UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

For the quarterly period ended June 30, 2016

OR

For the transition period from                      to                     

Commission file number: 000-51173

 

Catalyst Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

(650) 266-8674

(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):

 

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 July 29, 2016, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 11,835,864.

 

 

 

 

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CATALYST BIOSCIENCES, INC.

TABLE OF CONTENTS

 

 

 

 

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PART I. FINANCIAL INFORMATION

Catalyst Biosciences, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Catalyst Biosciences, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Catalyst Biosciences, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Catalyst Biosciences, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Catalyst Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

 

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Catalyst Biosciences, Inc. (the “Company” or “Catalyst”), is a clinical-stage biotechnology company focused on engineering proteases as therapeutics for hemophilia, hemostasis and complement-mediated diseases. Its facilities are located in South San Francisco, California and it operates in one segment.  

Prior to August 20, 2015, the name of the Company was Targacept, Inc. On August 20, 2015, Targacept completed its business combination with “Old Catalyst” in accordance with the terms of an Agreement and Plan of Merger, dated as of March 5, 2015, as amended on May 6 and May 13, 2015, by and among Targacept, Talos Merger Sub, Inc. (“Merger Sub”) and Old Catalyst, pursuant to which Merger Sub merged with and into Old Catalyst, with Old Catalyst surviving as a wholly-owned subsidiary of Targacept (the “Merger”). Also on August 20, 2015, in connection with, and prior to the completion of, the Merger, Targacept effected a 7-for-1 reverse stock split of its common stock (the “Reverse Stock Split”) and changed its name from Targacept, Inc. to Catalyst Biosciences, Inc. Following the completion of the Merger, the business conducted by the Company became primarily the business conducted by Old Catalyst described in the paragraph above. We refer in this Quarterly Report on Form 10-Q to the business combination as the “Merger,” to the Company prior to the Merger as “Targacept” and to our subsidiary as “Old Catalyst,” and discussions of historical results reflect the results of Old Catalyst prior to the completion of the Merger and do not include the historical results of Targacept prior to the completion of the Merger.

On August 19, 2015, prior to and in connection with the Merger, the Company paid a dividend to the Targacept holders consisting of cash and non-interest bearing redeemable convertible notes (the “Pre-Closing Dividend”), see Note 6 for further detail. In connection with the Pre-Closing Dividend and the reverse-stock split, the Company adjusted the number of shares subject to each outstanding option to purchase its common stock. On August 20, 2015, upon the completion of the Merger, the Company issued shares of its common stock to Old Catalyst stockholders in exchange for each share of Old Catalyst common stock outstanding immediately prior to the Merger and assumed all of the outstanding options and warrants of Old Catalyst, with such options and warrants henceforth representing the right to purchase a number of shares of the Company’s common stock. All preferred stock and warrants were converted to common stock and warrants to purchase common stock upon the closing of the Merger.

 

 

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and following the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s financial information. These interim results and cash flows for any interim period are not necessarily indicative of the results to be expected for the full year.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (“Annual Report”).

The Company’s significant accounting policies are included in “Part II - Item 8 - Financial Statements and Supplementary Data - Note 2 – Summary of Significant Accounting Policies” in the Company’s Annual Report. There have been no significant changes to these accounting policies during the first six months of 2016.

 

 

For a description of the fair value hierarchy and our fair value methodology, see “Part II - Item 8 - Financial Statements and Supplementary Data - Note 2 – Summary of Significant Accounting Policies” in the Company’s Annual Report. There were no significant changes in these methodologies during the six months ended June 30, 2016. As of June 30, 2016 and December 31, 2015, the Company’s highly liquid money market funds included within cash equivalents and restricted cash including deposit in an escrow account are financial assets that are valued using Level 1 inputs. The Company classifies its municipal bonds and corporate notes as Level 2. 

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. There were no transfers in or out of Level 1 and Level 2 during the periods presented.

Liabilities that are measured at fair value consist of the derivative liability that utilize Level 3 inputs. There were no transfers in or out of Level 3 during the periods presented.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 (in thousands):

 

 

 

 

The fair value of the derivative liability is measured using the Black-Scholes option-pricing valuation model. Inputs used to determine the estimated fair value of the conversion option include the fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the conversion option, risk-free interest rates, and expected dividends on and expected volatility of the price of the underlying common stock. In addition, the Company estimated the convertible redeemable note exchange rate based on an analysis of its actual exchange of notes for cash redemption or exchange of notes for conversion to common stock. See Note 6 for further detail.

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

The following table presents the activity for the derivative liability measured at estimated fair value using unobservable inputs as of June 30, 2016 (in thousands):

 

 

The estimated reporting date fair value-based measurement of the derivative liability was calculated using the Black-Scholes valuation model, based on the following weighted-average assumptions for the six months ended June 30, 2016:

 

 

 

Cash equivalents, restricted cash and short-term investments, all of which are classified as available-for-sale securities, consisted of the following (in thousands):

 

 

 

As of June 30, 2016, the remaining contractual maturities of available-for-sale securities were less than one year. There have been no significant realized gains or losses on available-for-sale securities for the periods presented.

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

In May and June 2015, Old Catalyst issued and sold convertible promissory notes in a series of closings in the aggregate principal amount of $1.9 million to existing stockholders, together with warrants to purchase shares of either the Old Catalyst’s Series E preferred stock or the capital stock issued during the next financing. The convertible promissory notes accrued interest at a rate of 12% per annum and were to mature one year from the date of issuance.

In connection with the debt financing, Old Catalyst also issued and sold to each investor purchasing a convertible promissory note a warrant to purchase equity securities of the same type that the principal amount of the convertible promissory note issued to such investor converts into.

In conjunction with the second closing in June 2015 of the Series F convertible preferred stock financing, Old Catalyst and the majority holders of the notes amended the notes such that the closing constituted a qualified financing and, accordingly, the total outstanding principal amount of the notes of $1.9 million and all unpaid accrued interest of $0.03 million, were converted into 1,511,723 shares of Series F convertible preferred stock and warrants for the purchase of 372,045 shares of Series F convertible preferred stock were issued to the note holders in connection with the conversion of the notes to Series F convertible preferred stock. All preferred stock and warrants were converted to common stock and warrants to purchase common stock upon the closing of the Merger.

As the recipients of the convertible promissory notes each had an equity ownership in the Company, the convertible promissory notes were considered to be a related-party transaction.

For the three and six months ended June 30, 2016 and 2015, the Company recognized interest expense of $0 related to the accrued interest and amortization of the debt discount.

All outstanding shares of Old Catalyst’s convertible preferred stock and warrants to purchase convertible preferred stock were converted into shares of the Company’s common stock and warrants to purchase common stock upon completion of the Merger.

On August 19, 2015, immediately prior to the Merger, the Company issued to Targacept stockholders non-interest bearing redeemable convertible notes (the “Notes”) in the aggregate principal amount of $37.0 million. The Notes do not bear interest. The principal amount of the Notes are convertible, at the option of each noteholder, into cash or into shares of the Company’s common stock at a conversion rate of $9.19 per share (after taking into account the Reverse Stock Split), and are payable in cash, if not previously redeemed or converted, at maturity on February 19, 2018, the 30-month anniversary of the closing of the issuance of the Notes.

In connection with the Pre-Closing Dividend, on August 19, 2015, Targacept entered into an indenture (the “Indenture”) with American Stock Transfer & Trust Company, LLC, as trustee, and an escrow agreement with American Stock Transfer & Trust Company, LLC and Delaware Trust Company, LLC, as escrow agent, under which $37.0 million, which represented the initial principal amount of the convertible notes, was deposited in a segregated escrow account for the benefit of the holders of the notes in order to facilitate the payment of the notes upon redemption or at maturity (the amount of such deposit together with interest accrued and capitalized thereon, the “Escrow Funds”). The Notes are the Company’s secured obligation, and the Indenture does not limit its other indebtedness, secured or unsecured.

Holders of the Notes may submit conversion notices, which are irrevocable, instructing the trustee to convert such the Notes into shares of the common stock at a conversion price of $9.19 per share. Following each conversion date, the Company will issue the number of whole shares of common stock issuable upon conversion as promptly as practicable (and in any event within 10 business days). The trustee will in turn release to the Company the respective amount of restricted cash to cover the stock issuance.

The conversion to common stock feature of the Notes was determined to be a derivative liability requiring bifurcation and separate accounting. The fair value of such conversion feature at issuance was determined to be $1.5 million. The Company initially estimated the fair value of the conversion option using the Black-Scholes option-pricing valuation model with the following assumptions: expected term of 2.25 years, risk-free interest rate of 0.84%, expected volatility of 70.0%, anticipated future exchange rate of the Notes and a dividend yield of 0%.

The bifurcation of the derivative liability from the estimated fair value of the Notes of $37.1 million at issuance resulted in a debt discount of $1.4 million. The Company elected to accrete the entire debt discount as interest expense immediately subsequent to the Merger. In addition, changes in the fair value of the derivative liability are being recorded within interest and other income in the consolidated statements of operations. The Company remeasures the derivative liability to fair value until the earlier of the conversion, redemption or maturity of the redeemable convertible notes.

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

For the three and six months ended June 30, 2016 and 2015, the Company did not recognize interest expense related to the amortization of the debt discount within interest expense on the Company’s consolidated statement of operations as the redeemable convertible notes are immediately fully redeemable at the option of the holders.

As of June 30, 2016, $6.4 million of the Notes were redeemed and $0.3 million of the Notes were converted into common stock since the Merger took effect. For the three and six months ended June 30, 2016, the Company recognized $0 million and $0.1 million of gain on the extinguishment of Notes upon the redemption of the Notes.

 

 

The Company assumed all of the outstanding options under Old Catalyst’s 2004 Stock Plan (the “Catalyst Plan”) and all of the standalone options of Old Catalyst that were not issued under the Catalyst Plan, in each case whether or not vested, outstanding immediately prior to the Merger, with such options henceforth representing the right to purchase that number of shares of the Company’s common stock equal to 0.0382 multiplied by the number of shares of Old Catalyst common stock previously represented by such options. For accounting purposes, however, the Company is instead deemed to have assumed all of the options under the Targacept, Inc. 2000 Equity Incentive Plan and the 2006 Stock Incentive Plan and all of the standalone options of Targacept that were not issued under such plans outstanding immediately prior to the Merger (such plans and options, together with the Catalyst Plan and the standalone Catalyst options, the “Plans”), in addition to the Company’s 2015 Stock Incentive Plan (as subsequently amended and restated).

The following table summarizes stock option activity under the Plans including stock options granted to non-employees, and related information:

 

 

Valuation Assumptions

The Company estimated the fair value of stock options granted using the Black-Scholes option-pricing formula and a single option award approach. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period. The fair value of employee stock options was estimated using the following weighted-average assumptions for the six months ended June 30, 2016 and 2015:

 

 

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

Total stock-based compensation recognized was as follows (in thousands):

 

 

As of June 30, 2016, the Company had unrecognized employee stock-based compensation expense of $1.5 million, related to unvested stock awards, which is expected to be recognized over an estimated weighted-average period of 2.98 years.

Pfizer

On August 20, 2013 the Company and Pfizer entered into an amendment to the Factor VIIa collaboration agreement whereby the companies agreed to provide specific mutual releases and covenants and modify certain milestone payment schedules in the agreement. Per the amendment, Pfizer agreed to make two non-refundable $1.5 million annual license maintenance payments to the Company, payable on August 1, 2014 and August 1, 2013. The annual license maintenance payments received were being amortized to contract revenue over the estimated expected performance period under the arrangement, which the Company estimated was to the end August 1, 2015.

On April 2, 2015, Pfizer notified the Company that it was exercising its right to terminate in its entirety the collaboration agreement. The termination became effective 60 days after the Company’s receipt of the termination notice. On June 1, 2015, the license and certain rights under the research and license agreement terminated and reverted back to the Company. Pfizer is in the process of transferring clinical trial data, regulatory documentation and related technology under the research and license agreement to the Company. The Company plans to continue clinical development of this product candidate. The Company revised the expected period of performance to end on June 1, 2015, which was the effective termination of all performance obligations of the Company under the research and license agreement. Accordingly, all deferred revenue was recognized through June 1, 2015.

Contract revenue related to the agreement with Pfizer was $0 and $0.8 million during the three months ended June 30, 2016 and 2015 and $0 and $1.3 million during the six months ended June 30, 2016 and 2015, respectively.

ISU Abxis

On June 16, 2013, the Company entered into a license and collaboration agreement with ISU Abxis, whereby the Company licensed its proprietary human Factor IX products to ISU Abxis for initial development in South Korea. Under the terms of the agreement, ISU Abxis is responsible for development and manufacturing of the licensed products through Phase 1 clinical trials. Until the completion of Phase 1 development, ISU Abxis also has a right of first refusal with respect to commercialization rights for the licensed products in South Korea. The Company has the sole rights and responsibility for worldwide development, manufacture and commercialization of Factor IX products after Phase 1 development, unless ISU Abxis has exercised its right of first refusal regarding commercialization rights in South Korea, in which case the Company’s rights are in the entire world excluding South Korea. ISU’s rights will also terminate in the event that the Company enters into a license agreement with another party to develop, manufacture and commercialize Factor IX products in at least two major market territories.

ISU Abxis paid the Company an up-front signing fee of $1.75 million and is obligated to pay to the Company contingent milestone-based payments on the occurrence of certain defined development events, and reimbursement for a portion of the Company’s costs relating to intellectual property filings and maintenance thereof on products. The Company is obligated to pay ISU Abxis a percentage of all net profits it receives from collaboration products.

Contract revenue of $0.1 million for both the three months ended June 30, 2016 and 2015 and $0.2 million for both of the six months ended June 30, 2016 and 2015, reflected the amortization of the up-front fee over the estimated period of the Company’s performance obligations under the agreement, which was assessed to be four years beginning in September 2013 when the agreement was executed. The deferred revenue balance related to the ISU Abxis collaboration was $0.5 million and $0.7 million as of June 30, 2016, and December 31, 2015, respectively.

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

The following table sets forth the computation of the basic and diluted net loss per share during the three and six months ended June 30, 2016 and 2015 (in thousands, except share and per share data):

 

 

Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities on an as-if converted basis that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

 

 

On March 16, 2016, the Company entered into a Capital on Demand^TM Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”). In accordance with the terms of the sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price up to $6.5 million, subject to certain limitations, from time to time in one or more public offerings of the Company’s common stock, with JonesTrading acting as agent, in transactions pursuant to a shelf registration statement that was declared effective by the SEC on April 28, 2016.

During the three and six months ended June 30, 2016, the Company sold 73,459 shares of common stock in the Capital on Demand^TM program, in the open market at a weighted-average selling price of $2.18 per share, for net proceeds (net of commissions) of $0.2 million. The Company expensed approximately $0.1 million of costs for the offering, excluding JonesTrading commissions. During the three and six months ended June 30, 2016 the Company charged $0.004 million of these costs against additional paid-in capital, respectively. As of July 29, 2016 the Company had up to $5.8 million of common stock available for sale under the Controlled Equity Offering^TM program.

Operating Leases

Future minimum lease payments under all non-cancelable operating leases as of June 30, 2016, were as follows (in thousands):

 

Manufacturing Agreements

On May 20, 2016, the Company entered into a development and manufacturing services agreement with CMC ICOS Biologics, Inc. (“CMC”), pursuant to which CMC will conduct manufacturing development and, upon successful development of the manufacturing process, manufacture the Company’s next-generation Factor VIIa variant CB 813d that the Company intends to

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Catalyst Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)

 

use in its clinical trials. The Company has agreed to a total of $3.8 million in payments to CMC pursuant to the initial statement of work under the Agreement, subject to completion of applicable work stages. As of June 30, 2016 the Company is obligated to $3.5 million in payments to CMC.

On April 15, 2016, the Company entered into a definitive sales agreement with Attenua, Inc. (“Attenua”), on the sale of TC-5619, TC-6987 and TC-6683, certain neural nicotinic receptor assets acquired from Targacept in the Merger, for approximately $1.0 million in upfront payments and the potential for future milestones and royalties, of which $0.7 million was received and recorded as deposits as of June 30, 2016. Subsequently the Company amended the April 15, 2016 contract on July 27, 2016 and received the remaining $0.3 million due thereunder together, with a warrant to purchase shares of Attenua’s capital stock as additional consideration. In connection with the closing of the transaction on July 27, 2016, the Company recognized the cash deposit of $0.7 million into other income.

 

 

 

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Unless otherwise indicated, in this Quarterly Report on Form 10-Q, (i) references to “Catalyst,” “we,” “us,” “our” or the “Company” mean Catalyst Biosciences, Inc. and our subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (“Report”).

In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding the strategies, prospects, plans, expectations or objectives of management for future operations, the progress, scope or duration of the development of product candidates or programs, clinical trial plans, timelines and potential results, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our ability to protect intellectual property rights, our anticipated operations, financial position, revenues, costs or expenses, statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” elsewhere in this Report and in Part I - Item 1A – “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (“Annual Report”). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

We are a clinical-stage biopharmaceutical company focused on creating and developing novel medicines to address serious medical conditions. To date, we have focused our product development efforts in the fields of hemostasis, including the treatment of hemophilia and surgical bleeding, and inflammation, including the prevention of delayed graft function (“DGF”) in renal transplants and the treatment of dry age-related macular degeneration (“Dry AMD”), a condition that can cause visual impairment or blindness for which there are no approved treatments. Our most advanced program is an improved next-generation coagulation Factor VIIa variant, CB 813d, which has successfully completed an intravenous Phase 1 clinical trial in severe hemophilia A and B patients. In addition to our lead Factor VIIa program, we have two other next-generation coagulation factors, a Factor IX variant, CB 2679d/ISU 304, which is in advanced preclinical development, and several Factor Xa variants that have demonstrated efficacy and safety in preclinical animal models. Proteases regulate several complex biological cascades, or sequenced biochemical reactions, including the coagulation cascade that controls bleeding (hemostasis) in hemophilia and non-hemophilia settings and the complement cascade that causes inflammation and tissue damage in certain diseases.

Our most advanced program is an improved next-generation coagulation Factor VIIa variant, CB 813d, which has completed an intravenous Phase 1 clinical trial evaluating safety and tolerability as well as pharmacokinetics, pharmacodynamics and coagulation activity in severe hemophilia A and B patients. We expect to advance CB 813d into a subcutaneous prophylaxis dosing trial in 2017, to be followed if successful by a pivotal clinical efficacy trial in hemophilia A and hemophilia B inhibitor patients. Based on our research, we estimate annual worldwide sales in 2014 for FDA-approved recombinant Factor VIIa products were approximately $1.6 billion. In addition to our lead Factor VIIa program, we have a Factor IX variant, CB 2679d/ISU 304, which is in advanced preclinical development, and several Factor Xa variants, for which we have delayed initiating further research studies so that we can focus our efforts and resources on advancing CB 813d, our next generation Factor VIIa, and CB 2679d, our next-generation FIX, through Phase 2/3 and Phase 1/2 clinical trials, respectively. In addition to intravenous dosing, the substantially enhanced potency of CB 813d and CB 2679d/ISU 304 may allow efficacious prophylaxis for hemophilia inhibitor patients (CB 813d) or hemophilia B patients (CB 2679d/ISU 304), respectively, using subcutaneous administration, thereby achieving significant differentiation versus competing intravenous therapeutics, particularly for pediatric patients and prevention of micro bleeds. Consequently, the Company intends to evaluate subcutaneous dosing of CB 813d and CB 2679d/ISU 304 in preclinical models and, if appropriate, in clinical trials. Based on our research, we estimate annual worldwide sales in 2014 for FDA-approved Factor IX and Factor Xa-containing products were approximately $1.8 billion.

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On June 29, 2009, we entered into a research and license agreement with Wyeth Pharmaceuticals, Inc., subsequently acquired by Pfizer, whereby we and Pfizer collaborated on the development of novel human Factor VIIa products, and we granted Pfizer the exclusive rights to develop and commercialize the licensed products on a worldwide basis. As a result of this agreement, Pfizer paid us an up-front non-refundable signing fee of $21.0 million, which was initially recognized as revenue ratably over the term of our continuing involvement in the research and development of products with Pfizer, which was determined to be five years (covering the initial two-year research term plus potential extensions permitted under the applicable agreement).

During the initial two-years of the collaboration period, Pfizer reimbursed us for certain costs incurred in the development of the licensed products, including FTE-based research payments. Following the conclusion of the initial collaboration, without extension by Pfizer, we had no further substantive performance obligations to Pfizer under the agreement, and we recognized the remaining $12.6 million of deferred revenue related to the up-front fee in June 2011. Subsequently, in August 2013, we entered into an amendment to the Pfizer agreement, in accordance with which Pfizer made two $1.5 million non-refundable annual license maintenance payments to us in August 2013 and August 2014 and we agreed to certain performance obligations to Pfizer for the period starting from the effective date of the amendment. Pfizer was also obligated to pay to us contingent milestone-based payments upon the occurrence of certain defined development, commercialization, and sales-based milestones.

On April 2, 2015, Pfizer notified us that it was exercising its right to terminate the research and license agreement effective June 1, 2015. Accordingly, we revised the expected period of performance to end on June 1, 2015, and the deferred revenue balance was fully amortized as of that date. We are currently negotiating with Pfizer regarding rights to use certain manufacturing materials and the amount and timing of payments to Pfizer.

In September 2013, we entered into a license and collaboration agreement with ISU Abxis pursuant to which we licensed our proprietary human Factor IX products to ISU Abxis for initial development in South Korea. Under the agreement, ISU Abxis is responsible for development and manufacturing of the licensed products through Phase 1 clinical trials. Until the completion of Phase 1 development, ISU Abxis also has a right of first refusal with respect to commercialization rights for the licensed products in South Korea. ISU Abxis paid us an up-front signing fee of $1.75 million and is obligated to pay to us contingent milestone-based payments on the occurrence of certain defined development events, none of which have been achieved as of June 30, 2016. Collaboration and license revenue related to the ISU Abxis agreement during both the three months ended June 30, 2016 and 2015 was $0.1 million and $0.2 million for both of the six months ended June 30, 2016 and 2015, which reflects the amortization of the up-front fee over the estimated period of our performance obligations, which are estimated to conclude in August 2017. We had a deferred revenue balance of $0.5 million as of June 30, 2016 related to the ISU Abxis collaboration.

On August 20, 2015, we completed the business combination between Old Catalyst and Targacept in accordance with the terms of the Agreement and Plan of Merger, dated as of March 5, 2015, as amended on May 6 and May 13, 2015. Also on August 20, 2015, in connection with, and prior to the completion of, the merger, we effected a 7-for-1 reverse stock split of our common stock (the “Reverse Stock Split”) and changed our name to “Catalyst Biosciences, Inc,” discussed in “Part II - Item 8 - Consolidated Notes to the Financial Statements- Note 7 - Reverse Merger” in the Annual Report.

We have never been profitable and have incurred significant operating losses in each year since inception. Our net losses were $4.8 million and $1.7 million for the three months ended June 30, 2016 and 2015 and $8.4 million and $4.6 million during the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, we had an accumulated deficit of $139.5 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Our operating costs have decreased since 2012 due to the termination of the research activities under the Pfizer agreement and other agreements, a restructuring of our operations that included a reduction in work force, and the focusing of our research programs.

We expect to incur significant expenses and increasing operating losses for at least the next several years as we continue the preclinical and clinical development of, and seek regulatory approval for, our drug candidates. In addition, following the merger our expenses have further increased as a result of hiring additional financial personnel, upgrading our financial information systems and incurring costs associated with being a public company. In addition, our operating losses may fluctuate significantly from quarter to quarter and year to year due to timing of preclinical, clinical development programs and regulatory approval.

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Financial Operations Overview

Contract Revenue

Our contract revenue was generated by recognizing revenue from the amortization of up-front licensee fees for research and development services under our collaboration agreements with Pfizer and ISU Abxis. Payments made to us under these agreements are recognized over the period of performance for each arrangement. We may also be entitled to receive additional milestone payments and other contingent payments upon the occurrence of specific events. We have not generated any revenue from commercial product sales to date. As of June 2015, our deferred revenue balance from the Pfizer research and license agreement was fully amortized following the termination by Pfizer of that agreement, and ISU represents 100% of our total contract revenue for the three and six months ending June 30, 2016.

Due to the nature of the milestone payments under the remaining collaboration agreement and the nonlinearity of the earnings process associated with certain payments and milestones, we expect that our revenue will fluctuate in future periods, as a result of the uncertainty of timing related to achievement of milestones.

Research and Development Expenses

Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred.

Research and development expenses consist primarily of the following:

The following table summarizes our research and development expenses during the three and six months ended June 30, 2016 and 2015 (in thousands):

 

 

The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. We are currently focusing substantially all of our resources and development efforts on our clinical and preclinical pipeline. Our internal resources, employees and infrastructure are not directly tied to individual product candidates or development programs. As such, we do not maintain information regarding these costs incurred for these research and development programs on a project-specific basis.

We expect our research and development expenses will increase during the next few quarters as we continue the preclinical, manufacturing and clinical development of our product candidates in the United States. Due to the termination of the research and license agreement with Pfizer, we expect to incur costs in connection with the Factor VIIa program. However, the incurrence of such costs are dependent on whether we will pursue the program on our own or enter into a new collaboration and license arrangement with another pharmaceutical or biotech company.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for our product candidates. The probability of success of each product candidate may be affected by numerous factors, including clinical data, competition, manufacturing capability and commercial viability. As a result, we are unable

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to determine the duration of and costs to complete our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

Successful development of current and future product candidates is highly uncertain. Completion dates and costs for our research programs can vary significantly for each current and future product candidate and are difficult to predict. As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with development of our product candidates. We anticipate we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early research programs, results of ongoing and future clinical trials, our ability to enter into collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

On May 20, 2016, we entered into a development and manufacturing services agreement with CMC ICOS Biologics, Inc. (“CMC”), pursuant to which CMC will conduct manufacturing development and, upon successful development of the manufacturing process, manufacture our next-generation Factor VIIa variant CB 813d that we intend to use in its clinical trials. We will own all intellectual property developed in such manufacturing development activities that are specifically related to CB 813d and will have a royalty free and perpetual license to use CMC’s intellectual property to the extent reasonably necessary to make CB 813d, including commercial manufacturing.

We have agreed to a total of $3.8 million in payments to CMC pursuant to the initial statement of work under the Agreement, subject to completion of applicable work stages. In the event that clinical manufacturing batches need to be cancelled or rescheduled, we would be obligated to pay for a portion of CMC’s manufacturing fees less certain fees that CMC is able to mitigate. The initial term of the agreement is ten years or, if later, until all stages under outstanding statements of work have been completed. Either party may terminate the Agreement in its entirety upon written notice of a material uncured breach or upon the other party’s bankruptcy, and we may terminate the agreement upon prior notice for any reason. In addition, each party may terminate the agreement in the event that the manufacturing development activities cannot be completed for technical or scientific reasons.  

General and Administrative Expenses

General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, bonus, benefits and stock-based compensation. We have and expect to incur additional expenses associated with operating as a public company, including expenses related to new hires, compliance with the rules and regulations of the SEC and NASDAQ Stock Market LLC (“NASDAQ”), additional insurance expenses, additional audit expenses, investor relations activities, Sarbanes-Oxley “SOX” compliance expenses and other administrative expenses and professional services.

Interest and Other Income, Net

Interest and other income consists primarily of the changes in fair value of the derivative liability and in 2015 the warrant liability and sub-lease income earned in connection with the sub-lease of a portion of our leased facility.

The derivative liability is associated with the redeemable convertible notes we issued immediately prior to the closing of the merger in August 2015. The accounting for the redeemable convertible notes, which are convertible into shares of our common stock, requires us to bifurcate the embedded redemption feature and account for it as a derivative liability at its estimated fair value upon issuance. The derivative liability is remeasured to estimated fair value as of each balance sheet date. We will record adjustments to the fair value of the derivative liability at the end of each reporting period until the earlier of the conversion, redemption or maturity of the redeemable convertible notes.

We recorded adjustments to the estimated fair value of the preferred stock warrants until they converted into warrants to purchase shares of common stock upon the closing of the merger in August 2015. At that time, we reclassified the preferred stock warrant liability into additional paid-in capital and no longer recorded any related periodic fair value adjustments.

On February 23, 2015, we entered into a new lease for the portion of the space we previously occupied in our headquarters building. The initial term of the lease was set to expire on August 31, 2015. On June 8, 2015 we exercised our right to extend the lease term through February 27, 2018.

Interest Expense

Interest expense consists of accrued interest costs related to our convertible notes and the amortization of debt discount for the warrants that were issued in connection with the redeemable convertible notes.

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Results of Operations

The following tables set forth our results of operations data for the periods presented (in thousands):

 

 

Contract Revenue

Contract revenue was $0.1 million and $0.9 million during the three months ended June 30, 2016 and 2015, respectively, a decrease of $0.8 million, or 87%. The decrease in contract revenue was due primarily to the termination of our collaboration agreement with Pfizer in June 2015.

Contract revenue was $0.2 million and $1.5 million during the six months ended June 30, 2016 and 2015, respectively, a decrease of $1.3 million, or 86%. The decrease in contract revenue was due primarily to the termination of our collaboration agreement with Pfizer in June 2015.  

We have recognized in revenue all amounts that had been previously deferred related to the terminated Pfizer collaboration and, therefore, in future periods, will not recognize any additional revenue under our previous collaboration agreement with Pfizer.

Research and Development Expenses

Research and development expenses were $2.8 million and $1.3 million during the three months ended June 30, 2016 and 2015, respectively, an increase of $1.4 million, or 108%. The increase was due primarily to an increase of $0.6 million related to manufacturing expenses for CB 813d, $0.4 million in personnel-related costs in connection with increased development activities and hiring of additional development employees and an increase of $0.4 million in lab supply costs and costs related to preclinical third-party research and development service contracts.

Research and development expenses were $5.0 million and $2.7 million during the six months ended June 30, 2016 and 2015, respectively, an increase of $2.3 million, or 87%. The increase was due primarily to an increase of $0.9 million related to manufacturing expenses for CB 813d, $0.8 million in personnel-related costs in connection with increased research and development activities and hiring of additional development employees and an increase of $0.6 million in lab supply costs and costs related to preclinical third-party research and development service contracts.

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General and Administrative Expenses

General and administrative expenses were $2.3 million and $1.8 million during the three months ended June 30, 2016 and 2015, respectively, an increase of $0.5 million, or 31%. The increase was due primarily to an increase of $0.2 million in personnel-related costs as a result of increased head count, $0.2 million in other expenses related to operating as a public company and an increase of $0.1 million in professional service costs, including patent-related legal costs and legal and accounting advisory services.

General and administrative expenses were $4.7 million and $4.1 million during the six months ended June 30, 2016 and 2015, respectively, an increase of $0.6 million, or 15%. The increase was due primarily to an increase of $0.6 million in personnel-related costs as a result of increased head count and $0.4 million in other expenses related to operating as a public company, partially offset by a decrease of $0.4 million in professional service costs, including patent-related legal costs and legal and accounting advisory services.

Interest and Other Income

Interest and other income was $0.1 million and $0.5 million during the three months ended June 30, 2016 and 2015, respectively, a decrease of $0.4 million, or 84%. The decrease was due primarily to a $0.5 million loss recognized related to the change in estimated fair value of warrant liability, partially offset by a $0.1 million gain recognized, related to the change in fair value of the derivative liability.

Interest and other income was $1.1 million and $0.7 million during the six months ended June 30, 2016 and 2015, respectively, an increase of $0.4 million, or 54%. The increase was due primarily to a $1.0 million gain recognized, related to the change in fair value of the derivative liability, partially offset by $0.6 million loss recognized related to the change in estimated fair value of warrant liability.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard involves 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. The new standard will be effective for the Company in its first quarter of 2017. We are currently evaluating the potential impact that this standard may have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which replaces the existing guidance for leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 will be effective for the Company beginning in its first quarter of 2019, but early adoption is permitted. We are currently evaluating the impact of adopting the new lease standard on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Topic 825-10), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for the Company beginning in its first quarter of 2018, and early adoption is not permitted. We are currently evaluating the potential impact that this standard may have on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. We may adopt the standard in either our first quarter of 2017 or 2018.

Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standard may be applied retrospectively to each prior period presented or prospectively with the cumulative effect recognized as of the date of adoption. We are currently evaluating the timing of our adoption and the impact of adopting the new revenue standard on our consolidated financial statements.

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Liquidity and Capital Resources

On August 20, 2015, we completed our merger with Targacept, which provided $41.2 million in cash, cash equivalents and short-term investments. Prior to that time, our operations had been financed primarily by net proceeds from the sale of convertible preferred stock, and the issuance of convertible notes. As of June 30, 2016, we had $24.0 million of cash, cash equivalents and short-term investments. We have an accumulated deficit of $139.5 million as of June 30, 2016.

Our primary uses of cash are to fund operating expenses, including research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in its outstanding accounts payable and accrued expenses.

We believe that our existing capital resources will be sufficient to meet our projected operating requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We plan to continue to fund losses from operations and capital funding needs through future equity and/or debt financings, as well as potential additional collaborations or strategic partnerships with other companies. The sale of additional equity or convertible debt could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We can provide no assurance that financing will be available in the amounts we need or on terms acceptable to us, if at all. If we are not able to secure adequate additional funding we may be forced to delay, make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm our business.

On March 16, 2016, we entered into a Capital on Demand^TM Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”). In accordance with the terms of the sales agreement, we may offer and sell shares of its common stock having an aggregate offering price up to $6.5 million, subject to certain limitations, from time to time in one or more public offerings of our common stock, with JonesTrading acting as agent, in transactions pursuant to a shelf registration statement that was declared effective by the SEC on April 28, 2016. During the six months ended June 30, 2016, we sold 73,459 shares of our common stock in the Capital on Demand^TM program, in the open market at a weighted-average selling price of $2.18 per share, for net proceeds (net of commissions) of $0.2 million.

The following table summarizes our cash flows for the periods presented (in thousands):

 

 

Cash Flows from Operating Activities

Cash used in operating activities for the six months ended June 30, 2016 was $8.4 million, due primarily to a net loss of $8.4 million, partially offset by the change in net operating assets and liabilities of $0.5 million due primarily to a $0.7 million increase in deposits related to a sale agreement with Attenua, Inc. relating to certain neural nicotinic receptor assets acquired from Targacept in the Merger and $0.4 million increase in prepaid expenses and other current assets, partially offset by a $0.3 million decrease in accrued compensation and other accrued liabilities, a $0.2 million decrease in deferred revenue due to the recognition of revenue and a $0.1 million decrease in accounts payable. Non-cash gains of $0.9 million related to the change in fair value of the derivative liability and $0.1 million related to extinguishment of redeemable convertible notes, partially offset by non-cash charges of $0.3 million for stock-based compensation and $0.2 million for depreciation and amortization.

Cash used in operating activities for the six months ended June 30, 2015 was $4.3 million, due primarily to a net loss of $4.6 million, the change in our net operating assets and liabilities of $0.5 million due primarily to a $1.5 million decrease in deferred revenue due to the amortization of upfront license fees from our collaborations, partially offset by a $1.3 million increase in accounts payable, $0.5 million increase in accrued compensation and other accrued liabilities and $0.2 million decrease in prepaid expenses and other current assets. Non-cash gains of $0.6 million related to the change in fair value of the warrant liability, which was offset by non-cash charges of $0.3 million for depreciation and amortization and $0.1 million for stock-based compensation.

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Cash Flows from Investing Activities

Cash used in investing activities for the six months ended June 30, 2016 was $9.5 million, due primarily to $13.4 million in purchases of investments and $0.3 million related to the purchase of property and equipment, partially offset by proceeds from maturities of investments of $4.2 million.

Cash provided from investing activities for the six months ended June 30, 2015 was $0.1 million, due primarily to $0.1 million increase in restricted cash for the Company’s credit card collateral and facility lease deposit.

Cash flows from Financing Activities

Cash provided by financing activities for the six months ended June 30, 2016 was $0.2 million was primarily related to release of restricted cash of $3.4 million related to the redemption of some of the redeemable convertible notes and $0.2 million in net proceeds from issuance of common stock in at-the-market transactions, partially offset by payments of $3.4 million related to the redemption of some of the redeemable convertible notes.

Cash provided by financing activities for the six months ended June 30, 2015 was $5.2 million, due primarily to proceeds received from the issuance of convertible preferred stock of $3.3 million and convertible notes of $1.9 million.

Contractual Obligations

The following table summarizes our fixed contractual obligations as of June 30, 2016 (in thousands):

 

 

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Polices and Estimates

Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation - Critical Accounting Estimates” in the Annual Report. There have been no significant changes to these critical accounting estimates during the first six months of 2016.

 

 

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Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and interest rates. We are exposed to market risks in the ordinary course of our business. Our primary exposure to market risk is interest income sensitivity in our investment portfolio, although currently income generated from our investment portfolio is insignificant. Fixed rate securities and borrowings may have their fair market value adversely impacted due to fluctuations in interest rates, while floating rate securities may produce less income than expected if interest rates fall and floating rate borrowings may lead to additional interest expense if interest rates increase. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates.

However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on the fair market value of our investment portfolio. As of June 30, 2016, we had cash and cash equivalents of $24.0 million, which consisted of bank deposits and money market funds, and short-term investments of $12.6 million. The redeemable convertible notes we issued in August 2015 in connection with the merger do not bear interest and thus a change in market interest rates would not have an impact on an interest expense related to these redeemable convertible notes. Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

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. Based on the evaluation of our disclosure controls and procedures as of June 30, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified during the first six months of 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

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PART II. OTHER INFORMATION

We are not a party to any material legal proceedings.

 

 

Other than as described below, we have not identified any material changes to the risk factors previously disclosed in “Part I - Item 1A - Risk Factors” in the Company’s Annual Report. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below or in the Annual Report, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

You should carefully consider the risks and uncertainties described below, together with all of the other information in this Report, including the section titled “Part I - Financial Information - Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the condensed consolidated financial statements and related notes.

We are substantially dependent upon the success of CB 813d, which is our only product candidate that has completed a Phase 1 clinical trial.

The failure of CB 813d to achieve successful clinical trial endpoints, delays in clinical trial commencement or in the clinical development of CB 813d generally, unanticipated adverse side effects related to CB 813d or any other adverse developments or information related to CB 813d would significantly harm our business, its prospects and the value of the company’s common stock. We expect to advance CB 813d into a subcutaneous prophylaxis dosing trial during 2017, to be followed if successful by a pivotal clinical efficacy trial in hemophilia A and hemophilia B inhibitor patients. There is no guarantee that the results of this clinical trial, if it occurs, will be positive or will not generate unanticipated safety concerns. The Phase 1 clinical trial of CB 813d was a single-dose intravenous escalation trial that would not, compared to multi-dose trials, be expected to exclude the possibility of an immunological response to CB 813d in patients who received the product candidate. One subject from the 18 μg/kg dose group developed a weak, transient and non-neutralizing anti-CB 813d antibody at a single time point of Day 60 post-dose. The positive anti-CB 813d antibody was characterized as cross-reactive with NovoSeven and native human Factor VII. Additional review of the raw data suggests that the bioanalytical result of a weak positive anti-drug antibody immune response at Day 60 may represent a false-positive test result. There were no subjects with evidence of neutralizing antibodies against CB 813d, and there were no subjects with >50% depletion of Factor VII activity relative to baseline.

If subsequent multi-dose trials demonstrate a treatment-related neutralizing immunological response in patients, development of CB 813d could be halted. Even if the next trials of CB 813d are positive, CB 813d may require substantial additional trials and other testing before approving CB 813d for marketing. In addition, we anticipate, but have not yet commenced, a full evaluation of CB 813d or CB 2679d/ISU 304 for subcutaneous administration. Results from these preclinical studies may not be positive, including, for example, due to failure to achieve sufficient protective levels of CB 813d in blood circulation to prevent spontaneous bleeding or the development of inhibitory antibodies. If we move forward with subcutaneous study of CB 813d, we will have to complete an additional pharmacokinetic and pharmacodynamic subcutaneous dosing study prior to initiating the pivotal study.

Even if the FDA or other regulatory agency approves CB 813d, the approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product and may impose ongoing commitments or requirements for post-approval studies, including additional research and development and clinical trials. The FDA and other agencies also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval. Regulatory approval from authorities in foreign countries will be needed to market CB 813d in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. If we fail to obtain approvals from foreign jurisdictions, the geographic market for CB 813d would be limited.

CB 813d is not expected to be commercially available in the near term, if at all. Further, the commercial success of CB 813d will depend upon its acceptance by physicians, patients, third-party payors and other key decision-makers as a therapeutic and cost effective alternative to products available at the time, which may include competing products currently under development by others. See “We face substantial competition that, may result in others discovering, developing or commercializing products before or more successfully than we do.” If we are unable to successfully develop, obtain regulatory approval for and commercialize CB 813d, our ability to generate revenue from product sales will be significantly delayed and our business will be materially and adversely affected, and we may not be able to earn sufficient revenues to continue as a going concern.

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We are very early in our development efforts and have only one product candidate that has completed a Phase 1 clinical trial. All of our other product candidates are still in preclinical development. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

We are very early in our development efforts and have only one product candidate that has completed a Phase 1 clinical trial, CB 813d. All of our other product candidates are still in preclinical development, and we have not yet commenced a full evaluation of CB 813d or CB 2679d/ISU 304 for subcutaneous administration. We expect to advance CB 813d into a subcutaneous prophylaxis clinical efficacy trial in hemophilia A and hemophilia B inhibitor patients. In addition, we expect that our collaborator ISU Abxis will initiate a Phase 1/2 subcutaneous clinical trial of CB 2679d/ISU 304, our next-generation Factor IX drug candidate for the treatment of patients with hemophilia B, in 2016. We have delayed initiating preclinical IND-enabling studies for our anti-C3 protease for the prevention of DGF and research studies for our Factor Xa, so that we can focus our efforts and resources on advancing CB 813d, our next generation Factor VIIa and CB 2679d, our next-generation FIX through Phase 2/3 and Phase 1/2 clinical trials respectively. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of these and other product candidates. The success of our product candidates will depend on several factors, including the following:

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

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

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

Specifically, there are a large number of companies developing or marketing treatments for hemophilia, including many major pharmaceutical and biotechnology companies, including Novo Nordisk, which has developed NovoSeven, a human recombinant coagulation Factor VIIa indicated for treatment of bleeding episodes that has been approved for use in treatment of hemophilia A or B patients with inhibitors to Factor VIII or Factor IX and in patients with Factor VII deficiency and Glanzmann’s thrombasthenia, Baxter, which has developed BAX 817, a biosimilar of NovoSeven that recently completed an intravenous Phase 3 clinical trial and has been filed for marketing approval, Roche, which is developing ACE910/Emicizumab, a recombinant humanized bispecific antibody that binds to activated Factor IX and Factor X and mimics the cofactor function of Factor VIII and has been granted breakthrough therapy designation by the FDA to potentially treat hemophilia A, and Alnylam, which is developing an investigational RNAi therapeutic targeting antithrombin for the treatment of hemophilia. We are also aware of many companies focused on developing gene therapies that may compete with our planned hemophilia B indication, as well as several companies addressing other methods for modifying genes and regulating gene expression.

Our commercial opportunity in different indications could be reduced or eliminated if competitors develop and market products or therapies that are more convenient to use, more effective, less expensive, and safer to use than our products. Furthermore, if competitors gain FDA approval faster than we do, we may be unable to establish a strong market presence or to gain market share. The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety,

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

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

Raising additional funds by issuing equity securities, taking on debt or through licensing arrangements may cause dilution to stockholders, restrict our operations or require us to relinquish proprietary rights.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, stockholders may be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of common stockholders. In March 2016, we filed a shelf registration statement on Form S-3 with the SEC, which upon being declared effective on April 28, 2016, allows us to offer up to $50 million of securities from time to time in one or more public offerings of our common stock. In addition, in March 2016, we entered into a Capital on Demand^™ Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”). In accordance with the terms of the sales agreement, as of July 29, 2016, we may offer and sell additional shares of our common stock having an aggregate offering price of up to $5.8 million from time to time. Any additional sales in the public market of our common stock, under the agreement with JonesTrading or otherwise under the shelf registration statement, could adversely affect prevailing market prices for our common stock.

We may also seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, debt financing, if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, product candidates or future revenue streams or grant licenses on terms that are not favorable to us. There can be no assurance that we will be able to obtain additional funding if and when necessary. If we are unable to obtain adequate financing on a timely basis, we could be required to delay, curtail or eliminate one or more, or all, of our development programs or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

 

None.

 

 

None.

 

 

Not applicable.

 

 

None.

 

 

See Index to Exhibits at the end of this Report, which is incorporated by reference here. The Exhibits listed in the accompanying Index to Exhibits are filed as part of this report.

 

 

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SIGNATURES

Pursuant to the requirements 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.

 

 

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EXHIBIT INDEX

 

 

 

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Exhibit 10.1

 

Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

DEVELOPMENT AND MANUFACTURING SERVICES AGREEMENT

This Development and Manufacturing Services Agreement (this “Agreement”) is made as of May 20, 2016 (“Effective Date”) between CMC ICOS BIOLOGICS, INC., a Washington corporation (“CMC”), and Catalyst Biosciences, Inc., a Delaware Corporation (“Customer”).

Therefore, the parties agree as follows:

1

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

3.CUSTOMER MATERIALS

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

4.TIMELINE CHANGES, SPECIFICATION AND CGMP CHANGES

(a)  [* * *].

then CMC must notify Customer and the parties must in good faith discuss ways to continue the Services [* * *]. If the parties do not reach agreement [* * *].

3

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

5.2Cancellation or Delay of cGMP Batches resulting from Customer’s actions or elections:

4

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

[* * *].

6.PACKAGING, DELIVERY, STORAGE, EXAMINATION, DEFECTS AND SAMPLES

6.2Delivery.

5

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

CMC is not liable for any loss or damage caused by Product that is the subject of Release For Further Processing prior to the delivery by CMC of the applicable Certificate of Analysis for such Product.  

6.5.2coordinate with the Shipping Company for the shipment of the Product; and

[* * *]

6

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

6.10Consequences of Defective Product.

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

8

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

[* * *]

Unless otherwise stated on an invoice, Customer must pay all undisputed amounts on invoices in full without any deductions within [* * *] by CMC.

9

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

10

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

11

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

11.INDEMNIFICATION

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

The foregoing indemnity obligation shall not apply to the extent that the CMC Parties fail to comply with the indemnification procedures set forth in Section 11.3 and Customer’s defense of the relevant Claims is prejudiced by such failure.

13

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

The foregoing indemnity obligation shall not apply to the extent that the Customer Parties fail to comply with the indemnification procedures set forth in Section 11.3 and CMC’s Customer’s defense of the relevant Claims is prejudiced by such failure.

12.TERM AND TERMINATION

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

CMC may terminate this Agreement or any Stage on [* * *] notice if CMC reasonably concludes that it cannot technically or scientifically deliver the Services contemplated by this Agreement or any Stage despite applying its[* * *] efforts.  During the [* * *] notice period or when CMC notifies Customer that it has become aware that a technical or scientific problem has or may arise, the parties must in good faith discuss the difficulties and scientific and technical hurdles in an attempt to resolve those problems.  If the parties agree during those discussions that the Services can be delivered then the notice to terminate will expire and this Agreement (or the Stage as the case may be) will continue in effect.  If agreement cannot be reached this Agreement or Stage, at CMC’s election, will terminate on expiration of the [* * *] notice period.  During the notice period, CMC will not undertake any new activities under the Services and will use [* * *] efforts to promptly wind down the affected Services and to mitigate or otherwise minimize costs relating to such affected Services (including cancelling all revocable fees and expenses).

Customer may terminate this Agreement or any Stage on [* * *] notice if Customer reasonably concludes that CMC cannot technically or scientifically deliver the Services contemplated by this Agreement or any Stage despite applying its [* * *] efforts after a delay of greater than [* * *] in the Timeline or upon the agreement of the parties, but only after the parties have discussed the difficulties and scientific and technical hurdles in an attempt to resolve those problems.  If agreement cannot be reached as to a technical or

15

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

scientific path forward this Agreement or Stage, at Customer’s election, will terminate on expiration of the [* * *] notice period.  During the notice period, CMC will not undertake any new activities under the services and will use [* * *] efforts to promptly wind down the affected Services and to mitigate or otherwise minimize costs relating to such affected Services (including cancelling all revocable fees and expenses).

12.6Effect of Termination.

16

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

17

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

18

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

19

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

The addresses of the parties for the purposes of this Section 15.9 are:

CMC ICOS Biologics, Inc.

22021 20th Ave. S.E.

Bothell, Washington U.S.A. 98021

For the attention of:  Legal Department

Catalyst Biosciences, Inc.

260 Littlefield Avenue

South San Francisco, CA 94080

For the attention of:  Vice President of Manufacturing Operations

Neither party has any obligation to notify any person or entity other than as provided in Section 15.9.

20

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

 

21

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

 

THIS DEVELOPMENT AND MANUFACTURING SERVICES AGREEMENT has been executed by the parties on the date first written above.  

 

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

APPENDIX I

Definitions

“Affiliate” means, with respect to any entity, any other entity that directly or indirectly controls, is controlled by or is under common control with that entity.  For this definition, “control” means that more than 50% of the controlled entity’s shares or ownership interests representing the right to make decisions for that entity are owned or controlled, directly or indirectly, by the controlling entity.

“Batch” means [* * *].

“Business Day” means any day that is not a Saturday, Sunday or U.S. public holiday.

“Cell Line” [* * *].

“Certificate of Analysis” means CMC’s standard form certificate of analysis confirming that Product to which the certificate relates meets the Specification and any other criteria identified on the certificate.

“cGMP” means Current Good Manufacturing Practices as promulgated under each of the following as in effect on the Effective Date and as amended or revised after the Effective Date:  (a) the U.S. Food, Drug & Cosmetics Act (21 U.S.C.  § 301 et seq.) and related U.S. regulations, including 21 Code of Federal Regulations (Chapters 210 and 211) and other FDA regulations, policies, or guidelines in effect at a particular time for the manufacture, testing and quality control of investigational drugs; and (b) the ICH guide Q7a “ICH Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients” as applied to investigational drugs (Section 19).

“cGMP Batch” means a Batch that is stipulated in the Work Statement to be manufactured according to cGMP.

“cGMP Product” means Product manufactured under a cGMP Batch.

“CHEF1® Technology” means [* * *].

“CMC Facility” means [* * *].

“CMC Intellectual Property Rights” means [* * *].

“CMC Know-How” means [* * *].

“CMC’s Fault” means [* * *].

“Commencement Date” means, with respect [* * *].

“Confidential Information” means information of a confidential nature and in any form (oral, written or otherwise) the use of which is governed according to the provisions of Section 9.  For clarity, the Confidential Information of each party will include all information and materials disclosed by the parties and their representatives under the Confidentiality Agreement by and between the parties dated as of June 12, 2015.

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

“Customer Intellectual Property Rights” means Intellectual Property rights and Customer Know-How owned by Customer or licensed to Customer by a third party covering any aspect of the Services or materials, techniques or processes used in the Services.

“Customer Know-How” means all information, techniques and technical information known to Customer in connection with the Cell Line, Customer Materials or Process which is not known to CMC or of general public knowledge.

“Customer Materials” means the [* * *].

“Deliverables” means the data, results and materials generated from the performance of the Services [* * *].

“Development Services” means any or all parts of the development and manufacturing services to be conducted by CMC as fully described in the relevant Work Statement which are not subject to cGMP standards, for clarity the Development Services will include the full scale engineering batch.

“Manufacturing Services” means any or all parts of the development and manufacturing services to be conducted by CMC as fully described in the relevant Work Statement which are subject to cGMP standards.

“Drug History Record” means all lot disposition documentation relevant to a cGMP Batch to be provided to Customer with the Product from that cGMP Batch as described in the Work Statement, including a Certificate of Analysis.

“Drug Substance” means the biological or chemical entities described or classified in the Work Statement [* * *].

“Intellectual Property” means all intellectual property rights, including patents, supplementary protection certificates, utility models, trademarks, database rights, rights in designs, copyrights (whether or not any of these are registered or capable of being registered) and including all applications and the right to apply for registered protection of the foregoing and all inventions, trade secrets, know-how, techniques and confidential information, and all rights and forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world, in each case for their full term and together with any renewals or extensions.

“Non-Fault Delay” means a delay in the Services to the extent caused by [* * *].

“Objective” means the desired outcome of the Services as described in the Work Statement.

“Permitted Recipients” means the directors, officers, employees, Testing Laboratories or professional advisers who are required, on a need‑to‑know basis, in the course of their duties to receive and consider the Confidential Information for the purpose of enabling the relevant party to perform its obligations under this Agreement; provided, that those persons are under obligations of confidence no less onerous than those set out in Section 9 imposed on the Recipient Party.

“Price” means [* * *].

“Process” means [* * *].

“Product” means [* * *].

“Quality Agreement” means the agreement between the parties defining the quality responsibilities, including cGMP standards, regarding the performance of the Services.

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

“Regulatory Obligations” means those mandatory regulatory requirements applicable in Europe and the U.S. to the manufacture of cGMP Product for human use.

“Scientific Delay” means a delay in the Services to the extent caused by [* * *].

“Services” means any or all parts of the Development Services and Manufacturing Services to be conducted by CMC as fully described in the relevant Work Statement.  

“Shipping Guidelines” means the storage and transport guidelines for the Product that are determined by mutual written agreement of the parties.

“Slot” means, with respect to CMC’s cGMP manufacturing suite, the period of time the suite is reserved in preparation for and the performance of a Batch.

“Specification” means the specification of the Product either as defined in the Work Statement or as otherwise agreed between the parties or modified in accordance with Section 4.2.2.

“Stage” means a particular activity or series of conjoined activities that constitute a main step in the Services and that is more specifically identified in the Work Statement by the breakdown of the Services into numbered stages.

“Standard Operating Procedures” or “SOPs” means the standard operating procedures of CMC in place from time to time that define CMC’s methods of performing activities applicable to the Services.

“Testing Laboratories” means any [* * *].

“Timeline” means the non‑binding estimated timeline for the performance of the Services as set out in the Work Statement.

“Work Statement” means the work statement attached as Appendix II and any other work statements that may be agreed on by the parties during the Term, as may be revised by [* * *].  To be valid, a Work Statement must be signed by both parties.

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

APPENDIX II

Incidental Fees

Storage Fees for Deliverables:

Handling Fee for Shipments:

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Appendix III

WORK STATEMENT NO. 01

THIS WORK STATEMENT NO. 01 (“[* * *] DMSA WS01”) is dated as of May 20  2016 (“Effective Date”) by and between CMC ICOS BIOLOGICS, INC. (“CMC”), CMC BIOLOGICS A/S (“CMC”) and Catalyst Bioscience, Inc. (“Customer”), and upon execution will be incorporated into and governed by the terms and conditions of the Development and Manufacturing Services Agreement between Customer and CMC dated May   2016 (the “Agreement”).  Capitalized terms used in this Work Statement but not otherwise defined will have the same meanings as set forth in the Agreement.

Customer engages CMC to provide the Services, as follows.

A recombinant human Factor VIIa (CB 813d). CB 813d is an improved version of this molecule with enhanced activity and longer half-life, thus requiring lower and fewer doses than the commercially available NovoSeven^®.

As described on the APPENDIX 1

[* * *]

As described in the APPENDIX 1

NA

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CMC will invoice Customer for all amounts due under this Work Statement.  Such amounts will be invoiced in [* * *] to the attention of [* * *] and per Payment Terms in 7.2 the Agreement:

 

[* * *].

[* * *]

The activities outlined in this proposal are based on the following assumptions.

[* * *]

[Signatures on next page]

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

IN WITNESS WHEREOF the parties have caused this Work Statement No. 01 to be executed by their respective representatives duly authorized as of the day and year first above written.

WORK STATEMENT AGREED TO AND ACCEPTED BY:

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

APPENDIX 1

SCOPE OF WORK

Stage 1 – [* * *]

[* * *]

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 4 – [* * *]

[* * *]

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 6 – [* * *]

[* * *]

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 7 – [* * *]

[* * *]

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 8 – [* * *]

[* * *]

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 9 – [* * *]

[* * *]

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 10 – [* * *]

[* * *]

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

Stage 11 – [* * *]

[* * *]

 

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

Stage 12 –[* * *]

[* * *]

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

Stage 13 – [* * *]

[* * *]

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

Stage 14 – [* * *]

[* * *]

 

[* * *]

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

[* * *]

[* * *]

 

 

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

All terms and conditions of the Agreement will apply to this Work Statement. In the event of any conflict between this Work Statement and the terms of the Agreement, the terms of the Agreement will control.

[Remainder of page left blank intentionally]

 

 

 

 

 

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Confidential treatment has been sought for portions of this agreement. The copy filed herewithin omits the information subject to the confidential treatment request. Ommissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

 

CONFIDENTIAL

 

APPENDIX IV

Commercial Supply Terms

[* * *].

 

 

CONFIDENTIAL

 

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) OF THE SECURITIES EXCHANGE ACT

OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nassim Usman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Catalyst Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

 

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) OF THE SECURITIES EXCHANGE ACT

OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fletcher Payne, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Catalyst Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

 

 

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Catalyst Biosciences, Inc. (the “Company”) for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nassim Usman, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Catalyst Biosciences, Inc. (the “Company”) for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fletcher Payne, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.