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United States securities and exchange commission logo
December 11, 2020
William Wei Cao, Ph.D.
Chief Executive Officer
Gracell Biotechnologies Inc.
Building 12, Block B. Phase II
Biobay Industrial Park
218 Sangtian St.
Suzhou Industrial Park, 215123
People's Republic of China
Re: Gracell
Biotechnologies Inc.
Amendment No. 1 to
Draft Registration Statement on Form F-1
Submitted November
24, 2020
CIK No. 0001826492
Dear Dr. Wei Cao:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form F-1 submitted on
November 24,
2020
Prospectus Summary, page 1
1. Please revise the risk
factors on pages 76 and 93 and the related disclosure in the
Summary to clarify if
the PRC could prevent you from seeking foreign approval and
commercialization of
any of your product candidates. Revise also to disclose in the
Summary any research
and development activities your wholly foreign-owned enterprise
Graycell Bioscience is
engaged in, whether any research and development at any of the
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany11,
December NameGracell
2020 Biotechnologies Inc.
December
Page 2 11, 2020 Page 2
FirstName LastName
VIEs may be attributable to Graycell Bioscience, and the basis to
support
your determination that the prohibition under the Negative List does
not apply to your
operations. Please also revise to define the term "WFOE" at its first
use.
Additionally, please expand your disclosure to address the following
risks, as applicable:
intellectual property rights and protections may be insufficient
to protect
your intellectual property in China;
the increased global focus on environmental and social issues and
China's potential
adoption of more stringent standards in these areas may adversely
impact your
operations;
potential adverse tax-consequences to shareholders if you are
determined to be a
resident enterprise for PRC tax purposes; and
Chinese governmental authorities have significant discretion that
can be used to
influence how you conduct your business and operations.
Refer to the Division of Corporation Finance Disclosure Guidance Topic
No.
10 "Disclosure Considerations for China-Based Issuers."
Overview, page 1
2. We note your response to comment 2 and reissue with respect to
references to potentially
enhanced safety and efficacy and disclosure that implies the safety
profile of your product
candidates has been established.
3. We note your response to comment 4 and reissue with respect to
references to product
candidates as potentially first-in-class.
4. We note your response to comment 22 indicating that you do not have
access to data from
the Phase 1 investigator-initiated trials until the data is published.
Please revise your
disclosure in the Summary to highlight this limitation. It should be
clear from your
disclosure throughout your prospectus that you do not have access to
data while the trials
are being conducted and are dependent on receiving published data.
Revise any references
to partnering on these studies to explain your involvement. Similarly,
revise your pipeline
table presentation to convey the limited scope of your involvement and
that you do not
have access to data from the investigator-initiated studies until the
data is published.
Lastly, please highlight the risks associated with your lack of access
to the data under an
appropriate heading in the Risk Factors section.
Risk Factors, page 18
5. To the extent any risk factor included in your prospectus could
involve any registrant or
any offering, revise this section to relocate all such risk factors at
the end of this
section under the caption General Risk Factors. Refer to Item 3
of form F-1 and 105(a)
of Regulation S-K and Section II.D. of Release No. 33-10825,
Modernization of
Regulation S-K Items 101, 103, and 105 (Oct. 8, 2020).
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany11,
December NameGracell
2020 Biotechnologies Inc.
December
Page 3 11, 2020 Page 3
FirstName LastName
Dilution , page 115
6. Please provide the information added to the Capitalization table in
response to prior
comment 12 to the corresponding section of the Dilution table.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Comparison of Nine Months Ended September 30, 2019 and 2020
Operating Expenses
Administrative Expenses, page 130
7. Please tell us why "research and development activities" are included
in your
discussion regarding changes in your administrative expenses or
revise.
Loan Agreements, page 134
8. We note your response to comment 13 and do not agree with your
conclusion that your
loan agreements are not material contracts required to be filed as
exhibits. In this regard,
we note that you have a history of losses, will continue to incur
research and development
expenses and may not be profitable in the near future. Please file
your loan agreements
with Bank of China, China Construction Bank and China Merchants Bank
as exhibits to
your registration statement.
Critical Accounting Policies, Judgments and Estimates
Research and Development Expenses, page 140
9. Your revised disclosure presents research and development expenses for
each of your
significant product candidates and separately by the major components
of your research
and development expenses. Please clarify how these two tables are
integrated or revise to
incorporate both tables into one table that reconciles to total
research and development
expense on the Consolidated Statements of Comprehensive Loss.
Share-Based Compensation, page 143
10. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of thecommon stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation. Please
discuss with the staff how to submit your response.
Business, page 145
11. We note your response to comment 20 and reissue the comment to the
extent you have not
revised the disclosure to define Grade 1 and higher adverse events as
discussed in your
response.
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany11,
December NameGracell
2020 Biotechnologies Inc.
December
Page 4 11, 2020 Page 4
FirstName LastName
12. We reissue comment 22 in part. To the extent you do not have access to
study data for the
studies you describe in your response, revise this section to explain
your limited
access. Tell us how you have access to the data you do have, and
whether you have any
agreement regarding the sharing of data or information. Tell us when,
if ever, you expect
to obtain access to full information on the studies, including not
only results but the
underlying data collected. For example, tell us whether you will
obtain access to the
information prior to submitting your IND applications to the FDA. In
addition, revise to
state what actions you have taken in the studies for which you do not
have access to the
data. For example, you continue to state "our trial" (page 163) and
"we observed" (page
164) with respect to the GC012F study, and "we administered all
patients with a single
infusion" in the GC027 study, on page 167. To be clear that you are
not conducting these
studies, revise throughout this section to avoid the passive voice and
state who is taking
the actions you describe.
Intellectual Property, page 173
13. We note your response to comment 23 and do not agree with your
conclusion that your
license agreement with ProMab is an ordinary course contract not
required to be filed as
an exhibit to your registration statement. Further, we note your
disclosure on page 64
that "[i]f we fail to comply with the obligations . . . our licensors
may have the right to
terminate the license," and, if terminated, you "may not be able to
develop, manufacture,
market or sell the product covered by our agreements," which "could
materially adversely
affect the value of the product candidates being developed under any
such agreement."
Please file your license agreement with ProMab as an exhibit to your
registration
statement.
14. We reissue comment 24 in part. Revise to describe the scope of patent
protection you
seek with respect to your patent applications described in this
section.
Taxation, page 245
15. We reissue comment 28 in part. Revise the discussion of PRC tax
consequences to
provide an opinion of counsel as to the material PRC tax consequences
of the ownership
of your ordinary shares represented by American Depositary Shares.
William Wei Cao, Ph.D.
Gracell Biotechnologies Inc.
December 11, 2020
Page 5
You may contact Frank Wyman at 202-551-3660 or Sasha Parikh at
202-551-3627 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Abby Adams at 202-551-6902 or Christine Westbrook at 202-551-5019 with
any other
questions.
Sincerely,
FirstName LastNameWilliam Wei Cao, Ph.D.
Division of Corporation
Finance
Comapany NameGracell Biotechnologies Inc.
Office of Life Sciences
December 11, 2020 Page 5
cc: Will Cai, Esq.
FirstName LastName