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United States securities and exchange commission logo
November 15, 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.
Draft Registration
Statement on Form F-1
Submitted October
19, 2020
CIK No. 0001826492
Dear Dr. Wei Cao:
We have reviewed your 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.
Draft Registration Statement on Form F-1 submitted October 19, 2020
Prospectus Summary, page 1
1. We note several
references here and throughout the prospectus to Gracell Biotechnology
being a "leading cell
and gene therapy company and entering into partnerships with
leading
biopharmaceutical companies. You also state on page 141 that you plan to
continue your
"leadership position" in cell therapy. Please substantiate your claims or
revise them to state
that these are your beliefs. Refer to Item 4.B.7. of Form 20-F.
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany 15,
November NameGracell
2020 Biotechnologies Inc.
November
Page 2 15, 2020 Page 2
FirstName LastName
2. We note several references here to your product candidates having
achieved a complete
response" in clinical trials, as well as "promising" preclinical data,
show[ing]
proliferation potency, tissue migration and tumor clearance effect,
having superior
efficacy, and enhanc[ing] the efficacy of [y]our CART-T cell
therapies in addition to
later disclosure, including on pages 121 and 137, claiming potency,
fast, deep and
durable responses, including multiple stringent complete responses,
and "enhanced
efficacy and safety. Further, you reference "demonstrated superior
engraftment and
anti-leukemia efficacy," "demonstrated superior in vivo proliferation
as well as duration
of expansion in the peripheral blood of treated animals, which was
correlated with its
robust anti-leukemia efficacy," "GC007 has shown favorable safety and
efficacy results,"
"manageable safety profile" and "compelling" data. You also state on
page 162 that "data
indicate GC007 is a safe and effective CAR-T therapy against CD19+ B
cell
malignancy." As safety and efficacy determinations are solely within
the authority of the
U.S. Food and Drug Administration (FDA) and comparable foreign
regulators, and are
evaluated throughout all phases of clinical trials, please remove
these and similar
references throughout your prospectus. In the Business section, you
may present
objective data resulting from your trials without including
conclusions related to efficacy.
3. Your summary should provide a balanced and factual presentation of
your business.
Please place your selected disclosure under the headings "Overview"
and "Our Proprietary
Technology Platforms" in appropriate context with an equally prominent
discussion of the
early-stage nature of your development programs, the challenges you
face in developing
novel therapeutics, your limited trial data to date and that all of
your clinical development
has been conducted outside the U.S. In your revised disclosure,
discuss that regulators
may not accept data from investigator-initiated trials, as referenced
on page 26.
4. We note references throughout your prospectus to your product pipeline
or various
product candidates as being "first-in-class" and revolutionary.
These terms suggest that
the product candidates are effective and likely to be approved. Please
delete these
references throughout your registration statement. If your use of
these terms was intended
to convey your belief that the products are based on a novel
technology or approach
and/or is further along in the development process, you may discuss
how your technology
differs from technology used by competitors and, if applicable, that
you are not aware of
competing products that are further along in the development process.
Statements such as
these should be accompanied by cautionary language that the statements
are not intended
to give any indication that the product candidates have been proven
effective or that they
will receive regulatory approval.
5. Please revise to briefly discuss the nature of the
"investigator-initiated" studies you
reference, your role/responsibility, if any, in the these studies, and
identify the
investigator(s) and sponsor(s).
6. Please revise your pipeline table to accurately reflect the
development status of each
product candidate in each jurisdiction. Your disclosure on page 157
indicates that
GC007F is being studied in an ongoing Phase 1 trial. Accordingly, the
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William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany 15,
November NameGracell
2020 Biotechnologies Inc.
November
Page 3 15, 2020 Page 3
FirstName LastName
corresponding to GC007 should not indicate that you have completed
Phase 1
development.
7. Please revise your disclosure to remove any implication that you will
be successful in
obtaining regulatory approval for your product candidates in an
accelerated manner. We
note, for example, your statement of strategy on page 5 and later on
page 141 to [r]apidly
advance [y]our lead product candidates through clinical development
and regulatory
approval by leveraging [y]our global clinical development
capabilities. We note also
your claims on page 4 that your strategy "expedites the initial
demonstration of safety and
efficacy" for your product candidates, and on page 154 that regulatory
pathways for this
subgroup of patients may enable you to adopt a "fast-to-market"
strategy.
8. Revise your summary risk factors to highlight the following risks:
From pages 73 and 90, the risks that your operations may be
subject to the negative
list, as [t]he 2020 Negative List provides that foreign
investment is prohibited in
the development and application of human stem cell or gene
diagnostic and
therapeutic technologies, as you disclose on page 90. Explain
that, if this category
applies, Gracell Bioscience would be prohibited from engaging
in the research or
development of such technologies.
The risks related to your intellectual property portfolio,
including that you do not own
or license any issued patents that cover any of your platforms or
product candidates,
as referenced on page 57, and that you are aware of third-party
patents and patent
applications that may be construed to cover your technology and
product candidates,
including GC012F and GC027, as referenced on page 60.
The risks related to concentration of share ownership by Dr.
William Wei Cao, as
referenced on page 198.
9. We note from page 10 that your reporting currency is Renminbi (RMB).
We note
numerous amounts throughout the document that are included in
currencies other
than dollars. Please reflect such amounts in U.S. dollars in addition
to
the foreign currency.
Risk Factors
Risks Related to Our Corporate Structure
ADS holders may not be entitled to a jury trial with respect to claims arising
under the deposit
agreement...., page 96
10. We note your disclosure on page 96 that indicates that the deposit
agreement provides that
ADS holders waive the right to a jury trial, "including claims under
federal securities
laws." Please amend your risk factor to disclose other risks, which
may include increased
costs to bring a claim. Please also clarify whether purchasers of your
ADSs in a
secondary transaction would be subject to the jury trial waiver
provision.
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany 15,
November NameGracell
2020 Biotechnologies Inc.
November
Page 4 15, 2020 Page 4
FirstName LastName
Use of Proceeds, page 107
11. To the extent you do not expect the proceeds, together with existing
cash, will be
sufficient to fund each of the referenced trials through regulatory
approval, please indicate
how far in research and development the proceeds of the offering,
together with your
existing cash, will allow you to proceed. Refer to Item 3.C.1 of Form
20-F.
Capitalization, page 110
12. In footnote (1) to the capitalization table, you noted that you did
not include the impact of
share-based compensation expense for share options which you expect to
record upon the
completion of this offering in your unaudited pro forma and pro forma
as adjusted
information. Please tell us why this compensation is not reflected as
a pro-forma
adjustment to your accumulated deficit in the capitalization table.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Loan Agreements, page 127
13. Please file the loan agreements with the Bank of China, the three loan
agreements with
China Construction Bank, and the loan agreement with China Merchants
Bank as exhibits
to your registration statement or tell us why you believe such filing
is not required. Refer
to Item 601(b)(10) of Regulation S-K.
Capital Expenditure, page 130
14. Revise to provide additional information regarding the property and
equipment
purchased. Refer to Items 4.D. and 5.B.3. of Form 20-F.
Holding Company Structure, page 131
15. Please add a risk factor discussing the regulations that require an
enterprise in China to set
aside at least 10% of its after-tax profit based on PRC accounting
standards each year to
its general reserves until its cumulative total reserve funds reaches
50% of its registered
capital, and state the current percentage you have achieved.
Critical Accounting Policies, Judgments and Estimates
Research and Development Expenses, page 134
16. Please disclose the costs incurred during each period presented for
each of your key
research and development projects. If you do not track your research
and development
costs by project, please disclose that fact and explain why you do not
maintain and
evaluate research and development costs by project. Provide other
quantitative or
qualitative disclosure that provides more transparency as to the type
of research and
development expenses incurred (i.e. by nature or type of expense)
which should reconcile
to total research and development expense on the Consolidated
Statements of
Comprehensive Loss.
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany 15,
November NameGracell
2020 Biotechnologies Inc.
November
Page 5 15, 2020 Page 5
FirstName LastName
Emerging Growth Company Status, page 136
17. In this discussion of your Emerging Growth Company status, please
clarify that you have
elected to take advantage of such exemptions as noted on page 7.
18. In addition, please provide a risk factor explaining that this
election allows you to
delay adopting new or revised accounting standards that have different
effective dates for
public and private companies until those standards apply to private
companies. Also
disclose that as a result of this election, your financial statements
may not be comparable
to companies that comply with public company effective dates.
Business, page 137
19. Please revise the description of your programs to eliminate the
reliance on overly
technical language so investors can understand the nature of your
product candidates. For
example, on page 137, you state with respect to GC012F, As of the
July 2020 data cutoff
date, 15 of 16 evaluable r/r MM patients achieved a response,
resulting in an overall
response rate, or ORR, of 93.8%, with all six patients, or 100%, from
the highest dose
cohort achieving a sCR, which was maintained through the landmark
analysis at six
months after CAR-T infusion. In addition, briefly describe cytokine
release syndrome
and the standard of care treatment, graft versus host disease,
allogeneic therapies,
evaluable patients and similar technical terms. In the first graph on
page 147, explain
PD-1+Lag3+Tim3+ and its significance in measuring exhaustion of
FasTCAR T cells,
and what you mean by exhaustion.
20. In several places you address deep and durable responses,
stringent complete
responses, and complete responses. Please revise your
document to define these terms
and disclose how these responses were measured. Also revise to define
Grade 1, Grade 2
and Grade 3 or higher adverse events.
21. Revise the graphic at the bottom of page 147 to increase the font and
resolution so the
graphics are readable.
22. Expand your disclosure of the phase 1 trials in China to indicate when
each trial was
conducted. Also, expand to discuss the duration of the trial, how the
drug candidate was
administered, who conducted and/or sponsored the trial, and all
serious adverse events
that were experienced, including the number of patients experiencing
serious adverse
events. To the extent you have not done so, disclose the number of
patients enrolled and
state the primary and secondary endpoints related to safety,
tolerability, pharmacokinetics
and dosage.
23. Under an appropriate heading, please expand your disclosure to provide
the material terms
of your license agreement with ProMab Biotechnologies, Inc., as
referenced on page 66,
and file such agreement as an exhibit or tell us why you believe such
filing is not
required.
William Wei Cao, Ph.D.
FirstName LastNameWilliam
Gracell Biotechnologies Inc. Wei Cao, Ph.D.
Comapany 15,
November NameGracell
2020 Biotechnologies Inc.
November
Page 6 15, 2020 Page 6
FirstName LastName
Intellectual Property, page 164
24. With respect to your patent applications, please disclose the specific
products, product
groups and technologies to which such applications relate, whether the
technology is
owned or licensed, the type of patent protection you seek, and the
applicable jurisdictions.
Regulation, page 167
25. You have provided disclosure with respect to regulations in the United
States and China.
We note on page 141 you reference leveraging your relationships in
Europe as well. To
the extent you intend to seek regulatory approval in Europe or other
jurisdictions, please
expand this section to briefly discuss the regulations and approval
processes in those
jurisdictions.
Management
Employment Agreements and Indemnification Agreements, page 195
26. Revise to disclose the material terms of any compensation agreement
with any member of
management or director that will be in effect at the time of this
offering on an individual
basis. Refer to Item 6.B. of Form 20-F.
Principal Shareholders, page 198
27. Please identify the natural person or persons who directly or
indirectly exercise sole or
shared voting and/or dispositive power with respect to the common
stock held by TLS
Beta Pte. Ltd. and entities affiliated with Kington. Refer to Item 7.A
of Form 20-F.
Taxation, page 230
28. It is not sufficient to provide only a description of the tax law of a
particular jurisdiction.
Revise the discussions of each jurisdiction to clearly identify each
material tax
consequence, provide an opinion on each and the basis for that
opinion. We note, for
example, that the introduction on page 230 states it is a general
summary of certain
Cayman Islands, People s Republic of China and United States federal
income tax
consequences and, with respect to U.S. taxation, the following
discussion is a summary
of certain material U.S. Federal income tax considerations. Revise
these statements to be
clear that you are addressing the material tax consequences. Clarify
who is providing the
opinion with respect to the U.S. federal tax consequences. With
respect to each
jurisdiction, to the extent the tax consequences are subject to
uncertainty, counsel may
describe what the tax consequences should or are more likely
than not to be, but
counsel must also describe why it cannot give a will opinion,
and describe the degree of
uncertainty. In addition, revise statements such as [w]e believe
that we should not be
considered . . . to clarify that it is the opinion of counsel, not
the company by avoiding
we believe. Refer to Section III.C. of Staff Legal Bulletin 19.
William Wei Cao, Ph.D.
Gracell Biotechnologies Inc.
November 15, 2020
Page 7
Notes to the Consolidated Financial Statements
9. Share-Based Compenation, page F-29
29. In your table presenting share option activity, you provide the
weighted average exercise
price in US$ but present the weighted-average grant date fair value in
RMB. For
consistency, please revise to also provide the weighted-average grant
date fair value in
US$.
30. Also, quantify the total unrecognized compensation cost related to:
the vested but not exercisable options that will be recognized
upon completion of the
listing; and
the non-vested options. In addition, disclose the weighted-average
period share-based
compensation that will be recognized for the non-vested options.
Refer to ASC 718-10-50.
31. Please disclose what happens to the options granted if a listing is
not achieved.
General
32. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Franklin 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.
FirstName LastNameWilliam Wei Cao, Ph.D. Sincerely,
Comapany NameGracell Biotechnologies Inc.
Division of
Corporation Finance
November 15, 2020 Page 7 Office of Life
Sciences
FirstName LastName