond and those who do not. Some T cell responses did not correspond with improved patient outcomes, and may be classified as “decoys,” further validating the ability of ATLAS to distinguish clinically relevant targets of T cell response. The collaboration with Dana-Farber is ongoing as we continue to analyze more tumor samples to characterize T cell response profiles that may be prognostic of CPI efficacy, and to identify T cell antigens that may be included in novel immunotherapies.

In November 2015, we also announced a collaboration with the Memorial Sloan Kettering Cancer Center to screen the T cell responses of melanoma and non-small cell lung cancer patients treated with CPIs against the complete repertoire of patient-specific putative cancer neoantigens. The goals of the collaboration are to identify signatures of T cell response in cancer patients associated with response or non-response to CPI therapy and to discover new T cell cancer vaccine antigens. ATLAS will be used in conjunction with Memorial Sloan Kettering’s patient-specific cancer neoantigen sequences and blood samples from the same cancer patients.

In November 2015, we commenced a new program focused on Epstein-Barr Virus (“EBV”). EBV infection has been linked to cancers with high unmet needs such as non-Hodgkin’s lymphoma, nasopharyngeal carcinoma and gastric carcinoma. We believe the ATLAS platform is highly suited to the creation of a new immunotherapy for EBV given that T cell responses are understood to be crucial for protection against EBV. Furthermore, EBV is part of the herpesvirus family, in which we have deep experience through our development of GEN-003.

We continue to advance our collaborations with Memorial Sloan Kettering Cancer Center and Dana-Farber Cancer Center and we expect to announce further data from these collaborations later in the fourth quarter of 2016.

Research and non-clinical development in infectious disease
 
We have paused activities on our non-clinical development programs in chlamydia, HSV-2 prophylaxis and malaria in order to focus all of our internal research and pre-clinical resources on our immune-oncology investments. Progress made and data generated to date in these infectious disease research programs remains valuable to Genocea for the future.
 
Company background

We commenced business operations in August 2006. To date, our operations have been limited to organizing and staffing our company, acquiring and developing our proprietary ATLAS technology, identifying potential product candidates and undertaking preclinical studies and clinical trials for our product candidates. All of our revenue to date has been grant revenue. We have not generated any product revenue and do not expect to do so for the foreseeable future. We have primarily financed our operations through the issuance of our equity securities, debt financings and amounts received through grants. As of September 30, 2016 , we had received an aggregate of $279.6 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $7.9 million from grants. At September 30, 2016 , our cash and cash equivalents and investments were $75.5 million .
 
Since inception, we have incurred significant operating losses. Our net losses were $12.8 million and $33.5 million for the three and nine months ended September 30, 2016 , respectively, and our accumulated deficit was $191.4 million as of September 30, 2016 . We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We will need to generate significant revenue to achieve profitability, and we may never do so.
 

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In March 2015, we completed an underwritten public offering of 6.3 million shares of our Common Stock at a public offering price of $8.25 per share for an aggregate offering price of $51.7 million (the "March 2015 Offering"). In August 2015, we completed another underwritten public offering of 3.9 million shares of our Common Stock at a public offering price of $13.00 per share for an aggregate offering price of $50.1 million (the "August 2015 Offering"). We received net proceeds from these offerings of approximately $101.8 million, after deducting approximately $6.1 million in underwriting discounts and commissions, excluding offering costs payable by us.

As of September 30, 2016 , we sold 136 thousand shares under our ATM program and received $0.8 million in net proceeds after deducting commissions.

On the basis of current operating plans, including the plan to focus research investments on immuno-oncology and the planned commencement of Phase 3 trials for GEN-003 in the second half of 2017, Genocea expects that these funds will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships, equity financings or debt drawdowns. We expect to report six-month placebo-controlled clinical efficacy results from the ongoing Phase 2b trial in January 2017 and we anticipate conducting an FDA end-of-Phase 2 meeting for GEN-003 in the first quarter of 2017. However, costs related to clinical trials can be unpredictable and therefore there can be no guarantee that our current balances of cash, cash equivalents and investments, and any proceeds received from other sources, will be sufficient to fund our studies or operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch GEN-003 or any other product candidate. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we will be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital when needed would have a negative effect on our financial condition and our ability to pursue our business strategy.
 
Financial Overview
 
Grant revenue
 
Grant revenue consists of revenue earned to conduct vaccine development research. We have received grants from private not-for-profit organizations and federal agencies. These grants have related to the discovery and development of several of our product candidates, including product candidates for the prevention of pneumococcus, chlamydia, malaria, and immunotherapy of cancer. Revenue under these grants is recognized as research services are performed. Funds received in advance of research services being performed are recorded as deferred revenue. We plan to continue to pursue grant funding, but there can be no assurance we will be successful in obtaining such grants in the future.
 
We have no products approved for sale. We will not receive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize such products or until we potentially enter into agreements with third parties for the development and commercialization of product candidates. If our development efforts for any of our product candidates result in regulatory approval or we enter into collaboration agreements with third parties, we may generate revenue from product sales or from such third parties.
 
We expect that our revenue will be less than our expenses for the foreseeable future and that we will experience increasing losses as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. Our ability to generate revenue for each product candidate for which we receive regulatory approval will depend on numerous factors, including competition, commercial manufacturing capability and market acceptance of our products.

Research and development expenses
 
Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

personnel-related expenses, including salaries, benefits, stock-based compensation expense and travel;
expenses incurred under agreements with contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), consultants and other vendors that conduct our clinical trials and preclinical activities;
costs of acquiring, developing and manufacturing clinical trial materials and lab supplies; and

22



facility costs, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.
 
We expense internal research and development costs to operations as incurred. We expense third party costs for research and development activities, such as conducting clinical trials, based on an evaluation of the progress to completion of specific performance or tasks such as patient enrollment, clinical site activations or information, which is provided to us by our vendors.
 
The following table identifies research and development expenses on a program-specific basis for our product candidates as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Genital herpes (GEN-003)(1)
$
4,979

 
$
2,955

 
$
11,339

 
$
12,582

Other research and development (2)
3,832

 
3,103

 
11,482

 
8,954

Total research and development
$
8,811

 
$
6,058

 
$
22,821

 
$
21,536


_______________________________________________________
(1)
Includes direct and indirect internal costs and external costs such as CMO and CRO costs.
(2)
Includes costs related to other product candidates and certain technology platform development costs related to ATLAS. Additionally, costs that are not specifically allocated by project including facilities costs, depreciation expense, and non-project specific costs incurred by R&D personnel, are included in this line item.
 
We expect our research and development expenses will increase as we continue the manufacture of clinical materials and manage the clinical trials of, and seek regulatory approval for, GEN-003, and advance our preclinical development pipeline.
 
General and administrative expenses
 
General and administrative expenses consist principally of salaries and related costs for personnel, including stock-based compensation and travel expenses, in executive and other administrative functions. Other general and administrative expenses include facility-related costs, communication expenses and professional fees associated with corporate and intellectual property legal expenses, consulting and accounting services.
 
We anticipate that our general and administrative expenses will increase in the future to support the continued research and development of our product candidates and to operate as a public company. These increases will likely include higher costs for insurance, hiring activities, and professional services, such as outside consultants, lawyers and accountants, among other expenses. Additionally, if and when we believe a regulatory approval of our first product candidate appears likely, we anticipate that we will increase our salary and personnel costs and other expenses as a result of our preparation for commercial operations.
 
Refund of research and development expenses
 
The refund of research and development expenses recorded in the nine months ended September 30, 2016 related to a one-time payment received from Novavax pursuant to contractual obligations under the Novavax Agreement that existed to refund research and development expenses paid to Novavax between 2009 and 2011.

Interest income
 
Interest income consists of interest earned on our cash, cash equivalent and investment portfolio.

Interest expense
 
Interest expense consists of interest expense on our long-term debt facilities and non-cash interest related to the amortization of debt discount and issuance costs.
 

23



Critical Accounting Policies and Significant Judgments and Estimates
 
We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used.  The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimates, which include, but are not limited to, estimates related to clinical trial accruals, prepaid and accrued research and development expenses, stock-based compensation expense and reported amounts of revenues and expenses during the reported period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.
 
The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2015 related to prepaid and accrued research and development expenses and stock-based compensation. There have been no material changes to our accounting policies from those described in our Annual Report on Form 10-K.  It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on February 17, 2016.
 
Results of Operations
 
Comparison of the Three Months Ended September 30, 2016 and September 30, 2015
 
 

Three Months Ended
September 30,
 
Increase
(in thousands)
2016
 
2015
 
(Decrease)
Grant revenue
$

 
$
213

 
$
(213
)

 
 
 
 
 
Operating expenses:
 
 
 
 
 

Research and development
8,811

 
6,058

 
2,753

General and administrative
3,619

 
3,645

 
(26
)
Total operating expenses
12,430

 
9,703

 
2,727

Loss from operations
(12,430
)
 
(9,490
)
 
(2,940
)
Other income and expenses:
 
 
 
 
 
Interest income
103

 
39

 
64

Interest expense
(438
)
 
(320
)
 
(118
)
Total other income and expense
(335
)
 
(281
)
 
(54
)
Net loss
$
(12,765
)
 
$
(9,771
)
 
$
(2,994
)

Grant revenue
 
We did not record any grant revenue in the three months ended September 30, 2016 as compared to $0.2 million in the three months ended September 30, 2015 . The $0.2 million decrease was due to the completion of work related to a $1.2 million grant entered into with the Bill & Melinda Gates Foundation in September 2014. The full amount of the grant was recognized as of March 31, 2016.
 
Research and development expenses
 
Research and development expenses increased $2.8 million in the three months ended September 30, 2016 .  The increase was due largely to increases in compensation, consulting and professional services (approximately $1.8 million), clinical costs (approximately $0.6 million), and office and facility costs (approximately $0.2 million).

On a program basis, GEN-003 costs increased by $2.0 million compared to the three months ended September 30, 2015, driven by increases in headcount related expenses and clinical expenses to support the GEN-003 program, and higher consulting and professional service costs in advance of the expected Phase 3 trials. GEN-004 costs decreased by approximately

24



$0.5 million following the suspension of development of the program in the fourth quarter of 2015. Other costs, including those to advance our pre-clinical product candidates and develop our ATLAS platform for immuno-oncology increased by approximately $1.3 million.

General and Administrative Expenses
 
General and administrative expenses were unchanged at approximately $3.6 million from the same three month period in 2015. Expenditures across various activities also remained consistent with the same quarter in the prior year.

Interest Income
 
Interest income increased $0.1 million for the three months ended September 30, 2016 due to both higher levels of investing activity and a higher interest rate environment.

Interest Expense
 
Interest expense increased $0.1 million in the three months ended September 30, 2016 . The increase was due primarily to the $5.0 million increase in principal borrowings under our 2014 Term Loan as a result of the First Amendment entered into in the fourth quarter of fiscal year 2015.

Comparison of the Nine Months Ended September 30, 2016 and September 30, 2015


Nine Months Ended
September 30,
 
Increase
(in thousands)
2016
 
2015
 
(Decrease)
Grant revenue
$
235

 
$
449

 
$
(214
)
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 

Research and development
22,821

 
21,536

 
1,285

General and administrative
11,569

 
10,206

 
1,363

Refund of research and development expense
(1,592
)
 

 
(1,592
)
Total operating expenses
32,798

 
31,742

 
1,056

Loss from operations
(32,563
)
 
(31,293
)
 
(1,270
)
Other income and expenses:


 


 


Interest income
323

 
70

 
253

Interest expense
(1,299
)
 
(946
)
 
(353
)
Total other income and expense
(976
)
 
(876
)
 
(100
)
Net loss
$
(33,539
)
 
$
(32,169
)
 
$
(1,370
)

Grant revenue
 
Grant revenue for the nine months ended September 30, 2016 decreased by $0.2 million from the same nine month period in 2015. We entered into a $1.2 million grant with the Bill & Melinda Gates Foundation in September 2014. Grant activities occurred throughout the nine-month period in 2015 and were largely completed in the first quarter of 2016.
 
Research and development expenses
 
Research and development expenses increased $1.3 million for the nine months ended September 30, 2016 . The increases in compensation, consulting and professional services (approximately $3.6 million), lab-related costs (approximately $1.5 million), facility costs (approximately $0.7 million), and depreciation expense (approximately $0.3 million), were partially offset by decreases in manufacturing costs (approximately $4.5 million) and clinical costs (approximately $0.7 million). The remaining increases, all insignificant by spending category, are attributable to the overall growth of the research and development function.


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On a program basis, GEN-003 costs decreased $1.2 million in the nine months ended September 30, 2016, driven by lower manufacturing costs offset by increases in headcount and related expenses to support the GEN-003 program and an increase in clinical trial activities for ongoing and anticipated trials GEN-004 costs decreased by $2.0 million following the suspension of development of the program in the fourth quarter of 2015. Other costs, including those to advance our pre-clinical product candidates and develop our ATLAS platform for immuno-oncology increased by $4.5 million.

General and Administrative Expenses
 
General and administrative expense increased $1.4 million in the nine months ended September 30, 2016 . The increase was due largely to GEN-003 market research costs and higher depreciation costs from facility expansion.

Refund of research and development expense

In February 2016, we recorded a gain upon receipt of $1.6 million, including accrued interest, pursuant to contractual obligations under the Novavax Agreement to refund research and development expenses paid to Novavax between 2009 and 2011.

Interest Income
 
Interest income increased $0.3 million in the nine months ended September 30, 2016 due to both higher levels of investing activity and a higher interest rate environment.

Interest Expense
 
Interest expense increased $0.4 million in the nine months ended September 30, 2016 . The increase was due primarily to the $5.0 million increase in principal borrowings under our 2014 Term Loan as a result of the First Amendment entered into in the fourth quarter of fiscal year 2015.

Liquidity and Capital Resources
 
Overview
 
Since our inception through September 30, 2016 , we have received an aggregate of $279.6 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $7.9 million from grants. At September 30, 2016 , our cash, cash equivalents and investment securities were $75.5 million , comprising cash and cash equivalents of $26.4 million and current investment securities of approximately $49.1 million.
 
In the March 2015 Offering, we completed an underwritten public offering of 6.3 million shares of our Common Stock at a public offering price of $8.25 per share for an aggregate offering price of $51.7 million. In the August 2015 Offering, we completed another underwritten public offering of 3.9 million shares of our Common Stock at a public offering price of $13.00 per share for an aggregate offering price of $50.1 million. We received net proceeds from these offerings of approximately $95.7 million, after deducting approximately $6.1 million in underwriting discounts and commissions, excluding offering costs payable by us.

As of September 30, 2016 , we sold 136 thousand shares under our ATM program and received $0.8 million in net proceeds after deducting commissions.

Debt Financings

On November 20, 2014 (the "Closing Date"), we entered into a loan and security agreement (the “Loan Agreement”) with Hercules Technology Growth Capital, Inc. (“Hercules”), which provided up to $27.0 million in debt financing in three separate tranches (the "2014 Term Loan"). The first tranche of $17.0 million was available through June 30, 2015, of which $12.0 million was drawn down at loan inception and for which approximately $9.8 million of the proceeds were used to repay all outstanding indebtedness under the previously existing $10.0 million loan agreement (the "2013 Term Loan"). The option to draw down the remaining $5.0 million under the first tranche expired unused on June 30, 2015. The second tranche of $5.0 million was subject to certain eligibility requirements that were achieved as of June 30, 2015 and we had the option to draw down the second tranche on or prior to December 15, 2015. The second tranche expired unused on December 15, 2015. We were not eligible to draw down the third tranche of $5.0 million because the Company did not achieve positive results in its Phase 2a human challenge study of GEN-004.

26




In December 2015, we entered into an amendment to the Loan Agreement (the "First Amendment") with Hercules. The First Amendment required us to draw an additional $5.0 million and permits us to draw two additional $5.0 million tranches. One $5.0 million tranche is immediately available to draw through December 15, 2016 and a second $5.0 million tranche becomes available through December 15, 2016, subject to us demonstrating sufficient evidence of continued clinical progression of our GEN-003 product candidate and making favorable progress in applying our proprietary technology platform toward the development of novel immunotherapies with application in oncology. As of September 30, 2016, the second $5.0 million tranche is not yet available to us. At September 30, 2016 , $17.0 million was outstanding under the amended 2014 Term Loan.

The 2014 Term Loan had an original maturity of July 1, 2018. The eligibility requirements for the second tranche also contained an election for us to extend the maturity date to January 1, 2019. During the second quarter of 2015, we elected to extend the maturity date of the 2014 Term Loan. The maturity date of January 1, 2019 remained unchanged by the First Amendment.

Each advance accrues interest at a floating rate per annum equal to the greater of (i) 7.25% or (ii) the sum of 7.25% plus the prime rate minus 5.0%. The 2014 Term Loan provided for interest-only payments until December 31, 2015, which was extended by us for a six-month period as the eligibility requirements for the second tranche were met during the second quarter of 2015. The First Amendment subsequently extended the interest only period through June 30, 2017. Thereafter, beginning July 1, 2017, principal and interest payments will be made monthly for 18 months with a payoff schedule based upon a 30-month amortization schedule, the original amortization term of the 2014 Term Loan. The remaining unpaid principal is due on January 1, 2019.

The 2014 Term Loan may be prepaid in whole or in part upon seven business days’ prior written notice to Hercules.  Prepayments will be subject to a charge of 3.0% if an advance is prepaid within 12 months following the Closing Date, 2.0%, if an advance is prepaid between 12 and 24 months following the Closing Date, and 1.0% thereafter. Amounts outstanding at the time of an event of default shall be payable on demand and shall accrue interest at an additional rate of 5.0% per annum on any outstanding amounts past due. We also are obligated to pay Hercules an end of term charge of 4.95% of the balance drawn when the advances are repaid.

Contemporaneously with the 2014 Term Loan, we issued a common stock warrant to Hercules on November 20, 2014. The warrant is exercisable for 73,725 shares of our Common Stock (equal to $607,500 divided by the exercise price of $8.24 per share).
 
Operating Capital Requirements
 
Our primary uses of capital are, and we expect will continue to be for the near future, manufacturing costs for pre-clinical and clinical materials, third party clinical trial research and development services, laboratory and related supplies, clinical costs, compensation and related expenses, legal and other regulatory expenses and general overhead costs.
 
On the basis of current operating plans, including the plan to focus research investments on immuno-oncology and the planned commencement of Phase 3 trials for GEN-003 in the second half of 2017, Genocea expects that its cash, cash equivalents and marketable securities as at September 30, 2016 will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships, equity financings or debt drawdowns. Through this timeframe, we expect to report six-month placebo-controlled clinical efficacy results from the ongoing Phase 2b study and we anticipate meeting the FDA in an end-of-Phase 2 meeting for GEN-003 in the first quarter of 2017. We are focused on maximizing the potential of our preclinical pipeline and our ATLAS technology for T cell target discovery, including enabling new immuno-oncology therapies. We expect that these funds will not be sufficient to enable us to seek marketing approval or commercialize any of our product candidates.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

the timing and costs of our ongoing and planned clinical trials for GEN-003;
the progress, timing and costs of manufacturing GEN-003 for current and planned clinical trials;

27



the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our other product candidates and potential product candidates;
the outcome, timing and costs of seeking regulatory approvals;
the costs of commercialization activities for GEN-003 and other product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;
the receipt of marketing approval;
revenue received from commercial sales of our product candidates;
the terms and timing of any future collaborations, grants, licensing, consulting or other arrangements that we may establish;
the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and
the extent to which we in-license or acquire other products and technologies.

We expect that we will need to obtain substantial additional funding in order to commercialize GEN-003 and our other product candidates in order to receive regulatory approval. To the extent that we raise additional capital through the sale of Common Stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of GEN-003 or our other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to GEN-003 or our other product candidates that we otherwise would seek to develop or commercialize ourselves.

Cash Flows
 
The following table summarizes our sources and uses of cash for each of the periods below (in thousands):
 
 
Nine Months Ended September 30,
 
2016
 
2015
Net cash used in operating activities
$
(30,103
)
 
$
(28,373
)
Net cash provided by (used in) investing activities
38,168

 
(44,547
)
Net cash provided by financing activities
1,093

 
95,689

Net increase in cash and cash equivalents
$
9,158

 
$
22,769

 
Operating Activities
 
Net cash used in operations increased by approximately $1.7 million to $30.1 million for the nine months ended September 30, 2016 from $28.4 million for the nine months ended September 30, 2015 . The increase in net cash used was due primarily to a higher net loss of approximately $1.3 million and a $1.4 million decrease in our working capital accounts both offset by increases in depreciation and amortization (approximately $0.6 million) and stock-based compensation expense (approximately $0.3 million).
 

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Investing Activities
 
Net cash provided by investing activities was $38.2 million for the nine months ended September 30, 2016 compared to net cash used of $44.5 million for the nine months ended September 30, 2015 . The $82.7 million increase was due largely to an increase of $42.8 million in net proceeds from maturities and sales of investments and a decrease in investment purchases of $39.9 million.
 
Financing Activities
 
Net cash provided by financing activities decreased $94.6 million for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 due to $0.8 million in net proceeds from equity offerings under the ATM in the nine months ended September 30, 2016 compared to $95.2 million in net proceeds from the follow-on equity offerings in March and August of 2015.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Contractual Obligations
 
There have been no material changes to our contractual obligations from those described in our Annual Report on Form 10-K, as filed with the SEC on February 17, 2016.


29



Item 3.                            Quantitative and Qualitative Disclosures about Market Risks
 
We are exposed to market risk related to changes in interest rates. As of September 30, 2016 and December 31, 2015 , we had cash, cash equivalents and investments of $75.5 million and $106.4 million, respectively, consisting primarily of money market funds, U.S Treasury securities, and FDIC insured certificates of deposits. The investments in these financial instruments are made in accordance with an investment policy approved by our Board of Directors, which specifies the categories, allocations and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. Some of the financial instruments in which we invest could be subject to market risk. This means that a change in prevailing interest rates may cause the value of the instruments to fluctuate. For example, if we purchase a security that was issued with a fixed interest rate and the prevailing interest rate later rises, the value of that security will probably decline. To minimize this risk, we intend to maintain a portfolio that may include cash, cash equivalents and investment securities available-for-sale in a variety of securities, which may include money market funds, government and non-government debt securities and commercial paper, all with various maturity dates. Based on our current investment portfolio, we do not believe that our results of operations or our financial position would be materially affected by an immediate change of 10% in interest rates.
 
We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Further, we do not believe our cash equivalents and investment securities have significant risk of default or illiquidity. We made this determination based on discussions with our investment advisors and a review of our holdings. Although we believe our cash equivalents and investment securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. All of our investments are recorded at fair value.
 
We are also exposed to market risk related to change in foreign currency exchange rates. We contract with certain vendors that are located in Europe which have contracts denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign exchange rate risk. As of September 30, 2016 and December 31, 2015 , we had minimal liabilities denominated in foreign currencies.
 
Item 4.                            Controls and Procedures
 
Management’s Evaluation of our Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
 
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2016 (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of September 30, 2016 , our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting
 
During the nine months ended September 30, 2016 , there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


30



PART II. OTHER INFORMATION
 
Item 1.                            Legal Proceedings
 
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as of September 30, 2016 , we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on our financial position or profitability. No governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.
 
Item 1A.                   Risk Factors
 
There have been no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 17, 2016.

Item 6.                            Exhibits
 
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibits Index, which Exhibit Index is incorporated herein by reference.
Exhibit
Number
 
Exhibit
 
 
 
10.1*
 
Amended and Restated Exclusive License Agreement between Children’s Medical Center Corporation and Genocea Biosciences, Inc., dated March 23, 2012.
 
 
 
10.2*
 
Amended and Restated License Agreement between Genocea Biosciences, Inc. and President and Fellows of Harvard College, dated November 19, 2013.
 
 
 
10.3*
 
License and Collaboration Agreement between Genocea Biosciences, Inc. and Isconova AB, dated August 5, 2009, as amended on March 19, 2010, June 18, 2010, August 17, 2010, October 19, 2011, February 6, 2012 and October 21, 2014.
 
 
 
10.4*
 
Exclusive License Agreement for Escherichia Coli K12 to Deliver Protein to the Macrophage Cytosol between Genocea Biosciences, Inc. and the Regents of the University of California, dated August 18, 2006.
 
 
 
31.1
 
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive Officer
 
 
 
31.2
 
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Financial Officer
 
 
 
32.1
 
Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Executive Officer
 
 
 
32.2
 
Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Financial Officer
 
 
 
101
 
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 and (iv) Notes to Unaudited Condensed Consolidated Financial Statements

*Confidential treatment has been granted by, or is being requested from, the Securities and Exchange Commission as to certain portions of this exhibit (indicated by asterisks), which portions have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, as applicable.  


31



SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Genocea Biosciences, Inc.
 
 
Date: November 4, 2016
By:
/s/ WILLIAM D. CLARK
 
 
William D. Clark
 
 
President and Chief Executive Officer and Director
(Principal Executive Officer)
 
 
 
Date: November 4, 2016
By:
/s/ JONATHAN POOLE
 
 
Jonathan Poole
 
 
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)


32
EXHIBIT 10.1
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AMENDED AND RESTATED EXCLUSIVE LICENSE AGREEMENT
BETWEEN
CHILDREN'S MEDICAL CENTER CORPORATION
AND
GENOCEA BIOSCIENCES, INC.
Dated March 23, 2012 and Supplemented with a Side Letter dated March 23, 2012
 




EXHIBIT 10.1
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TABLE OF CONTENTS

ARTICLE I.
DEFINITIONS    3
ARTICLE II.
GRANT    9
ARTICLE III.
DUE DILIGENCE AND RELATED MATTERS    15
ARTICLE IV.
ROYALTIES AND OTHER PAYMENTS    17
ARTICLE V.
REPORTS, RECORDS AND RELATED MATTERS    20
ARTICLE VI.
PATENT PROSECUTION    23
ARTICLE VII.
INFRINGEMENT    25
ARTICLE VIII.
UNIFORM INDEMNIFICATION AND INSURANCE PROVISIONS    27
ARTICLE IX.
COMPLIANCE WITH LAWS; EXPORT CONTROLS    30
ARTICLE X.
NON-USE OF NAMES AND PUBLICATIONS    31
ARTICLE XI.
ASSIGNMENT    31
ARTICLE XII.
DISPUTE RESOLUTION AND ARBITRATION    32
ARTICLE XIII.
TERM AND TERMINATION    33
ARTICLE XIV.
OWNERSHIP    35
ARTICLE XV.
PAYMENTS, NOTICES, AND OTHER COMMUNICATIONS    35
ARTICLE XVI.
GENERAL PROVISIONS    36
ARTICLE XVII.
CONFIDENTIALITY    38


Appendix 1    Patent Rights
Appendix 2    Development Plan
Appendix 3    MTA
Appendix 4    Collaboration Agreement


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AMENDED AND RESTATED EXCLUSIVE LICENSE AGREEMENT

This Amended and Restated Exclusive License Agreement ("Agreement") is made and entered into as of the date last signed below (the "Effective Date"), by and between CHILDREN'S MEDICAL CENTER CORPORATION, a charitable corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having its principal office at 300 Longwood Avenue, Boston, Massachusetts, 02115, U.S.A. (hereinafter referred to as "CMCC"), and Genocea Biosciences, Inc., a business corporation organized and existing under the laws of the State of Delaware and having its principal office at 161 First Street, Suite 2C, Cambridge, MA 02142, U.S.A. (hereinafter referred to as "Licensee"). CMCC and Licensee may be referred to individually as "Party" and collectively as the "Parties".
WHEREAS, Licensee and Children's Hospital Boston ("CHB") entered into a Material Transfer Agreement, dated September 17, 2008 and attached and incorporated as Appendix 3 hereto (the "MTA"), whereby a collaborative research project was performed by the Parties;
WHEREAS, CHB and Licensee were each funded by separate awards from PATH Vaccine Solutions ("PVS") and such awards contained provisions for granting a non-exclusive license to certain rights to PVS in the developing world as further described in the "Children's Hospital Collaborative Research Agreement," dated June 19, 2008 and attached and incorporated herein as Appendix 4 (the "Collaboration Agreement");
WHEREAS, the conduct of the Research Plan as defined in the MTA has resulted in the creation of Research Plan Intellectual Property (as defined in the MTA) including the Patent Rights (as that term shall be defined hereafter), and the Licensee wishes to negotiate a license with CMCC to CMCC's interest in the Research Plan Intellectual Property that, as of the Effective Date of this Agreement, has been discovered, conceived, made, developed or reduced to practice;

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WHEREAS, CMCC is a joint owner (along with Licensee) of certain Research Plan Intellectual Property developed under the MTA and the Collaboration Agreement referenced above and has the right to grant exclusive licenses to its rights under the Patent Rights, subject only to a royalty-free, non-exclusive license granted to the United States Government for those inventions and ensuing patents developed with U.S. Government funding, and certain laws and regulations relating to federally funded projects and institutions and the PVS License as defined below;
WHEREAS, in furtherance of its charitable and research missions and those laws and regulations, CMCC desires to have the Patent Rights utilized to promote the public interest and to further that goal is willing to grant a license to Licensee on the terms and conditions described herein;
WHEREAS, Licensee is experienced in the development of products similar to the technology which is the subject of this Agreement and desires to engage in the commercial development, production, manufacture, marketing and sale of Licensed Products (as that term shall be defined hereafter) and/or the use of Licensed Processes (as that term shall be defined hereafter) via the implementation of a development program as described in this Agreement;
WHEREAS, CMCC and Licensee are parties to that certain Exclusive License Agreement, effective as of February 18, 2010, as amended by Amendment No. 1 to Exclusive License Agreement, dated as of March 30, 2011 (the "Original Agreement") pursuant to which CMCC granted to Licensee an exclusive license to CMCC's rights, within a designated territory and for a prescribed field of use, relating to certain licensed products and processes within the scope of the Patent Rights; and
WHEREAS, the Parties now desire to modify their arrangements under the Original Agreement pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the Parties hereto agree as follows:

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ARTICLE 0.    AMENDMENT AND RESTATEMENT
CMCC and Licensee hereby agree that, as of the Effective Date, the Original Agreement is hereby amended and restated in its entirety as set forth in this Agreement, and the Original Agreement shall be of no further force or effect from and after the Effective Date, provided that except as expressly provided herein, nothing in this Agreement shall affect the rights and obligations of the Parties under the Original Agreement with respect to periods prior to the Effective Date, all of which shall survive in accordance with their terms.
ARTICLE I.
DEFINITIONS
For the purpose of this Agreement, the following words and phrases shall have the meanings set forth below:
A.
"Affiliate" shall mean any company or other legal entity actually controlling, controlled by or under common control with a Party. For purposes of the definition of "Affiliate" the term "control" shall mean: (i) in the case of a corporate entity, the ability to effect the election of directors, or in the case of a for-profit entity direct or indirect ownership of at least a majority of the stock or participating shares entitled to vote for the election of directors of that entity, in any case coupled with active managerial involvement and accountability for directing the business and affairs of that entity; (ii) in the case of a partnership, the power customarily held by a managing partner to direct the management and policies of such partnership, provided that such power is actively exercised; or (iii) in the case of a joint venture, whether in corporate, partnership or other legal form, a prevailing joint economic interest coupled with a managerial role entailing active direction, control and accountability with respect to the business and affairs of the entity.
B.
"Chargeback Payments" shall mean payments made by Licensee, its Affiliates, its agents, or its Sublicensees to wholesalers to cover the difference between the

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price charged for a Licensed Product to such wholesaler and the price charged for such Licensed Product to group purchasing organizations, managed health care organizations or to federal, state/provincial, local and other governments, including their agencies, who are the final customer and who will be an end user of the Licensed Product.
C.
"Combination Product(s) or Process(es)" shall mean a product or process that includes a Licensed Product or Licensed Process sold in combination with another component(s) whose manufacture, use or sale by an unlicensed party would not constitute an infringement of the Patent Rights licensed in this Agreement.
D.
"Commercially Reasonable Efforts" shall mean, with respect to the efforts to be expended by Licensee to any objective for maintaining the priority of rapid and effective development, Licensee shall use diligent efforts and resources consistent with practices used in the Licensee's industry for a product which is of similar commercial potential at a similar state in its development or product life, taking into account issues of efficacy, safety, market size, the competitiveness of alternative products in the marketplace, any legal or technical difficulties directly related to such product development, the patent and other proprietary position of the product, regulatory approvals, and the actual and/or projected profitability of the product. It is understood that, for the purposes of this definition of "Commercially Reasonable Efforts", the commercial potential of a product may change from time to time based upon certain changing considerations, including without limitation changing scientific, business, marketing and return on investment considerations.
E.
"Developing Countries" shall mean (i) those countries identified by the World Bank as of June 19, 2008 as having "low income economies" or "lower-middle income economies" and (ii) Argentina, Brazil, Chile, Mexico, and South Africa, provided these five countries specifically listed herein are not reclassified as "high

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income economies" by the World Bank as of the date that a license is granted to PVS pursuant to the Collaboration Agreement.
F.
"Fair Market Value" shall mean, with respect to a valuation required by any provision of this Agreement, the price which a willing buyer would pay, on an arm's length basis, for all rights and related intellectual property assets which comprise the assets, data, or rights being valued, in light of all relevant factors including, without limitation, the status of development and reasonably anticipated risks and costs of further development and the market potential for the commercialization of such assets, data or rights. In any case where Fair Market Value must be determined but is not determined by good faith negotiations between the Parties in sixty (60) days, the determination will be made by an independent third party accounting firm to be mutually agreed upon by the Parties. In the event that the Parties cannot agree upon an independent third party accounting firm within twenty (20) days, Fair Market Value will be determined by a panel of three (3) independent third party accounting firms, one chosen by Licensee, one chosen by CMCC and one chosen at the mutual agreement of the two chosen firms. Any such determination will be binding and conclusive upon the Parties and the Parties will split the costs of such determination.
G.
"Field of Use" shall mean the prevention and treatment of Streptococcus pneumoniae .
H.
"First Commercial Sale" shall mean, with respect to each country: (i) the first sale of any Licensed Product or Licensed Process by Licensee or any Sublicensee, following approval of such Licensed Product's or Licensed Process's marketing by the appropriate governmental agency, if any such approval is necessary, for the country in which the sale is to be made; or (ii) when governmental approval is not required, the first sale by Licensee or any Sublicensee in that country of the Licensed Product or Licensed Process.

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I.
"Licensed Product" shall mean:
1.
Any product or part thereof in the Field of Use the manufacture, use or sale of which is covered by any Valid Claim in the country in which it is manufactured, used or sold; or
2.
Any product or part thereof in the Field of Use the manufacture or use of which uses a "Licensed Process" as that term shall be defined hereafter; or
3.
Any service provided for or on behalf of a third party on a fee-for-service basis that entails the practice of a Licensed Process.
J.
"Licensed Process" shall mean any process the practice of which is covered by any Valid Claim.
K.
"Licensee" shall mean Licensee and its successors and assignees permitted by this Agreement (including Affiliates where they are assignees permitted by this Agreement).
L.
"Net Sales" shall mean the gross amounts recognized for sales, leases, or other transfers of Licensed Products by Licensee, its Affiliates, its agents, or its Sublicensees for any Licensed Products to a final customer who will be an end user of the Licensed Product and is not an Affiliate or Sublicensee, in accordance with generally accepted accounting principles or the then-current internal accounting standard used by the Licensee and/or its Affiliates, less the following amounts (if not previously deducted from gross amounts invoiced):
1.
credits and allowances for price adjustment, rejection, uncollectible amounts or return of Licensed Products previously sold;

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2.
Chargeback Payments, fees, rebates, and quantity and cash discounts to purchasers allowed and taken, including, without limitation, payments made to buying groups;
3.
amounts for third party transportation, insurance, handling or shipping charges to purchasers;
4.
taxes, duties and other governmental charges levied on or measured by the sale of Licensed Products, whether absorbed by Licensee or paid by the purchaser so long as Licensee's price is reduced thereby, but not franchise or income taxes of any kind whatsoever;
5.
for any sale in which the United States government, on the basis of its royalty-free license pursuant to 35 USC Sec. 202(c) to any Patent Right, requires that the gross sales price of any Licensed Product subject to such Patent Right, be reduced by the amount of such royalty owed Licensor, the amount of such royalty.
Licensee shall make periodic adjustments to the amounts described in (1) through (5) above, to its initial accruals of such amounts applied to prior periods, in order to reflect amounts actually incurred or deducted by the Licensee; provided, however, that Licensee shall use the same accrual method that is used for its own financial accounting purposes. Net Sales also includes the Fair Market Value of any non-cash consideration received by Licensee (as defined herein) or any Sublicensee in exchange for the sale, lease, or transfer of Licensed Products.
Neither consideration deemed to be a Sublicensee Payment nor the transfer of a Licensed Product within Licensee or between Licensee and an Affiliate or a Sublicensee for sale by the transferee shall be considered a Net Sale for purposes of ascertaining royalty charges. In such circumstances, the gross amounts invoiced and resulting Net Sales price shall be based upon the sale of the Licensed Product by the transferee.

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M.
"Patent Rights" shall mean all of the following intellectual property which CMCC owns or has rights to during the Term of this Agreement as hereafter defined:
1.
The United States and foreign patent applications listed in Appendix 1 attached hereto and incorporated herein by reference and divisionals and continuations thereof.
2.
The United States and foreign patents issued from the applications listed in Appendix 1 and from divisionals and continuations of those applications.
3.
Claims of United States and foreign continuation-in-part applications, and of the resulting patents, which are directed to the subject matter specifically described in the United States and foreign patent applications described in Appendix 1.
4.
Claims of all later filed foreign patent applications, and of the resulting patents, which are directed to the subject matter specifically described in the United States patent and/or patent applications described in subparagraphs 1, 2 or 3 of this ARTICLE I, Paragraph M.
5.
Any reissues, divisions, amendments or extensions of the United States or foreign patents described in subparagraphs 1, 2, 3 or 4 of this ARTICLE I, Paragraph M.
N.
"PVS License" shall mean the non-exclusive license granted by CHB to PVS pursuant to the Collaboration Agreement, as attached and incorporated herein as Appendix 4. Such rights to PVS include a non-exclusive royalty-free license, with the right to sublicense, to (i) develop, make or have made, and use a pneumococcal T cell based protein vaccine in the world and (ii) use market,

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promote, distribute and sell a pneumococcal T cell-based protein vaccine in Developing Countries as defined in Paragraph E of this ARTICLE I.
O.
"Sublicensee" shall mean a person or entity unaffiliated with Licensee to whom Licensee has granted an arm's length sublicense under this Agreement.
P.
"Sublicensee Payments" shall mean any payments received by Licensee from a Sublicensee (whether in the form of cash, Fair Market Value of cash equivalents or Fair Market Value of securities of Sublicensee or any other third party) in consideration of permitting the Sublicensee to practice the Patent Rights licensed to Licensee hereunder, including but not limited to sublicense issue fees, any lump sum payments, milestone payments, technology transfer payments or other similar fees; provided , however , that Sublicensee Payments shall not include any (i) royalty or profit-sharing payments; provided further , however , that Sublicensee Payments shall include profit-sharing payments if Licensee receives royalty payments based on Net Sales of Licensed Products in addition to profit-sharing payments from a Sublicensee in a contractual arrangement with such Sublicensee, (ii) reimbursement of patent prosecution expenses that have not been recovered prior to the sublicense, (iii) funded research arrangements after the Effective Date of this Agreement (including without limitation any amounts received by Licensee from PVS), (iv) amounts received by Licensee for the Fair Market Value of the sale of its equity securities to Sublicensee, or (5) the attributed value of any cross-license granted by a Sublicensee to Licensee to the extent such cross-license provides Licensee with freedom to operate with respect to a Licensed Product or Licensed Process (but not excluding any monetary consideration actually received from such Sublicensee on account of such cross-license).
Q.
"Territory" shall mean world-wide.
R.
"Term" shall have the meaning stated in Paragraph A of ARTICLE XIII.

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S.
"Valid Claim" means an issued, unexpired claim or pending claim of a Patent Right, which issued claim or pending claim has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, which is not appealable or has not been appealed within the time allowed for appeal, and which has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or other final, irrevocable action.
ARTICLE II.
GRANT
A.
Subject to the terms of this Agreement, CMCC hereby grants to Licensee, under CMCC's one-half ownership interest in the Patent Rights, subject to the rights granted to PVS under the PVS License as set forth in Appendix 4 and the rights retained by CMCC pursuant to ARTICLE II, Paragraph B below, the worldwide right and exclusive license, with the right to sublicense, to import, make, have made, use, lease, offer for sale, sell and otherwise export the Licensed Products, and to practice the Licensed Processes, in the Territory for the Field of Use during the Term, unless sooner terminated as provided in this Agreement.
B.
Notwithstanding anything above to the contrary, CMCC shall retain a royalty-free, non-exclusive, right to practice and use, and to license for a nominal fee (such as shipping and handling charges) to academic nonprofit research organizations to practice and/or use the Patent Rights for their own Licensed Products and Licensed Processes, for research, educational, clinical and/or charitable purposes only. Any such license shall specifically exclude and prohibit any commercialization of the Patent Rights, including any of such organization's own Licensed Products and Licensed Processes. For clarity, nothing in this Paragraph B or elsewhere in this Agreement obligates Licensee or any Sublicensee to transfer or otherwise provide any of their respective Licensed Products or Licensed Processes to CMCC or any other third party.

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C.
Notwithstanding any other provision of this Agreement, the license and any sublicense shall be subject to the rights of the United States government, if any, under Public Law 96-517, 97-226, and 98-620, codified at 35 U.S.C. sec. 200-212 and any regulations promulgated thereunder; the obligations of CMCC under applicable laws and regulations; and Licensee's warranty to comply with all applicable laws and regulations.
D.
Licensee agrees that Licensed Products leased or sold in the United States shall be manufactured substantially in the United States to the extent required by applicable law. Upon the First Commercial Sale and thereafter, Licensee's annual report to CMCC shall substantiate Licensee's compliance with this provision. To support exclusivity for Licensee consistent with this Agreement, CMCC hereby agrees that, except as provided in Paragraph B of this ARTICLE II, and the grant under the PVS License, it shall not, without Licensee's prior written consent (which Licensee shall have no obligation to give and shall be given at Licensee's sole discretion) grant to any other commercial party a license to make, have made, use, lease and/or sell Licensed Products, or to use the Licensed Processes in the Field of Use, during the period of time in which this Agreement is in effect, except as required by laws affecting the rights of the United States Government.
E.
The license granted hereunder shall not be construed to confer any rights upon Licensee by implication, estoppel or otherwise as to any inventions, discoveries, know-how, technology or other intellectual property not described in Paragraph A of this ARTICLE II.
F.
In the event that Licensee uses any non-public information it has acquired in the course of prosecution of the Patent Rights from CMCC and/or patent counsel prosecuting the Patent Rights, or non-public information Licensee has provided, or recommendations made by Licensee that have been implemented in whole or in part with respect to prosecution of the Patent Rights, to formally challenge

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CMCC's joint ownership of the Patent Rights before any applicable regulatory authority, without CMCC's consent, then CMCC may immediately terminate this Agreement upon written notice to Licensee. Any assignment or sublicense granted by Licensee of the rights granted to it hereunder shall contain a substantially similar provision applicable to the assignee or Sublicensee.
G.
Nothing in this Agreement shall be construed to limit or constrain CMCC, or any officer, director, employee, member of its medical staff, or of any CMCC Affiliate, from continuing to engage in related research; or from the development of related or unrelated inventions, discoveries, rights or technology, and from practicing, licensing or sublicensing related or unrelated intellectual property rights arising from their own inventions occurring after the Effective Date of this Agreement; or from academic publication related thereto; or from entering into agreements and other relationships with other persons or organizations related to matters not regarding the Patent Rights, Licensed Products and Licensed Processes in the Field of Use and matters otherwise not within the scope of this Agreement.
H.
If, during the Term of this Agreement, CMCC makes any discovery or invention that CMCC reasonably believes to be patentable that is not included within the scope of the license to the Patent Rights granted hereunder but is dominated by the Patent Rights, CMCC shall use reasonable efforts to offer Licensee an option to exclusively license CMCC's rights to such discovery or invention, whether or not patentable, under which license Licensee may fully exploit (including without limitation, develop, manufacture and commercialize) such discovery or invention on an exclusive basis. Upon Licensee's acceptance of such option, which acceptance must be made within forty-five (45) days of receipt of notice from CMCC of any such discovery or invention, CMCC and Licensee shall negotiate the terms of such exclusive license in good faith for at least one hundred and

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eighty (180) days from the time of CMCC's disclosure of such discovery and invention and CMCC shall use good faith commercially reasonable efforts to reach agreement with Licensee on the terms of such definitive license agreement. If the Parties are unable to reach agreement after such good faith negotiations, CMCC shall be free, and without any obligations to Licensee, to offer such rights to any other party.
I.
Licensee shall have the right to enter into sublicensing agreements with respect to any of the rights, privileges, and licenses granted hereunder, subject to the terms and conditions hereof: CMCC agrees that, in the event CMCC terminates this Agreement for any reason provided hereafter, then CMCC shall provide to known Sublicensees, no less than thirty (30) days prior to the effective date of said termination, written notice of said termination at the address specified by Licensee in the notice provided to CMCC under Paragraph J of this ARTICLE II. If the Sublicensee, during that thirty (30) day period, provides to CMCC authorized and written notice that the Sublicensee: (i) reaffirms the terms and conditions of this Agreement as it relates to the rights the Sublicensee has been granted under the sublicense; (ii) agrees to abide by all of the terms and conditions of this Agreement applicable to Sublicensees and to discharge directly all pertinent obligations of Licensee which Licensee is obligated hereunder to discharge; and (iii) acknowledges that CMCC shall have no obligations to the Sublicensee other than its pertinent obligations set forth in this Agreement with regard to Licensee, then, provided that the Sublicensee has fulfilled (i), (ii) and (iii) herein and Sublicensee is not in material breach of its sublicense, CMCC shall grant to such Sublicensee a license with rights and on terms equivalent to the sublicense rights and terms which the Licensee shall have previously granted to said Sublicensee, to the extent that those rights were granted by CMCC to the Licensee under this Agreement. In any event, the Sublicensee shall remain a Sublicensee under this Agreement for a period of at least sixty (60) days

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following notice by CMCC under this Paragraph I. For the avoidance of doubt, a Sublicensee will be considered in material breach of its sublicense if Sublicensee has committed an outstanding uncured payment default or an outstanding uncured breach of its diligence obligations under such sublicense.
J.
In any event, Licensee agrees that any sublicense granted by it shall impose obligations on the Sublicensee consistent with Licensee's obligations to CMCC under ARTICLES II (Grant), VII (Infringement), VIII (Uniform Indemnification and Insurance Provisions), IX (Compliance with Laws; Export Controls), and X, Paragraph A, (Non-Use of Names and Publications) of this Agreement (such flow-down obligations collectively, the "CMCC Obligations"). The CMCC Obligations shall be binding upon the Sublicensee for the benefit of CMCC and Licensee. In addition, every sublicense shall (1) contain requirements for commercially reasonable due diligence efforts from the Sublicensees in the development or exploitation of the Patent Rights, or the sale of Licensed Products, as specifically applicable, and (2) obligate Licensee to use Commercially Reasonable Efforts to enforce those provisions consistent with achieving Licensee's obligations pursuant to this Agreement. The Licensee's sublicenses shall also make CMCC a third-party beneficiary of the sublicense, with the right, but not the obligation, to enforce the CMCC Obligations in the event Licensee fails to, provided that CMCC has provided Licensee sixty (60) days' written notice to Licensee of CMCC's belief that Sublicensee has not complied with CMCC Obligations and within such sixty (60) day period, Licensee has not either (i) reasonably shown that such CMCC Obligations are being complied with or such non-compliance is immaterial or (ii) made reasonable efforts to enforce such CMCC Obligations with respect to the defaulting Sublicensee. Licensee agrees to provide to CMCC notice of any sublicense granted hereunder or amendments related thereto and to forward to CMCC a copy of any and all fully executed sublicense agreements or amendments within thirty (30) days after execution.

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Regarding such copies, Licensee may reasonably redact confidential information of Licensee or Sublicensee only to the extent that it does not impair CMCC's ability to ensure Licensee's or Sublicensee's compliance with the terms of this Agreement. Licensee further agrees to forward to CMCC annually a copy of such reports received by Licensee from its Sublicensees during the preceding twelve (12) month period as shall be pertinent to a royalty accounting under the applicable sublicense and compliance with the other terms of this Agreement.
K.
Licensee shall advise CMCC in writing of any consideration received from Sublicensees, and, at CMCC's reasonable request, provide such information in an electronic or other format recognizable by CMCC's data processing systems. Licensee shall not accept from any Sublicensee anything of value in lieu of cash payments to discharge Sublicensee's payment obligations (if any) under any sublicense granted under this Agreement, without the express written permission of CMCC, which permission shall not be unreasonably withheld but may take into account a reasonable valuation for purposes of Licensee's payment obligations to CMCC.
ARTICLE III.
DUE DILIGENCE AND RELATED MATTERS
A.
Licensee, upon execution of this Agreement, shall use Commercially Reasonable Efforts in good faith to bring at least one (1) Licensed Product to market as soon as reasonably practicable, consistent with sound and legal business practices and judgment, through a program using Commercially Reasonable Efforts for the exploitation of the Patent Rights. Licensee shall use Commercially Reasonable Efforts to obtain all necessary government approvals for the manufacture, use, sale and distribution of Licensed Products. Thereafter, Licensee agrees that until expiration or termination of this Agreement, Licensee shall use Commercially Reasonable Efforts to keep Licensed Products reasonably available to the public, in quantities sufficient to meet market demand, in the Territory. In the event

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Licensee decides not to exploit, either directly or indirectly, a licensed Patent Right in a given country of the Territory, it shall promptly inform CMCC in writing and the license granted to it hereunder with respect to that Patent Right in that country in the Territory will immediately terminate.
B.
Licensee shall use Commercially Reasonable Efforts to accomplish the specific tasks set forth in Appendix 2 attached hereto in accordance with the timeframe set forth therein (such Appendix 2 is hereby incorporated by reference and is referred to herein as the "Development Plan")
C.
Licensee shall use Commercially Reasonable Efforts to accomplish the specific requirements of the Development Plan, including the Diligence Specifications set forth in this Paragraph C (the "Diligence Specifications"). The Diligence Specifications shall be part of the Development Plan and the timeframes for such Diligence Specifications shall be treated as definitive.
1.
Determine protective efficacy of Licensed Products in mouse colonization or systemic models within [* * *]. The Parties acknowledge and agree that Licensee has completed this Diligence Specification as of [* * *].
2.
Nominate top 2-3 Licensed Products for vaccine formulation within [* * *] of accomplishing Diligence Specification 1.
3.
Final formulation of Licensed Product for pre-IND studies within [* * *] of accomplishing Diligence Specification 2.
4.
Completion of toxicology lots of nominated Licensed Products for in vivo toxicology studies within [* * *] of accomplishing Diligence Specification 3.

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D.
In the event Licensee fails to meet any of the objective(s) set forth in the Development Plan, including without limitation the Diligence Specifications, in a timely manner, CMCC shall notify Licensee thereof in writing, and Licensee shall have sixty (60) days following such notification to establish to the reasonable satisfaction of CMCC that (i) it has met such objective(s); or (ii) a revision to the Development Plan is necessary and appropriate as contemplated below in Paragraph E. In the event Licensee fails to establish the same to CMCC's reasonable satisfaction, CMCC shall have the right in its sole discretion to terminate in whole or in part the license granted to Licensee under this Agreement effective immediately.
E.
Notwithstanding anything above to the contrary, CMCC shall not unreasonably withhold its consent to any revision of the objective(s) or timing of the Development Plan, when requested in writing in advance by Licensee and the request is supported by evidence reasonably acceptable to CMCC: (i) of technical difficulties or delays that Licensee could not reasonably have avoided; (ii) that Licensee is proposing and will implement satisfactory and effective means of addressing such difficulties or delays, including sufficient financial and technical resources; and (iii) that Licensee, its Affiliates and/or Sublicensees have in good faith made Commercially Reasonable Efforts and expended commercially reasonable and adequate resources to meet said objective and will continue to do so.
F.
If, during the Term of this Agreement, Licensee makes any discovery or invention that Licensee reasonably believes to be patentable and is not within the scope of the license to the Patent Rights granted to it hereunder but is dominated by the Patent Rights, Licensee shall, as a condition of this license, confidentially disclose such discovery or invention to CMCC, on usual and customary terms necessary to protect its patentability or its confidentiality as a trade secret. CMCC shall have

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the right to review in advance of filing any related patent application by or on behalf of Licensee or any assignee of Licensee, for purposes of evaluating the relatedness to the Patent Rights. Recognizing that CMCC enters into this Agreement in furtherance of its charitable academic research mission, Licensee shall use good faith and reasonable efforts to enter into with CMCC a non-exclusive license or permit CMCC, as applicable, including for no more than a nominal fee, to practice such discovery or invention, whether or not patented, solely for CMCC internal and academic research purposes. For the avoidance of doubt, any license granted under this ARTICLE III, Paragraph F by Licensee to CMCC shall not grant CMCC, its Affiliates or its sublicensees any right to use or practice the licensed rights for commercial purposes.
ARTICLE IV.
ROYALTIES AND OTHER PAYMENTS
A.
For the rights, privileges and exclusive license granted hereunder, Licensee shall pay to CMCC the following amounts in the manner hereinafter provided. Unless expressly stated otherwise in this Agreement, periodic payment obligations listed below shall endure through the Term of this Agreement, unless this Agreement shall be sooner terminated as hereinafter provided.
1.
A license amendment fee of [* * *], and such fee is due within thirty (30) days after the Effective Date of this Agreement.
2.
As of the Effective Date Licensee has paid in full the license issue fee of [* * *], which license issue fee was deemed earned and due within thirty (30) days of the effective date of the Original Agreement.
3.
Licensee shall make the following one-time payments to CMCC in connection with the first occurrence of the following events ("Milestones"):

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(a)
[* * *] upon the [* * *] by Licensee or any Sublicensee with respect to a Licensed Product;
(b)
[* * *] upon the [* * *] by Licensee or any Sublicensee with respect to a Licensed Product; and
(c)
[* * *] upon the [* * *] of a Licensed Product.
Licensee will promptly notify CMCC in writing of the achievement of any of the foregoing Milestones by Licensee or any of its Sublicensees, and will require its Sublicensees to provide it with prompt written notice upon their achievement of any of the foregoing Milestones. CMCC may invoice Licensee for the applicable Milestone payment after receipt of such notice, and Licensee shall pay such invoice within forty-five (45) days after its receipt thereof.
B.
During the Term, Licensee shall pay CMCC running royalties in an amount equal to [* * *] of Net Sales of Licensed Products or Licensed Processes used, leased or sold by and/or for Licensee (including its Affiliates) or any Sublicensees ("Running Royalties"); provided , however , to the extent that a license or licenses is required by Licensee to third party patents or other intellectual property (i) in order to practice the Patent Rights, or (ii) in order to manufacture or sell Licensed Products without such activities (as described in clause (i) or (ii) of this sentence) resulting in the infringement of such third party intellectual property, Licensee may, for each such required license, deduct from the Running Royalties owed to CMCC an amount up to [* * *] of the royalties due to each third party for such intellectual property rights; provided further , that no single Running Royalty payment owed to CMCC may be reduced by more than [* * *] as a result of any such deduction. Licensee may not deduct, as a result of any such required third party license, a greater percentage of royalties from those owed to CMCC than the

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percentage deducted from such third party from whom such license is required as described in this Paragraph. Notwithstanding anything in this ARTICLE IV, Paragraph B, the Running Royalty owed to CMCC by Licensee shall not be reduced below [* * *] of the Net Sales of Licensed Products or Licensed Processes.
1.
No multiple royalties shall be payable on account of any Licensed Product or Licensed Process, its manufacture, use, lease or sale being covered by more than one Patent Rights patent application or Patent Rights issued patent licensed under this Agreement. In the event that any patent or claim thereof included within the Patent Rights is no longer a Valid Claim, then all obligations to pay royalties based on that patent or claim or any claim patentably indistinct therefrom will cease as of the date such patent or claim is no longer a Valid Claim.
2.
For purposes of calculating royalties, in the event that a Licensed Product includes [* * *], then Net Sales of the [* * *] shall be calculated using one of the following methods:
(a)
[* * *]; or
(b)
In the event that no such [* * *] during the applicable accounting period, Net Sales for purposes of determining royalties payable hereunder shall be calculated by [* * *].
C.
In the event Licensee has granted sublicenses under this Agreement, Licensee shall pay to CMCC the relevant percentage as set forth below of Sublicensee Payments: (i) [* * *] of Sublicensee Payments received by Licensee any time prior to [* * *]; and (ii) [* * *] of Sublicensee Payments received by Licensee any time after [* * *].

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D.
Royalty payments shall be paid in United States dollars in Boston, Massachusetts, or at such other place as CMCC may reasonably designate consistent with the laws and regulations controlling in any foreign country. If currency conversion shall be required in connection with the payments of royalties or other amounts hereunder, the conversion shall be made by using the exchange rate prevailing at Bank of America on the last business day of the calendar quarterly reporting period to which such royalty payments relate.
E.
Licensee shall make payment of the amounts specified in this ARTICLE IV to CMCC within forty-five (45) days after March 31, June 30, September 30 and December 31 each year during the Term of this Agreement, covering the quantity of Licensed Products sold by Licensee during the preceding calendar quarter (in the case of royalties payable under ARTICLE IV, Paragraph B) and covering the percentage of any Sublicensee Payment (as calculated in accordance with ARTICLE IV, Paragraph C) received during the preceding calendar quarter. The last such payment shall be made within forty-five (45) days after termination of this Agreement. The royalty payments set forth in this Agreement shall, if overdue, bear interest until payment at a per annum rate of two and a half percent (2.5%) above the prime rate in effect at Bank of America on the due date. The payment of such interest shall not foreclose CMCC from exercising any other rights it may have as a consequence of the lateness of any payment.
ARTICLE V.
REPORTS, RECORDS AND RELATED MATTERS
A.
Licensee shall keep, and shall require its Affiliates and Sublicensees to keep, full, true and accurate books and records, including books of account in accordance with generally accepted accounting principles, in sufficient detail to enable CMCC to determine Licensee's compliance with this Agreement, including diligence with respect to development, and the royalty and other amounts payable to CMCC under this Agreement. Said books and records, including books of

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account, shall be kept at Licensee's principal place of business or the principal place of business of the appropriate division of Licensee to which this Agreement relates. Said books and the supporting data shall be retained for at least four (4) years following the end of the calendar year to which they pertain.
B.
CMCC shall have the right to inspect, copy and audit, on five (5) business days' notice, the books described above from time to time to verify the reports provided for herein or compliance in other respects with this Agreement. CMCC or its agents shall perform such inspection, copying and auditing at CMCC's expense during Licensee's regular business hours. CMCC may exercise its rights under this Paragraph B of ARTICLE V no more than one (1) time in any twelve-month period unless for cause.
C.
Until the later of First Commercial Sale of a Licensed Product or the achievement of the last development Milestone, and for such later periods as CMCC shall by written request from time to time require, Licensee shall provide to CMCC, at least annually, reasonable detail regarding the activities of Licensee and Licensee's Affiliates and Sublicensees relative to achieving the objectives set forth in the Development Plan in a timely manner, including but not limited to, financial expenditures to achieve said objectives; research and development activities; names, addresses and actions of all Sublicensees and Affiliates; the progress of obtaining regulatory approvals; strategic alliances and manufacturing, sublicensing and marketing efforts. Licensee shall report no more than quarterly.
D.
After First Commercial Sale, within ninety days (90) after the end of each calendar quarter, Licensee shall deliver to CMCC, at Licensee's expense, true and accurate reports for the said preceding quarter, giving such particulars of the business conducted by Licensee, its Affiliates and its Sublicensees under this Agreement as shall be pertinent to CMCC determining compliance with this Agreement, including a royalty accounting hereunder and to verify Licensee's

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activities with respect to achieving the objectives of the Development Plan described in ARTICLE III above. Licensee shall provide these reports in an electronic or other format compatible with CMCC's data processing and/or license management systems (e.g., Microsoft Excel) as CMCC may reasonably specify. Such Reports shall include at least the following:
1.
Number of Licensed Products and Licensed Processes manufactured and sold and a breakdown indicating numbers sold to CHB.
2.
Total Net Sales for Licensed Products and Licensed Processes sold, by country.
3.
Accounting for all Licensed Products and Licensed Processes disposed of for no consideration, such as those distributed for, as the case may be, test marketing, sampling and promotional uses, clinical trial purposes, regulatory approval or compliance, compassionate uses, global access programs intended to provide Licensed Product at reduced prices in the developing world, or other similar uses.
4.
Applicable deductions including but not limited to e.g. Chargeback Payments, and rebates.
5.
Total royalties payable to CMCC.
6.
Names and addresses of all Sublicensees of Licensee.
7.
Payments received by Licensee from Affiliates and Sublicensees.
8.
Licensed Products manufactured and sold to the U.S. Government, segregating those sold at a profit from those sold at cost in light of any royalty-free, non-exclusive license that may heretofore have been granted to the U.S. Government.

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9.
A listing, with brief descriptions, of any intellectual property required to be disclosed pursuant to ARTICLE III, Paragraph F.
E.
On or before the ninetieth (90th) day following the close of Licensee's fiscal year, Licensee shall provide CMCC with Licensee's certified financial statements for the preceding fiscal year, including without limitation all statements reflecting profits and losses from operations, cash balances, and any management letter.
F.
Licensee acknowledges that policies of CMCC, Harvard Medical School and affiliated organizations, relating to, inter alia, conflicts of interest and intellectual property, may affect certain direct and indirect arrangements between inventors and Licensee or related organizations. During the Term of this Agreement and for so long as a CHB-inventor of the Patent Rights is affiliated with CHB or Harvard Medical School, Licensee shall notify CMCC in writing at least 30 days before Licensee, or any Affiliate of Licensee, or any organization owned, controlled or influenced by a substantial shareholder (>5%), officer or director of Licensee, enters into any agreement other than this Agreement with or involving such CHB-inventor, or his or her family, relatives or members or staff of his or her laboratory, whether relating to sponsored research, consulting, board membership, securities, or otherwise. Licensee's notice to CMCC shall include a detailed description of all proposed terms and conditions. Licensee shall not enter into such an agreement if it would violate such policies unless the terms and conditions of the agreement have been duly approved pursuant to such policies.
ARTICLE VI.
PATENT PROSECUTION
A.
Licensee shall apply for, seek prompt issuance of, and maintain during the Term of this Agreement the Patent Rights set forth in Appendix 1 using counsel reasonably acceptable to CMCC. The specifications of any such patent application and any patent issuing thereon shall state, to the extent applicable, "This invention was made with government support under [contract] awarded by

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[Federal agency]. The government has certain rights in this invention." The prosecution, filing and maintenance of all Patent Rights applications and patents shall be the primary responsibility of Licensee and at Licensee's sole expense. CMCC will be copied on all patent prosecution correspondence. CMCC shall have reasonable opportunities to comment on and to advise Licensee regarding such prosecution and shall reasonably cooperate with Licensee at Licensee's sole expense, in the preparation, filing, prosecution and maintenance of the Patent Rights.
B.
Licensee shall reimburse CMCC for all patent costs, past, present and future incurred by CMCC for the preparation, filing, prosecution and maintenance of patents underlying the Patent Rights. After the Effective Date, CMCC shall not incur any such patent prosecution expenses related to the Patent Rights without Licensee's prior written consent except for those Patent Rights CMCC has the right to prosecute pursuant to Paragraph C and D of this ARTICLE VI. Upon request of CMCC, and only upon such request, Licensee agrees to have CMCC's patent counsel directly bill Licensee and Licensee shall directly pay such invoices in compliance with such counsel's customary business terms, but in any event within thirty (30) days.
C.
If, in any country, Licensee elects to no longer pay the expenses of a patent application or patent included within Patent Rights, Licensee shall notify CMCC not less than thirty (30) days prior to such action (but no less than sixty (60) days prior to the date that a response related to such patent application or patent is due) and, in such event, the license granted to Licensee hereunder with respect to such patent or patent application in such country will immediately cease. Such notice shall not relieve Licensee from responsibility to pay such patent related expenses incurred by Licensee prior to the expiration of the notice period (or such longer period specified in Licensee's notice). CMCC may elect to continue paying such

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patent related expenses, at its own expense, and Licensee will execute all documents CMCC may reasonably request for such purposes; however no such action will change the Parties' respective ownership interests in the relevant patent or patent application.
D.
In the event Licensee elects not to pursue, maintain or retain a particular Patent Right(s) listed in Appendix 1 in any country in the Territory, then Licensee shall immediately notify CMCC in writing and, subject to the rights of the United States government and any other contractual obligations to research sponsors, Licensee will authorize CMCC to assume the filing, prosecution and/or maintenance of such application or patent in such country at CMCC's expense. In such event, Licensee shall provide to CMCC any authorization necessary to permit CMCC to pursue and/or maintain such Patent Right and Licensee's license under this Agreement to that Patent Right in such country will immediately cease. CMCC shall then be free to license its one-half ownership interest in the applicable Patent Right(s) to any third party without any obligations to Licensee (other than those obligations with respect to Joint Inventions as set forth in the MTA and ARTICLE XIV of this Agreement).
ARTICLE VII.
INFRINGEMENT
A.
Licensee and CMCC shall each inform the other promptly in writing of any alleged infringement by a third party of the Patent Rights in the Field of Use and of any available evidence thereof.
B.
During the Term of this Agreement, CMCC shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Patent Rights and, in furtherance of such right, Licensee hereby agrees that CMCC may include Licensee as a party plaintiff in any such suit, without expense to Licensee. No settlement, consent judgment or other voluntary final disposition of the suit that adversely affects the rights of Licensee under this Agreement may be entered into

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without the consent of Licensee. The total cost of any infringement action commenced or defended solely by CMCC shall be borne by CMCC. Any recovery or damages for past infringement derived therefrom will first be applied to CMCC and Licensee's expenses, including reasonable attorney's fees, in connection therewith, and any balance remaining then will be divided eighty percent (80%) to CMCC and twenty percent (20%) to Licensee.
C.
If within three (3) months after having been notified with sufficient facts of any alleged infringement, CMCC shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if CMCC notifies Licensee of its intention not to bring suit against any alleged infringer then, provided that the exclusive license granted to Licensee in ARTICLE II is still in effect for such relevant Patent Rights, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Patent Rights. CMCC hereby agrees that Licensee may include CMCC as a party plaintiff in any such suit, without expense to CMCC. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of CMCC, which consent shall not be unreasonably withheld. Licensee shall indemnify CMCC against any order for costs that may be made against CMCC in such proceedings to the extent that such order does not relate to or arise from CMCC's negligence, reckless misconduct or intentional misconduct during such proceeding.
D.
In the event Licensee shall undertake the enforcement and/or defense of the Patent Rights by litigation pursuant to Paragraph C of this ARTICLE VII, Licensee may withhold up to fifty percent (50%) of the payments otherwise thereafter due to CMCC under ARTICLE IV above and apply the same toward reimbursement of up to fifty percent (50%) of Licensee's expenses, including reasonable attorney's

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fees, in connection therewith provided that Licensee sends a quarterly report to CMCC detailing such expenses, offset and withholdings. Any recovery of damages by Licensee for each such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of CMCC and Licensee relating to such suit and next toward reimbursement of CMCC for any payments under ARTICLE IV past due or withheld and applied pursuant to this ARTICLE VII. Any balance remaining will then be divided eighty percent (80%) to Licensee and twenty percent (20%) to CMCC.
E.
In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights shall be brought against Licensee, CMCC, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and participate along with Licensee in the defense of the action at its own expense.
F.
In any infringement suit which either Party may institute to enforce the Patent Rights pursuant to this Agreement, the other Party hereto shall cooperate in all reasonable respects and, to the extent reasonably possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.
G.
Licensee shall, during the exclusive period of this Agreement, have the sole right subject to the terms and conditions hereof to sublicense any alleged infringer for future use of the Patent Rights to the extent licensed by this Agreement. Any upfront fees paid to Licensee as part of such a sublicense shall be shared between Licensee and CMCC in accordance with the terms of ARTICLE IV, Paragraph C as if they were Sublicensee Payments under this Agreement.
ARTICLE VIII.
UNIFORM INDEMNIFICATION AND INSURANCE PROVISIONS

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A.
Licensee shall indemnify, defend and hold harmless CMCC, its Affiliates, current or future directors, trustees, officers, faculty, medical and professional staff, employees, students and agents and their respective successors, heirs and assigns (the "Indemnitees"), against any claim, liability, cost, damage, deficiency, loss, expense or obligation of any kind or nature (including without limitation reasonable attorneys' fees and other costs and expenses of litigation) incurred by or imposed upon the Indemnitees or any one of them in connection with any claims, suits, actions, demands or judgments arising out of any theory of product liability (including, but not limited to, actions in the form of tort, warranty, or strict liability) concerning any product, process or service made, used or sold by the Licensee, its Affiliates or its Sublicensees or any agents thereof pursuant to any right or license granted to the Licensee under this Agreement.
B.
Licensee's indemnification under ARTICLE VIII, Paragraph A above shall not apply to any liability, damage, loss or expense to the extent that it is directly attributable to the negligent activities, reckless misconduct or intentional misconduct of the Indemnitees.
C.
Licensee agrees, at its own expense, to provide attorneys reasonably acceptable to CMCC to defend against any actions brought or filed against any party indemnified hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought.
D.
Beginning at the time as any such product, process or service is being commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by Licensee or by a Sublicensee, Affiliate or agent of Licensee, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate and naming the Indemnitees as additional insureds. Such commercial general liability insurance shall provide (i)

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product liability coverage and (ii) contractual liability coverage for Licensee's indemnification under ARTICLE VIII, Paragraphs A through C of this Agreement. If Licensee elects to self-insure all or part of the limits described above (including deductibles or retentions which are in excess of $250,000 annual aggregate), such self-insurance program must be acceptable to CMCC and the Risk Management Foundation of the Harvard Medical Institutions, Inc. The minimum amount of insurance coverage required under this ARTICLE VIII, Paragraph D, shall not be construed to create a limit of Licensee's liability with respect to its indemnification under ARTICLE VIII, Paragraphs A through C of this Agreement.
E.
Licensee shall provide CMCC with written evidence of such insurance upon request of CMCC. Licensee shall provide CMCC with written notice at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance. Notwithstanding any other term of this Agreement, if Licensee does not obtain replacement insurance providing comparable coverage within such fifteen (15) day period, CMCC shall have the right to terminate this Agreement effective at the end of such fifteen (15) day period without notice of any additional waiting periods.
F.
Licensee shall maintain such commercial general liability insurance during (i) the period that any such product, process or service is being commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by Licensee or by a Sublicensee, Affiliate or agent of Licensee and (ii) a reasonable period after the period referred to above, which in no event shall be less than fifteen (15) years.
G.
The provisions of this ARTICLE VIII shall survive expiration or termination of this Agreement.

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H.
CMCC MAKES NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR ANY EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OF NON-INFRINGEMENT, WITH RESPECT TO ANY MATTER WITHIN THE SCOPE OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY WARRANTY WITH RESPECT TO THE PATENT RIGHTS, LICENSED PRODUCTS, OR ANY PATENT, TRADEMARK, SOFTWARE, TRADE SECRET, TANGIBLE RESEARCH PROPERTY, INFORMATION OR DATA LICENSED OR OTHERWISE PROVIDED TO LICENSEE HEREUNDER, AND HEREBY DISCLAIMS THE SAME.
ARTICLE IX.
COMPLIANCE WITH LAWS; EXPORT CONTROLS
Licensee shall comply with all applicable laws and regulations, including, without limitation, statutes and regulations affecting drug testing, development, marketing and distribution; laws and implementing regulations of the Department of Commerce governing intellectual property in federally-funded inventions; and Export Administration Regulations of the United States Department of Commerce issued pursuant to the Export Administration Act of 1979 (50 App. U.S.C. §2401 et seq.). Licensee understands and acknowledges that transfer of certain technical data, computer software, laboratory prototypes and other commodities is subject to United States laws and regulations controlling their export, some of which prohibit or require a license for the export of certain types of technical data, to certain specified countries. CMCC neither represents that a license shall not be required, nor that if required, it shall be issued. Licensee hereby agrees and gives written assurance that it will comply with all United States laws and regulations, and any applicable similar laws and regulations of any other country, controlling the export of commodities and technical data, that it will be solely responsible for any violation of such by Licensee and/or its Affiliates and/or Sublicensees and that it will defend and hold CMCC, its Affiliates and their officers, directors, employees, agents, and medical staff harmless in accordance with the process set forth in Paragraphs B and C of ARTICLE VIII in the event of

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any legal action of any nature occasioned by such violation and any action by any governmental agency or authority, or any other party, relating to any asserted illegality or regulatory violation in the development, production, approval, marketing, sale, storage, manufacture, distribution, export or commercialization of Licensed Products or Licensed Processes by the Licensee, its Affiliates and/or its Sublicensees.
ARTICLE X.
NON-USE OF NAMES AND PUBLICATIONS
A.
Licensee represents and agrees that it will not use the name, names, logos or trademarks of the CMCC or any of its Affiliates, nor the name or photograph or other depiction of any employee or member of the staff of CMCC or such Affiliates, nor any adaptation of any of the foregoing, in any advertising, promotional, or sales literature without, in each case, prior written consent from CMCC and from the individual staff member, employee, or student if such individual's name, photograph or depiction is used. Notwithstanding the above, Licensee may state that it is licensed by CMCC under one or more patents and/or applications consistent with this Agreement, and Licensee may comply with disclosure requirements of all applicable laws relating to its business, including United States and state security laws. In addition, Licensee may refer to publications by employees of CMCC in the scientific literature.
B.
CMCC agrees to use reasonable efforts to provide Licensee with any draft publications or presentations that are submitted to the Technology & Innovation Development Office of CMCC by Dr. Richard Malley directly related to the Patent Rights under CMCC's retained rights under ARTICLE II, Paragraph B at least thirty (30) days prior to its anticipated publication or presentation. Licensee shall have the right to review such publication or presentation to identify Licensee's non-public information.
ARTICLE XI.
ASSIGNMENT

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A.
CMCC may assign this Agreement at any time without the prior consent of Licensee. Except as otherwise provided herein, this Agreement is not assignable or delegable, in whole or in part, by Licensee without the prior written consent of CMCC acting through an authorized designee, and any purported assignment otherwise shall be void and of no effect.
B.
Notwithstanding the foregoing, in the event Licensee merges with another entity, is acquired by another entity, or sells all or substantially all of its assets to another entity, Licensee may assign its rights and obligations hereunder to the surviving or acquiring entity if: (i) Licensee is not then in breach of this Agreement; (ii) the proposed assignee has, or will have, immediately upon assignment, sufficient available resources to carry out the Development Plan; (iii) Licensee provides to CMCC written notice of the assignment at least five (5) days prior to the effective date of the assignment; and, CMCC receives from the assignee, in writing, at least five (5) days prior to the effective date of the assignment, a reaffirmation of the terms of this Agreement, an agreement to be bound by the terms of this Agreement and an agreement to perform the obligations of Licensee under this Agreement.
C.
In addition, the license granted to Licensee under ARTICLE II shall include the right to have some or all of Licensee's rights or obligations under this Agreement performed or exercised by one or more of Licensee's Affiliates, provided that any act or omission taken or made by an Affiliate of Licensee under this Agreement shall be deemed an act or omission by Licensee under this Agreement.
ARTICLE XII.
DISPUTE RESOLUTION AND ARBITRATION
A.
Any and all claims, disputes or controversies arising under, out of, or in connection with this Agreement, which have not been resolved by good faith negotiations between the Parties shall be resolved by final and binding arbitration in Boston, Massachusetts in accordance with the rules then obtaining applicable to

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the appointment of a single arbitrator of the American Health Lawyers Association, or in the event such arbitration is not then available under those rules, the rules of the American Arbitration Association ("AAA"). All expenses and costs of the arbitrators and the arbitration in connection therewith will be shared equally, except that each Party will bear the costs of its prosecution and defense, including without limitation attorneys' fees and the production of witnesses and other evidence. Any award rendered in such arbitration shall be final and may be enforced by either Party.
B.
Notwithstanding the foregoing, nothing in this Agreement shall be construed to waive any rights or timely performance of any obligations existing under this Agreement, including without limitation Licensee's obligations to make royalty and other payments, and also, unless the license granted in ARTICLE II has been terminated, Licensee's obligation to continue due diligence and development obligations. Notwithstanding any other provision of this Agreement, Licensee agrees that it shall not withhold or offset such payments, and agrees that Licensee's sole remedy for alleged breaches by CMCC is pursuant to this ARTICLE XII.
ARTICLE XIII.
TERM AND TERMINATION
A.
The "Term" of this Agreement shall be fifteen (15) years or upon the expiration of the last expiring Patent Right, whichever period is the longer term.
B.
Notwithstanding ARTICLE XII of this Agreement, CMCC may terminate this Agreement immediately upon the bankruptcy, judicially declared insolvency, liquidation, dissolution or cessation of operations of Licensee; or the filing of any voluntary petition for bankruptcy, dissolution, liquidation or winding-up of the affairs of Licensee; or any assignment by Licensee for the benefit of creditors; or the filing of any involuntary petition for bankruptcy, dissolution, liquidation or winding-up of the affairs of Licensee which is not dismissed within ninety (90)

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days of the date on which it is filed or commenced; or upon any final judicial or administrative determination that this Agreement violates, or if continued would violate, in a substantial manner, any provision of the Federal Internal Revenue Code, applicable rights of the United States or obligations of CMCC under Title 15 of the United States Code, or other Federal or State laws applicable to CMCC; or in the circumstances providing for immediate termination of the license granted to Licensee hereunder as described in ARTICLE III, Paragraph D or in ARTICLE VI, Paragraph C or D of this Agreement.
C.
CMCC may terminate this Agreement upon thirty (30) days prior written notice in the event of Licensee's failure to pay to CMCC royalties or any payments due and payable hereunder in a timely manner, unless Licensee shall make all such payments to CMCC within said thirty (30) day period. Notwithstanding ARTICLE XII of this Agreement upon the expiration of the thirty (30) day period, if Licensee shall not have made all such payments to CMCC, the rights, privileges and licenses granted hereunder shall terminate without further action by CMCC.
D.
Except as otherwise provided in Paragraphs B and C above, in the event that Licensee shall default in the performance of any of its material obligations under this Agreement, and the default has not been remedied to CMCC's reasonable satisfaction within sixty (60) days after the date of CMCC's notice to Licensee in writing of such default, CMCC may, by written notice to Licensee, terminate this Agreement effective immediately or upon such date as CMCC, in its sole discretion, shall designate in such notice.
E.
Licensee shall have the right to terminate this Agreement in its entirety, or on a country-by-country and Licensed Product-by-License Product basis, at any time upon ninety (90) days' prior written notice to CMCC, upon payment by Licensee of all amounts due CMCC through the effective date of termination. This right is

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in addition to, and separate from, Licensee's rights under ARTICLE VI, Paragraph C and Licensee's rights under ARTICLE VI, Paragraph D.
F.
Upon expiration or termination of this Agreement for any reason, all of the rights, privileges and licenses granted hereunder shall terminate without further action by either Party, except that nothing herein shall be construed to release either Party from any obligation that matured prior to the effective date of, or that expressly survives, such termination or expiration. For clarity, upon expiration or termination of this Agreement for any reason, Licensee's obligation to pay royalties or any other amount to CMCC under this Agreement (other than any such payments that matured prior to the effective date of such termination) shall immediately cease.
G.
If Licensee terminates this Agreement due to adverse results in clinical or other testing of Licensed Products or Licensed Processes, Licensee shall make available to CMCC, for purposes of its evaluation of the future viability of the technology, a summary of such results together with copies of any government-mandated reports, such as FDA safety reports, made in connection with the decision to terminate development.
ARTICLE XIV.
OWNERSHIP
The Parties acknowledge that, notwithstanding anything to the contrary contained in this Agreement or in the MTA, the Patent Rights are and shall at all times remain Joint Inventions (as defined in the MTA) and as such, are jointly owned by Licensee and CMCC and each Party has an undivided one-half ownership interest therein. Except as expressly set forth in this Agreement, either Party may fully exploit or non-exclusively license their rights in the Patent Rights and/or their rights in any other Joint Inventions to third parties without accounting to, or seeking the consent of, the other. For clarity, except as expressly contemplated in ARTICLE III, Paragraph F, nothing herein shall grant CMCC any right or license with respect to Licensee's

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interest in the Joint Inventions. The provisions of this ARTICLE XIV shall survive expiration or termination of this Agreement.
ARTICLE XV.
PAYMENTS, NOTICES, AND OTHER COMMUNICATIONS
All notices, reports and/or other communications made in accordance with this Agreement shall be sufficiently made or given if delivered by hand, delivered by facsimile (with mechanical confirmation of transmission), or sent by overnight receipted mail, postage prepaid, or by reasonable, customary and reliable commercial overnight carrier in general usage, and addressed as follows:
In the case of CMCC:
Director:

Technology and Innovation Development Office
Children's Hospital Boston
300 Longwood Avenue
Boston, MA 02115
Payments shall be transmitted by reliable means to the same addressee, payable to Children's Hospital Boston.
Wire transfers for CMCC can be made directly to:
Bank Name: Bank of America, 100 Federal Street, Boston, MA
ABA#: 0260-0959-3
Account name: Children's Hospital IDE Receipts Account
Bank Account Number: 274-31645
Attention: Bruce Balter (phone 617-355-7806)
Reference: Technology & Innovation Development Office
In the case of Licensee:
Genocea Biosciences, Inc.
Attention: Chief Executive Officer
161 First Street Suite 2C
Cambridge, MA 02142, USA
Telephone: (617) 876-8191
Fax: (617) 876-8192

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or such other address as either Party shall notify the other in writing. NOTICE SHALL BE EFFECTIVE UPON RECEIPT.
ARTICLE XVI.
GENERAL PROVISIONS
A.
All rights and remedies hereunder will be cumulative and not alternative. This Agreement shall be construed and governed by the laws of the Commonwealth of Massachusetts.
B.
This Agreement may be amended only by written agreement signed by the Parties.
C.
It is expressly agreed by the Parties hereto that CMCC and Licensee are independent contractors and nothing in this Agreement is intended to create an employer relationship, joint venture, or partnership between the Parties. No Party has the authority to bind the other.
D.
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all proposals, representations, negotiations, agreements and other communications between the Parties, whether written or oral, with respect to the subject matter hereof. Where inconsistent with the terms of any contemporaneous related agreements (such as sponsored research agreements), terms in this Agreement shall control.
E.
If any provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid, illegal or unenforceable provisions, which valid provisions in their effect are sufficiently similar to the invalid, illegal or unenforceable provisions that it can be reasonably assumed that the Parties would have entered into this Agreement with such valid provisions. In the event such valid provisions cannot be agreed upon, the invalidity, illegality or

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unenforceability of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole.
F.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against the Party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument.
G.
The failure of either Party to assert a right to which it is entitled, or to insist upon compliance with any term or condition of this Agreement, shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other Party.
H.
Licensee agrees to mark any Licensed Products sold in the United States with all applicable United States patent numbers. All Licensed Products shipped to or sold in other countries shall be marked in such a manner as to conform with the patent laws and practices of the country of manufacture or sale.
I.
Each party hereto agrees to execute, acknowledge and deliver such further instruments as may be reasonably necessary to carry out the purposes and intent of this Agreement.
J.
The paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
K.
The signatories below each warrant that he or she is duly authorized to execute this Agreement.
ARTICLE XVII.
CONFIDENTIALITY
A.
Each Party agrees, during the Term and for five (5) years after termination of this Agreement, to maintain and protect the confidentiality of the Confidential

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Information of the other Party. "Confidential Information" shall mean (i) non-public information acquired by Licensee from CMCC pursuant to ARTICLE II, Paragraph F, (ii) information disclosed or made available to or otherwise obtained by CMCC pursuant to ARTICLE III, Paragraphs B, C, D or F, ARTICLE IV, Paragraph C, ARTICLE V, Paragraphs B, C, D, E, or F, or ARTICLE XIII, Paragraph G and (iii) all other information relevant to the subject matter of this Agreement which (A) is either marked by the Party disclosing it ("Disclosing Party") as confidential or proprietary or with a similar legend at the time of disclosure to the Party receiving such information hereunder ("Receiving Party") or (B) is of such a nature and is disclosed in such a manner that a reasonable person would know it to be the confidential or proprietary information of the Disclosing Party. The Receiving Party agrees to use the Disclosing Party's Confidential Information only as necessary to fulfill the Receiving Party's obligations or to exercise the rights granted to it under this Agreement and for no other purpose. Furthermore, the Receiving Party agrees not to disclose the Disclosing Party's Confidential Information to any third-party without the prior written consent of the Disclosing Party, except that either Party may disclose Confidential Information of the other Party (1) to its Affiliates, and to its and their respective directors, employees, consultants, and agents in each case who have a specific need to know such Confidential Information for purposes of this Agreement and who are bound by obligations of confidentiality and restrictions on use similarly protective of the Disclosing Party's Confidential Information as those set forth herein, or (2) to the extent such disclosure is required for a Party (a) to comply with applicable law or regulation or the order of a court of competent jurisdiction, (b) to defend itself from litigation brought against it by the other Party or to prosecute litigation relating to a breach of the Agreement by the other Party, or (c) to comply with the rules of the U.S. Securities and Exchange Commission, any stock exchange or similar listing entity applicable to such Party;

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provided, however, that in the case of each of clauses 2(a), (b), and (c) above, the Receiving Party provides prior written notice of such disclosure to the Disclosing Party and takes reasonable and lawful actions to avoid or minimize the degree of such disclosure. Notwithstanding any other provision of this Agreement, Licensee may disclose and use Confidential Information of CMCC as necessary to file or prosecute the Patent Rights and may also disclose this Agreement to any third party in connection with a financing transaction or due diligence inquiry involving Licensee; provided, however, that any such third party is bound by reasonable obligations of confidentiality and restrictions on use similar to those set forth herein. Similarly, notwithstanding any other term of this Agreement, and in addition to its rights under subparagraphs (1) and (2) above of this ARTICLE XVII, Paragraph A, CMCC shall have the right to disclose the nature, terms and a copy of the Agreement to oversight bodies of CMCC, such as the institutional review board or conflicts of interest committee of CMCC, as necessary to comply with its obligations to such bodies and to disclose the general nature of the Agreement (without including any of the financial terms or any other specific terms or language from the Agreement, but including reasonable detail about its overall structure and business goals) in standard organizational communications issued by CMCC, such as the annual report of the Technology and Innovation Development Office and publications of the Office of Public Affairs (not to be construed as press releases).
B.
The Parties' obligations under this ARTICLE XVII shall not apply to any information which:
1.
at the time of disclosure is already in the public domain;
2.
after disclosure hereunder enters the public domain, except through breach of this Agreement by the Receiving Party;

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3.
the Receiving Party can demonstrate was rightfully in the Receiving Party's possession prior to the time of disclosure by or on behalf of the Disclosing Party hereunder, and was not acquired directly or indirectly from the Disclosing Party;
4.
becomes available to the Receiving Party from a third-party who, to the knowledge of the Receiving Party, is not legally or contractually prohibited from disclosing such Confidential Information;
5.
the Receiving Party can demonstrate was developed by or for the Receiving Party independently of the disclosure of Confidential Information by the Disclosing Party or its Affiliates.
C.
Licensee and CMCC agree that the confidentiality obligations hereunder shall require that each Party use confidentiality procedures and practices to protect the other Party's Confidential Information as each would use for its own confidential information, but at least a reasonable degree of care.
D.
Licensee agrees that nothing herein shall prevent CMCC from disclosing or publishing CMCC's own Confidential Information (other than this Agreement), or create any legal liability to Licensee for doing so.
E.
The provisions of this ARTICLE XVII shall survive expiration or termination of this Agreement for the period of time specified in the first sentence of ARTICLE XVII, Paragraph A.
[ Signature Page Follows ]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be effective as of the date last written below.
CHILDREN'S MEDICAL CENTER CORPORATION
   
GENOCEA BIOSCIENCES, INC.


By: /s/ Erik Halvorsen    


By: /s/ Chip Clark    

Name: Erik Halvorsen, Ph.D.    

Title: Executive Director, TIDO    

Date: March 29, 2012    

Name: Chip Clark    

Title: President & CEO    

Date: March 23, 2012    
 
 


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Appendix 1
PATENT RIGHTS
Serial Number
Filing Type
Filing Date
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Appendix 2
DEVELOPMENT PLAN

[* * *].



EXHIBIT 10.1
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Appendix 3
CMCC # 7876
Material Transfer Agreement
THIS AGREEMENT is entered into this ____ day of September 2008, (“Effective Date”) by and between CHILDREN’S HOSPITAL BOSTON, a charitable corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having a principal place of business located at 300 Longwood Avenue, Boston, Massachusetts (“Hospital”) and Genocea Biosciences, Inc., a corporation duly organized and existing under the laws of the State of Delaware and having a principal place of business located at 161 First Street, Suite 2c Cambridge, MA 02142 (“Company”).
WHEREAS, through expenditure of substantial effort and resources, Company has developed and/or controls a high-throughput system for in vitro screening of proven effectors of immunity (e.g. libraries of efficacious T cells) to identify their specific target antigens from the complete proteome of any disease-causing agent (the “High Throughput System”);
WHEREAS, through expenditure of substantial effort and resources, Richard Malley, M.D., (“Hospital Principal Investigator”) has determined that a whole cell vaccine (WCV) made from killed unencapsulated pneumococcal cells, as well as purified antigens, can protect animals against colonization via CD4 + T H l7 responses;
WHEREAS, Company and Hospital (including Hospital Principal Investigator) agree that identification of effective antigens (e.g., T cell antigens) useful in vaccine systems is particularly challenging and that application of the High Throughput System to the problem of identifying pneumococcal T-cell antigens would be of mutual interest and benefit to Hospital and to Company and may further the practice of medicine and the research mission of Hospital in a manner consistent with its status as a non-profit, tax-exempt, teaching hospital;
WHEREAS, Hospital and Company are willing to collaborate and conduct research in the fie1d of pneumococcal T cell-based protein vaccines and wish to enter into this Agreement to conduct a research project entitled, Novel high-throughput screening platform to develop a pneumococcal protein-based vaccine (“Research Plan”). Hospital Principal Investigator and Company regard this project as a scientific collaboration and treat matters of authorship and experimental plans as such;
NOW, THEREFORE, the parties agree as follows:

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1. Hospital/Principal Investigator Responsibilities.
(a)      Principal Investigator agrees to participate in Research Plan described in Appendix A. The scope of participation and timeframe of participation is expected to commence and terminate in accordance with the collaborative research agreement with PATH Vaccine Solutions (“PVS”) dated June 19, 2008 between PVS and Hospital and in accordance with the collaborative research agreement with PVS dated April 21, 2008 between PVS and Company, and may be extended and additional material added by amendment(s) mutually agreed to by Hospital and Company in writing.
(b)      Principal Investigator shall provide to Company certain written information, materials and data (collectively “Hospital Material”) as necessary for the performance of the Research Plan, and/or as otherwise agreed by the parties and as listed in Appendix B.
2.      Company Responsibilities.
(a)      Company agrees to participate in Research Plan described in Appendix A. The scope of participation and timeframe of participation is expected to commence and terminate in accordance with the collaborative research agreement with PVS dated June 19, 2008 between PVS and Hospital and in accordance with the collaborative research agreement with PVS dated April 21, 2008 between PVS and Company, and may be extended and additional material added by amendment(s) mutually agreed to by Hospital and Company in writing.
(b)      Company shall provide to Hospital Principal Investigator written information, materials and data (collectively, “Company Material”) as necessary for the performance of the Research Plan and/or as otherwise agreed by the parties and as listed in Appendix C.
3.      Confidentiality of Hospital/Company Materials. The parties agree Hospital/Company Material shall constitute Confidential Information (as defined below in Section 5(a)(1)), and in the case of Hospital, to use such Material for research purposes only and in the case of Company, to use such Material for research and development purposes only.
4.      Publications. The parties encourage academic publications to issue as a result of the performance of the Research Plan. In anticipation of a continuing collaborative relationship as a result of this Agreement, the parties agree that authorship of future publications shall be determined on a case by case basis in accordance with accepted academic standards. In the event a party publishes independently of the other, such party shall provide copies of publications arising or related to the Research Plan (“Publications”) to the other party at least 30 days in advance of submission for publication. The party receiving such copy shall have the right to



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(a) request a sixty (60) day delay in publication in order to submit a patent application on any disclosed subject matter or otherwise protect any patentable information, and (b) edit the publication in a manner reasonably acceptable to the independently submitting party to protect confidential information. All such Publications will include the following acknowledgment of PVS’s financial support of the Research Program: “Funded in whole or in part by Program for Appropriate Technology in Health (PATH)”. The parties agree that PVS may publish the Data after a time period of twelve (12) months after completion of the Research Plan, subject to the procedures and limitations set forth in the applicable collaborative research agreements between Hospital and PVS and between Company and PVS.
5.      Intellectual Property.
(a)      Definitions .
(1)      “Confidential Information” shall mean all scientific, technical, financial or business information owned, possessed or used by the disclosing party that (a) is marked or if orally disclosed must be followed up by in writing within thirty (30) days that is treated by the disclosing party as confidential or proprietary, or (b) a person skilled in the industry would reasonably know is confidential; including without limitation, data, development and marketing plans, regulatory and business strategies, financial information, and forecasts, information of third parties that a party has an obligation to keep confidential and Hospital Materials, in the case of Hospital, and Company Materials, in the case of Company.
(2)      For purposes of this Agreement, the term “Data” shall mean any and all information, materials and results arising from the performance of the Research Plan (“Data”). Each Party shall promptly provide Data obtained in performance of the Research Plan to the other Party. Subject to Section 4 concerning publication, it is appreciated that all Data are considered to be Confidential Information and shall be avidly protected as such by the Party obtaining the Data. Data shall be presented to the other Party in a common technical document format similar to Data provided by Company to PVS.
(3)      “Research Plan Intellectual Property” shall mean any product, know how, information, discovery, invention, patent or patent application including related reissues, divisionals, continuations, and continuations-in-part) that is discovered, conceived, made, developed or reduced to practice either jointly, or by Hospital, or Company individually by performance of the Research Plan detailed in Appendix A. Each party shall promptly disclose to the other party under confidentiality the invention or discovery of any Research Plan Intellectual Property. Each party shall also disclose to the other party the intent to file for intellectual



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property protection, including patents and provisional patents, on solely-owned Research Plan Intellectual Property (“Sole Inventions”).
(b)      Confidentiality Obligations .
(1)      Subject to the terms of this Agreement, neither party shall, directly or indirectly, publish, disseminate or otherwise disclose, or deliver or make available to any third party, or use any Confidential Information of the disclosing party, other than in furtherance of the purposes of this Agreement. Each party shall exercise all reasonable precautions to protect the integrity and confidentiality of the disclosing party’s Confidential Information. The receiving party may disseminate or permit access to Confidential Information only to Company or Hospital personnel (as applicable) who have a need-to-know such Confidential Information in the course of the performance of their duties under this Agreement and who are bound to obligations of confidentiality and non-use of the Confidential Information that are at least as restrictive as those set forth in this Agreement. This obligation shall continue, for five (5) years following the date of termination of this Agreement, but may be modified by written agreement.
(2)      Further, during the course of the parties’ performance of the Research Plan, each party may have their respective employees working on the other party’s site to further the objectives of the Research Plan. In this capacity, it is expected that such employee will receive or be exposed to, and may learn about the existence of, certain Confidential Information that is not related to the Research Plan (“Non-Research Plan Confidential Information’’). It is expressly agreed that such Non-Research Plan Confidential Information shall not , without the prior written consent of the disclosing party, be used for any purpose, including the purposes of this Agreement. For the avoidance of doubt, Company Materials and Hospital Materials shall not constitute Non-Research Plan Confidential Information.
(3)      Neither party shall have any obligations of confidentiality and non-use with respect to any portion of the Confidential Information which: (a) is or later becomes generally available to the public by use, publication or the like, through no-fault of the receiving party; (b) is obtained by the receiving party from a third party who had the legal right to disclose such Confidential Information to the receiving party without obligation of confidentiality; (c) is in receiving party’s prior possession without obligation of confidentiality, as evidenced by receiving party’s contemporaneously dated written records; or (d) is independently developed by the receiving party without use of the disclosing party’s Confidential Information. In the event that either party is required by order of a court or other government entity having jurisdiction to disclose any Confidential Information, the receiving party shall give the disclosing party prompt notice thereof so that the disclosing party may seek an appropriate protective order. The



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receiving party shall reasonably cooperate with the disclosing party in its efforts to seek such a protective order. If any such order does not fully preclude disclosure of the Confidential Information, the receiving party shall make such disclosure only to the extent that such disclosure is legally required.
(4)      In the event a receiving party performs unauthorized work (e.g., work outside the Purpose and/or work with Non-Research Plan Confidential Information) utilizing any Confidential Information of the other party, all data and any inventions or discoveries, whether patentable or not, arising from such unauthorized work are and shall be the sole and exclusive property of the disclosing party, and the receiving party shall and hereby does assign its entire right, title and interest, in any such data; inventions or discoveries to the disclosing party. For the avoidance of doubt, inventions pursuant to this Section 5(b)(4) shall not Constitute Research Plan Intellectual Property and shall be referred to as “Non-Research Plan IP”.
(c)      Ownership .
(1)      Each party shall own all right, title and interest to that Research Plan Intellectual Property that it solely invented, such inventorship to be determined consistent with U.S. patent law whether or not the invention has been patented. Each party shall ensure that its respective inventor(s) assign his/her ownership interest in the Sole Invention to the party by which he/she was employed when the Sole Invention was created.
(2)      Each party shall unilaterally decide whether its Sole Invention should be patented, where it should be patented (i.e. United States and/or certain foreign countries) and when it is appropriate to seek patent protection. Patent applications or patents for Sole Inventions shall be filed, prosecuted and maintained by the party whose personnel solely created or invented the Sole Invention and patent costs for such patent applications and patents shall be borne by the party whose personnel created or invented the Sole Invention.
(3)      In the event a party elects not to prosecute or maintain any patent application described herein (excluding Non-Research Plan IP), that party (the “Declining Party”) shall notify the other party (the “Non-Declining Party”) at least thirty (30) days prior to taking or not taking, any action which would result in abandonment, withdrawal or lapse of such patent or patent application; in such event, the Non-Declining Party may thereafter file, prosecute or maintain the patent or patent application. The Non-Declining Party shall reimburse the Declining Party for any expenses the Declining Party incurs in evaluating, prosecuting, maintaining or consulting with Company with regard to any patent application described herein.



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(4)      The parties shall jointly own the Research Plan Intellectual Property that they jointly invented (“Joint Inventions”). Hospital and Company shall collaborate to maintain proper record of inventorship on Joint Inventions, such inventorship to be determined consistent with US patent law whether or not the inventions has been patented. All patent applications on Joint Inventions shall be assigned to both Company and Hospital and each party shall ensure that its respective inventor(s) assign his/her ownership interest in the patent rights to the party by which he/she was employed when the Joint Invention was created. Company shall assume sole responsibility for filing, prosecution, maintenance and defense/enforcement of Joint Inventions.
(5)      “Background Intellectual Property” shall mean all intellectual property related to the Research Plan developed, and/or owned and/or acquired by a party or outside the purview of this Agreement, before the date the Research Plan commenced. The Background Intellectual Property of a party shall remain the separate intellectual property of such party. No rights to Background Intellectual Property are conferred by this Agreement, other than a limited license right to use Background Intellectual Property solely as required to perform the Research Plan. Any such limited license right shall and does terminate immediately upon completion of the relevant work under the Research Plan.
(6)      Company and Hospital each acknowledge the funding contribution of PVS to each party and its mission to make vaccines and technologies accessible, available, and affordable to the developing countries. Therefore, Hospital and Company hereby jointly grant to PVS at no additional cost a non-exclusive royalty-free license, with the right to sublicense, to the Research Plan Intellectual Property including any patent rights related thereto to: i) develop, make or have made, and use a pneumococcal T-cell based protein vaccine in the world; and ii) use, market, promote, distribute and sell a pneumococcal T-cell based protein vaccine in Developing Countries (“PVS License”). “Developing Countries” shall mean (i) those countries identified by the World Bank as of April 21, 2008 (i.e., the effective date of the collaborative research agreement between PVS and Company) as having “‘low-income economies” or “lower-middle income economies” and (ii) Argentina, Brazil, Chile, Mexico and South Africa, provided these five countries specifically listed herein are not reclassified as “high income economies” by the World Bank as of the date that the license is granted to PVS pursuant to this Agreement.
6.      License Rights and Terms. Hospital shall and hereby does grant to Company a fully paid up, nonexclusive right to Hospital’s rights in any invention made under this Agreement solely for internal research and development purposes (inclusive of permitting third parties to conduct such research and development on Company’s behalf). Hospital hereby grants to Company an exclusive option to negotiate an exclusive license to Hospital’s interest in any and all Research Plan Intellectual Property (the “Option”). Company shall have sixty (60) days (the



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“Option Term”) after receipt of written notice from Hospital of a relevant invention, to exercise this Option. In addition to the exclusivity during the Option Term, once the option has been exercised, Hospital shall not negotiate with any third party for rights to the optioned invention for a period of twelve (12) months, extendible by agreement of the Parties if licensing negotiations between the Parties are proceeding (the “Negotiation Term”). Should the Negotiation Term expire without license terms being agreed to, then Hospital shall have no further obligation to Company with respect to licensing that invention, and shall be free to enter into licenses with any third parties except that Hospital shall notify Company if and when it enters into any third party license to the invention. Any license to Hospital’s rights in Research Plan Intellectual Property negotiated pursuant to this provision shall include articles directed to the following:
(a)      Rights of the United States government reserved under Public Laws 96-517, 97-256, and 98-620, codified at 35 U-.S.C. 200-212, and any regulations promulgated thereunder, if appropriate.
(b)      Requirement for due diligence in the development of the subject matter claimed in the licensed patent(s) -for public use.
(c)      Reservation of the unrestricted right of Hospital to use subject matter claimed in the licensed patent(s) for academic research purposes.
(d)      The CRICO Uniform Indemnification and Insurance provisions then in effect.
(e)      Licensing fees, royalties, and/or other payments that reflect the respective contributions of the parties to the licensed technology and similar, contemporary agreements between for-profit and non-profit institutions.
7.      Communications. Requests and notices regarding this agreement shall be given in writing, to the following addresses with a copy to Hospital Principal Investigator:
To Hospital
Fernando Vallés, J.D.
Corporate Sponsored Research Officer
Children’s Hospital
300 Longwood Avenue
Boston MA 02115

To Company
Genocea Biosciences, Inc,



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c/o Chief Executive Officer
161 First Street, Suite 2C
Cambridge, MA 02142

8.      Use of Names. Each party agrees not to use of refer to this Agreement in any promotional activity, or to use the names of the other party, its employees, or Hospital Principal Investigator without prior written permission. However, each party shall have the right to acknowledge in scientific publications and other scientific communications the source of materials used in the collaboration.
9.      Term. This Agreement shall be effective for the period given in Article l(a) above.
10.      General Provisions
(a)      All rights and remedies, hereunder will be cumulative and not alternative, and this Agreement shall be construed and governed by the laws of the Commonwealth of Massachusetts.
(b)      This Agreement may be amended only by written agreement signed by both parties.
(c)      Company and Hospital agree to conduct the Research Plan in accordance with all applicable Federal, State and local laws and regulations, as well as with applicable regulations of Hospital.
(d)      It is expressly agreed by the parties hereto that Hospital and Company are independent contractors and nothing in this Agreement is intended to create an employer relationship, joint venture, or partnership between the parties. Neither party has the authority to bind the other.
(e)      If any provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired thereby.
(f)      EXCEPT AS PROVIDED HEREIN, HOSPITAL, MAKES NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY PATENT, TRADEMARK, SOFTWARE, TRADE SECRET, TANGIBLE RESEARCH PROPERTY, INFORMATION, MATERIAL OR DATA PROVIDED TO COMPANY HEREUNDER AND HEREBY



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DISCLAIMS THE SAME. HOSPITAL SHALL NOT BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL OR OTHER DAMAGES SUFFERED BY COMPANY RESULTING FROM COMPANY’S USE OF ANY PATENT, TRADEMARK, SOFTWARE, TRADE SECRET, TANGIBLE RESEARCH PROPERTY, INFORMATION, MATERIAL OR DATA PROVIDED TO COMPANY HEREUNDER.
(g)      This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against the party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument.
(h)      Each, party hereto agrees to execute, acknowledge and deliver such further instruments and do all such further acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
(i)      The paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.



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IN WITNESS WHEREOF, the parties have executed this Agreement us of the date first written above.
CHILDREN’S HOSPITAL

By: /s/ Carleen Brunelli, Ph.D., MBA    
Title: Carleen Brunelli, Ph.D., MBA
Vice President of Research Administration
Date:     Sept 5, 2008             
COMPANY

By:     /s/ Robert Paull          
Title:     President                 
Date:     9.17.08             

HOSPITAL PRINCIPAL INVESTIGATOR ACKNOWLEDGMENT:
By: /s/    HOSPITAL PRINCIPAL INVESTIGATOR    
Date:     9/8/08        ____         




EXHIBIT 10.1
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APPENDIX A
RESEARCH PLAN
[●]

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APPENDIX B
[* * *]



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APPENDIX C
Company Responsibilities
[†]





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Appendix 4
CHILDREN’S HOSPITAL COLLABORATIVE RESEARCH AGREEMENT
[● ●]



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Side Letter
March 23, 2012
Erik Halvorsen, PhD
Executive Director
Technology and Innovation Development Office
Children’s Hospital Boston
300 Longwood Avenue
Boston, MA 02115

Re:     Share of Sublicense Payments
Erik,
As you know, Genocea Biosciences, Inc. (“ Genocea ”) and Children’s Medical Center Corporation (“ CMCC ”) are parties to that certain Amended and Restated Exclusive License Agreement, dated March 23, 2012 (the “ Agreement ”). The purpose of this letter is to confirm the parties’ understanding with respect to certain financial terms in the Agreement. Capitalized terms used but not otherwise defined herein shall have the same meaning attributed to them in the Agreement.
To the best of Genocea’s knowledge as of the Effective Date of the Agreement, neither Genocea nor its Affiliates is under an active license agreement with any third party licensor of patent rights (“ Licensor ”) to make, have made, use, sell or import a multi-component vaccine product that also falls under the definition of a Licensed Product which obligates Genocea or any Affiliate to pay to such Licensor a percentage of any sublicensing payment or other non-royalty sublicensing income (e.g., up-front license fees, lump sum payments, milestone payments or technology transfer payments) that they receive (“ Non-Royalty Sublicensing Income ”) that is [* * *] the [* * *] of such amount that Genocea is also required to make to CMCC as a Sublicensee Payment pursuant to Article IV Paragraph C of the Agreement.
In the event the foregoing statement is subsequently discovered to be inaccurate, Genocea shall pay to CMCC: (a) the difference between the single highest percentage of any Non-Royalty