Filed Pursuant to Rule 424(b)(3)
 Registration No. 333-262672 ​

PROSPECTUS FOR
132,857,109 SHARES OF COMMON STOCK
24,333,365 WARRANTS TO PURCHASE SHARES OF COMMON STOCK
AND
24,333,365 SHARES OF COMMON STOCK UNDERLYING WARRANTS
OF
GELESIS HOLDINGS, INC.

This prospectus relates to (i) the resale of 9,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) originally purchased in the PIPE Financing (as defined below) by certain of the selling securityholders named in this prospectus (the “Selling Securityholders”) at a purchase price of $ 10.00 per share, (ii) the resale of an aggregate of 2,727,967 shares of Common Stock originally issued pursuant to the Backstop Agreement (as defined below) to certain of the Selling Securityholders at an effective purchase price of approximately $ 2.73 per share, (iii) the resale of 4,916,250 Founder Shares (as defined below) by certain of the Selling Securityholders previously acquired by our predecessor’s sponsor at an effective purchase price of $ 0.0051 per share, (iv) the resale of 54,990,973 shares of Common Stock by Legacy Gelesis shareholders originally issued as consideration in connection with the Business Combination (as defined below) at a per share value of $10.00 per share; (v) up to an aggregate of 7,520,000 shares of Common Stock that may be issued upon exercise of the Private Placement Warrants (as defined in this prospectus) held by the Selling Securityholders that were originally purchased at a purchase price of $1.00 per warrant; (vi) up to an aggregate of 13,800,000 shares of Common Stock that may be issued upon exercise of the Public Warrants (as defined in this prospectus) held by the Selling Securityholders that were originally issued as part of the units sold by our predecessor, Capstar Special Purpose Acquisition Corp. (“CPSR”) at a purchase price of $ 10.00 per unit on July 7, 2020 as part of its initial public offering; (vii) up to 3,013,365 shares of Common Stock that may be issued upon exercise of Rollover Warrants (as defined in this prospectus) held by the Selling Securityholders; (viii) up to 13,405,709 shares of Common Stock issuable upon exercise of the Rollover Options (as defined in this prospectus) held by the Selling Securityholders; and (ix) up to 23,482,845 Earnout Shares (defined below) reserved for issuance to certain of the Selling Securityholders, subject to certain market price-based target requirements. This prospectus also relates to the resale of up to 24,333,365 Warrants (as defined in this prospectus) held by the Selling Securityholders. Additional details regarding the securities to which this prospectus relates and the Selling Securityholders is set forth in this prospectus under “Information Related to Offered Securities” and “Selling Securityholders”.

We will not receive any proceeds from the sale of the Common Stock or the Warrants by the Selling Securityholders. We could receive up to an aggregate of $251.0 million if all of the Warrants registered hereby are exercised for cash. However, we will only receive such proceeds if and when the Warrant holders exercise the Warrants. The exercise of the Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the Warrant and the price of our Common Stock at the time of exercise. We have 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share; and (iii) 3,013,365 exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $4.26 and 1,660,303 of which are exercisable at an exercise price of $0.02. If the market price of our Common Stock is less than the exercise price of a holder’s Warrants, it is unlikely that holders will exercise their Warrants. As of June 6, 2022, the closing price of our Common Stock was $3.80 per share. There can be no assurance that all of our Warrants will be in the money prior to their expiration. Our Public Warrants under certain conditions, as described in the warrant agreement, are redeemable by the Company at a price of $0.01 per Warrant or on a cashless basis. Our Private Warrants are not redeemable so long as they are held by the initial stockholders and are exercisable on a cashless basis. Our Rollover Warrants are not redeemable and are exercisable on a cashless basis only with respect to the 1,660,303 Rollover Warrants that have an exercise price of $0.02. As such, it is possible that we may never generate any cash proceeds from the exercise of our Warrants. We will bear all costs, expenses and fees in connection with the registration of the securities. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their respective sales of the securities.

Trading of our Common Stock and Public Warrants began on the New York Stock Exchange (“NYSE”) on January 14, 2022, under the ticker symbols “GLS” and “GLS WS”, respectively. Prior to the consummation of the Business Combination, CPSR’s Class A common stock, par value $0.0001 per share (the “CPSR Class A Common Stock”), and CPSR warrants to purchase CPSR Class A Common Stock traded on the NYSE under the ticker symbols “CPSR” and “CPSR WS”, respectively. On June 6, 2022, the closing prices of our Common Stock and Public Warrants as reported by the NYSE were $3.80 and $0.1578, respectively.

Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 22 of this prospectus.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is June 7, 2022.

 

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.

 

i

 

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the SEC using the “shelf” registration process. Under the shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of shares of Common Stock issuable upon the exercise of stock options and warrants. We will receive proceeds from any exercise of the Warrants for cash.

Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where such offer or sale are not permitted. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

The Selling Securityholders and their permitted transferees may use this shelf registration statement to sell securities from time to time through any means described in the section titled “Plan of Distribution”. More specific terms of any securities that the Selling Securityholders and their permitted transferees offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus titled “Where You Can Find More Information”.

Unless the context indicates otherwise, references in this prospectus to the “company”, “Gelesis”, “Gelesis Holdings”, “we”, “us”, “our” and similar terms refer to Gelesis Holdings, Inc. (f/k/a Capstar Special Purpose Acquisition Corp.) and its consolidated subsidiaries. References to “Capstar Special Purpose Acquisition Corp.” and “CPSR” refer to our predecessor company prior to the consummation of the Business Combination (the “Closing”, and the date of the consummation of the Business Combination, the “Closing Date”). References to “Legacy Gelesis” refer to Gelesis, Inc. prior to the Closing.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information”.

 

1

 

TRADEMARKS

This document contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.

 

2

 

SELECTED DEFINITIONS

Unless otherwise stated in this prospectus or the context otherwise requires, references to:

“2006 Plan” means the Legacy Gelesis 2006 Stock Incentive Plan assumed by Gelesis Holdings in connection with the Business Combination.

“2016 Plan” means the Legacy Gelesis 2016 Stock Option and Grant Plan assumed by Gelesis Holdings in connection with the Business Combination.

“ASC” means Accounting Standards Codification.

“Backstop Agreement” means the Backstop Agreement, dated as of December 30, 2021, by and among CPSR and the Backstop Purchasers.

“Backstop Purchasers” means PureTech Health LLC and SSD2, LLC.

“Backstop Shares” means (i) the 744,217 shares of CPSR Class A Common Stock purchased by the Backstop Purchasers and (ii) the 1,983,750 shares of CPSR Class A Common Stock issued to the Backstop Purchasers, in connection with the Closing pursuant to the terms of the Backstop Agreement.

“Board” means the board of directors of Gelesis Holdings, unless the context otherwise requires.

“Bridge Financing” means the bridge financing arrangement in the amount of $27.0 million entered into by Legacy Gelesis on December 13, 2021.

“Business Combination” means the transactions contemplated by the Business Combination Agreement.

“Business Combination Agreement” means the Business Combination Agreement, dated as of July 19, 2021, by and among CPSR, Merger Sub and Legacy Gelesis, as amended on November 8, 2021 and December 30, 2021.

“Bylaws” means the Gelesis Holdings amended and restated bylaws.

“Certificate of Incorporation” means the Gelesis Holdings amended and restated certificate of incorporation.

“Capstar Stockholder Redemption” means the right of the holders of CPSR Class A Common Stock to redeem all or a portion of their CPSR Class A Common Stock prior to the Closing (in connection with the transactions contemplated by the Business Combination Agreement or otherwise) as was set forth in CPSR’s certificate of incorporation.

“Closing” means the closing of the Business Combination.

“Closing Date” means January 13, 2022.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Common Stock” means the common stock, par value $0.0001 per share, of Gelesis Holdings.

“Continental” means Continental Stock Transfer & Trust Company.

“CPSR” means Capstar Special Purpose Acquisition Corp., a Delaware corporation.

“CPSR Class A Common Stock” means the Class A Common Stock, par value $0.0001 per share, of CPSR, which automatically converted into an equal number of shares of our Common Stock in connection with the Business Combination.

“CPSR Class B Common Stock” or “Founder Shares” means the Class B Common Stock, par value $0.0001 per share; of CPSR, which were initially issued to the Sponsor (a portion of which were subsequently transferred to the other Initial Shareholders or issued as Backstop Shares) in a private placement prior to the CPSR Initial Public Offering, and, in connection with the Business Combination, which automatically converted into an equal number of shares of Common Stock.

 

3

 

“CPSR Initial Public Offering” means the initial public offering of CPSR, which closed on July 7, 2020.

“CPSR Initial Stockholders” means the Sponsor, Kathryn Cavanaugh, John Ghiselli and James Whittenburg, who collectively own all of the CPSR Class B Common Stock.

“CPSR Units” means the units of CPSR, each consisting of one (1) share of CPSR Class A Common Stock and one-half (1/2) of one Public Warrant of CPSR that were offered and sold by CPSR in the CPSR Initial Public Offering (less the number of units that have been separated into the underlying public shares and underlying warrants upon the request of the holder thereof).

“DGCL” means the General Corporation Law of the State of Delaware, as amended.

“Dollars” or “$” means U.S. dollars, except where otherwise noted.

“Earn Out Period” means the five (5) year period immediately following the Closing.

“Earnout Shares” means the twenty-three million four hundred eighty-three thousand two hundred and fifty (23,483,250) restricted shares of Gelesis Holdings Common Stock to be issued to Legacy Gelesis stockholders, holders of Legacy Gelesis Warrants and holders of Legacy Gelesis Options, pro rata with the portion of the Transaction Share Consideration allocated to each Legacy Gelesis Stockholder, holder of Legacy Gelesis Options and holder of Legacy Gelesis Warrants, subject to certain vesting conditions as set forth in the Business Combination Agreement.

“Effective Time” means the effective time of the Business Combination.

“Equity Incentive Plan” means the Gelesis Holdings, Inc. 2021 Stock Option and Incentive Plan.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FDA” means the United States Food and Drug Administration.

“Founder Shares” means the shares of CPSR Class B Common Stock purchased by the Sponsor in a private placement prior to the CPSR Initial Public Offering, which were converted into shares of CPSR Class A Common Stock and automatically exchanged for Common Stock.

“FTC” means the United States Federal Trade Commission.

“GAAP” means accounting principles generally accepted in the United States of America.

“Gelesis” or “Gelesis Holdings” means Gelesis Holdings, Inc., a Delaware corporation.

“Legacy Gelesis” means Gelesis, Inc., a Delaware corporation.

“Gelesis Equityholders” means the holders of Common Stock, Gelesis Holdings Options and Gelesis Holdings Warrants.

“Gelesis Holdings Equity Plan” means the 2016 Plan and the 2006 Plan.

“Gelesis Holdings Options” means options to purchase shares of Common Stock.

“Gelesis Holdings Warrants” means warrants to purchase Common Stock.

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

“Legacy Gelesis” means Gelesis, Inc., a Delaware corporation, prior to the consummation of the Business Combination.

“Legacy Gelesis Stockholders” means the stockholders of Legacy Gelesis and holders of Legacy Gelesis equity awards prior to the Business Combination.

“Merger” means the merger of Merger Sub with and into Gelesis, with Gelesis surviving the merger as a wholly owned subsidiary of Gelesis Holdings, Inc.

 

4

 

“Merger Sub” means CPSR Gelesis Merger Sub, Inc., a Delaware corporation and subsidiary of CPSR, prior to the consummation to the Business Combination.

“NYSE” means the New York Stock Exchange.

“PIPE Financing” means the private placement of an aggregate of 9,000,000 shares of CPSR Class A Common Stock to the PIPE Investors pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, for a purchase price of $10.00 per share, resulting in an aggregate amount of $90 million to CPSR, pursuant to Subscription Agreements with the PIPE Investors, including the PIMCO Private Funds.

“PIPE Investors” means those investors who participated in the PIPE Financing.

“Preferred Stock” means the preferred stock, par value $0.0001 per share, of Gelesis Holdings.

“Private Placement Warrants” means the warrants to purchase shares of Common Stock outstanding as of the date of this prospectus that were issued at the time of the Business Combination in exchange for the private placement warrants previously sold in a private placement to the Sponsor concurrently with the CPSR Initial Public Offering.

“Private Placement Warrants” means the private placement warrants issued to the Sponsor concurrently with the CPSR Initial Public Offering, or the warrants of Gelesis Holdings issued in exchange thereof at the time of the Business Combination, as context requires.

“Public Stockholders” means holders of CPSR Class A Common Stock issued in the CPSR Initial Public Offering.

“Public Warrants” means the redeemable warrants that were offered and sold by CPSR in the CPSR Initial Public Offering as part of the CPSR Units or the redeemable warrants of Gelesis Holdings issued in exchange thereof at the time of the Business Combination, as context requires.

“Registration Rights Agreement” means the Registration and Stockholder Rights Agreement, dated January 13, 2022, by and among Gelesis Holdings, Inc., certain former stockholders of Gelesis, the Sponsor and certain directors and officers of CPSR prior to the Effective Time.

“Rollover Option” means each vested and unvested Legacy Gelesis option which, at the Effective Time, by virtue of the Merger and without any action of any party or any other person, but subject to the terms of the Business Combination Agreement, ceased to represent the right to purchase shares of Legacy Gelesis common stock and was canceled in exchange for an option to purchase shares of Common Stock. Each Rollover Option is subject to the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding Legacy Gelesis option immediately prior to the Effective Time, except for (i) terms (A) rendered inoperative by reason of the transactions contemplated by the Business Combination Agreement (including any anti-dilution or other similar provisions that adjust the number of underlying shares that could become exercisable subject to the options) or (B) to the extent they conflict with the Gelesis Holding Equity Plan and (ii) such other immaterial administrative or ministerial changes as the CPSR board of directors (or the compensation committee of the CPSR board of directors) may have determined in good faith are appropriate to effectuate the administration of the Rollover Options.

“Rollover Warrant” means each Legacy Gelesis warrant which, at the Effective Time, by virtue of the Merger and without any action of any party or any other person, ceased to represent the right to purchase shares of Legacy Gelesis common stock and was canceled in exchange for a warrant to purchase shares of Common Stock. Each Rollover Warrant is subject to the same terms and conditions that applied to the corresponding Legacy Gelesis warrant immediately prior to the Effective Time, except for (i) terms rendered inoperative by reason of the transactions contemplated by the Business Combination Agreement (including any anti-dilution or other similar provisions that adjust the number of underlying shares that could become exercisable subject to the warrants) and (ii) such other immaterial administrative or ministerial changes as the CPSR board of directors (or the compensation committee of the CPSR board of directors) may have determined in good faith are appropriate to effectuate the administration of the Rollover Warrants.

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.

 

5

 

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Sponsor” means Capstar Sponsor Group, LLC, a Delaware limited liability company.

“Subscription Agreements” means the subscription agreements pursuant to which the PIPE Financing was consummated.

“Transactions” mean the Business Combination, the PIPE Financing, the Bridge Financing, the Backstop Agreement and related adjustments.

“Trust Account” means the trust account maintained by Continental, acting as trustee, that holds the proceeds from the CPSR Initial Public Offering and the private placement of the Private Placement Warrants and established for the benefit of holders of CPSR Class A Common Stock in connection with the CPSR Initial Public Offering.

“Warrants” means the Private Placement Warrants, the Public Warrants and the Rollover Warrants.

 

6

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. The information included in this prospectus has been provided by us and our management, and such forward-looking statements include statements relating to the expectations, hopes, beliefs, intentions or strategies regarding the future of Gelesis and its management team. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

•

our ability to raise financing in the future, if and when needed;

​

•

our ability to continue as a going concern;

​

•

our ability to achieve and maintain widespread market acceptance of Plenity, including building brand recognition and loyalty, increasing sales, and achieving commercial success;

​

•

the impact of current and future applicable laws and regulations, whether in the United States or foreign countries, and our ability to comply with such laws and regulations;

​

•

our ability to produce adequate supply of Plenity, including its ability to continue to invest in manufacturing capacity and to build additional manufacturing sites;

​

•

risks related to the development of the telehealth market and regulations related to remote healthcare;

​

•

global economic, political and social conditions and uncertainties in the markets that we serve, including risks and uncertainties caused by the COVID-19 pandemic or other natural or man-made disasters;

​

•

our ability to enter into additional strategic collaborations with third parties, to acquire businesses or products or form strategic alliances in the future and to realize the benefits of such collaborations, acquisitions and alliances;

​

•

our ability to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect Plenity and our ability to prevent third parties from infringing on our proprietary technology;

​

•

the risk that a third-party’s activities, including with respect to third parties that we have granted outlicenses to or granted limited exclusive or non-exclusive commercial rights, may overlap or interfere with the commercialization of Plenity or that we become dependent on such arrangements;

​

•

our ability to successfully develop and expand our operations and manufacturing and to effectively manage such growth;

​

•

risks related to our suppliers and distributors, including the loss of such suppliers or distributors, or their inability to provide adequate supply of materials or distribution;

​

•

our ability to retain our senior executive officers and to attract and keep senior management and key scientific and commercial personnel;

​

•

our ability to identify and discover additional product candidates and to obtain and maintain regulatory approval for such candidates;

​

•

risks related to potential product liability exposure for Plenity or other future product candidates;

​

•

risks related to adverse publicity in the weight management industry, changes in the perception of our brands, and the impact of negative information or inaccurate information about us on social media;

​

•

our ability to generate product sales and to reduce operating losses going forward;

​

 

7

 

•

our ability to accurately forecast revenue and appropriately monitor its associated expenses in the future;

​

•

our ability to compete against other weight management and wellness industry participants or other more effective or more favorably perceived weight management methods, including pharmaceuticals, devices and surgical procedures;

​

•

foreign currency fluctuations and inflation;

​

•

failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;

​

•

our ability to successfully protect against security breaches and other disruptions to our information technology structure; and

​

•

other factors detailed under the section entitled “Risk Factors.”

​

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This prospectus also contains estimates, projections and other information concerning our industry, our business, and the markets for our products, including data regarding the estimated size of those markets.

Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties.

 

8

 

9

 

​

10

 

​

11

 

​

12

 

13

 

14

 

15

 

16

 

17

 

18

 

Offered Shares*

​

​

Exercise Price

​

​

Number of Shares/Warrants

​

​

Effective Purchase Price Per Share/Warrant(1)

​

​

Lock-Up Restrictions

​

Founder Shares(2)

​

​

​

​

​

​

​

​

​

​

4,916,250

​

​

​

​

$

0.0051

​

​

​

January 13, 2023

​

PIPE Shares(3)

​

​

​

​

​

​

​

​

​

​

9,000,000

​

​

​

​

$

10.00

​

​

​

None

​

Backstop Shares(4):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Backstop Purchase Shares

​

​

​

​

​

​

​

​

​

​

744,217

​

​

​

​

$

10.00

​

​

​

None

​

Backstop Sponsor Shares

​

​

​

​

​

​

​

​

​

​

1,983,750

​

​

​

​

$

0.00

​

​

​

July 13, 2022

​

Common Stock issued in exchange for shares of Legacy Gelesis in connection with the Business Combination(5)

​

​

​

​

​

​

​

​

​

​

54,990,973

​

​

​

​

$

10.00

​

​

​

July 13, 2022

​

Common Stock issuable upon exercise of the Rollover Options

​

​

​

​

​

​

​

​

​

​

13,405,709

​

​

​

​

​

—(6)

​

​

​

July 13, 2022

​

Earnout Shares

​

​

​

​

​

​

​

​

​

​

23,482,845

​

​

​

​

​

—(7)

​

​

​

July 13, 2022

​

Shares Issuable Upon Exercise of the following Warrants:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Public Warrants(8)

​

​

​

​

​

​

​

​

​

​

13,800,000

​

​

​

​

$

11.50

​

​

​

None

​

Private Warrants(9)

​

​

​

​

​

​

​

​

​

​

7,520,000

​

​

​

​

$

11.50

​

​

​

January 13, 2023

​

2020 Rollover Warrants(10)

​

​

​

​

​

​

​

​

​

​

1,353,062

​

​

​

​

$

4.26

​

​

​

July 13, 2022

​

2015 Rollover Warrants(11)

​

​

​

​

​

​

​

​

​

​

1,660,303

​

​

​

​

$

0.02

​

​

​

July 13, 2022

​

Offered Warrants

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Public Warrants

​

​

​

$

11.50

​

​

​

​

​

13,800,000

​

​

​

​

​

—(8)

​

​

​

None

​

Private Warrants(9)

​

​

​

$

11.50

​

​

​

​

​

7,520,000

​

​

​

​

$

1.00

​

​

​

January 13, 2023

​

2020 Rollover Warrants

​

​

​

$

4.26

​

​

​

​

​

1,353,062

​

​

​

​

​

—(10)

​

​

​

July 13, 2022

​

2015 Rollover Warrants

​

​

​

$

0.02

​

​

​

​

​

1,660,303

​

​

​

​

​

—(11)

​

​

​

July 13, 2022

​

19

 

​

20

 

​

21

 

RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors described below in addition to the other information included in this prospectus, including matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking Statements,” before making an investment decision. These risk factors are not exhaustive and investors are encouraged to perform their own investigation with respect to our business, prospects, financial condition and operating results. We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, prospects, financial condition or operating results. The following discussion should be read in conjunction with our financial statements and the notes to the financial statements included herein. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

Risks Related to Our Business and Industry

Risks Related to Product Development, Regulatory Approval and Commercialization

We are dependent on the success of our hydrogel technology for Plenity, which is currently our only marketed and FDA-authorized product.

Plenity is currently our only marketed FDA de novo authorized product and our business depends on the successful commercialization of Plenity. We may never be able to achieve widespread market acceptance of Plenity or, if we do, be able to develop additional indications for Plenity, which will require substantial additional clinical development, testing and regulatory approval before we are permitted to commercialize those indications. The manufacturing and marketing of Plenity is subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to market Plenity. Because our business is almost entirely dependent upon Plenity and its underlying hydrogel technology, any setback in our pursuit of commercialization of Plenity would have a material adverse effect on our business and prospects.

Plenity may cause undesirable side effects that could result in significant negative consequences, including product liability or other litigation, that may be costly to us and/or adversely impact the commercial success of Plenity.

Undesirable side effects caused by Plenity could cause us, the FDA or European regulatory authorities to interrupt, delay or halt the continued commercialization of Plenity and could result in more restrictive labeling, or withdrawal or limitations on Plenity’s marketing approval. To date, the main adverse events in patients taking Plenity have been bloating, flatulence, abdominal pain and diarrhea. However, there have been no serious adverse events attributed to Plenity and the difference in adverse events between Plenity and placebo has been negligible. If we or others identify other undesirable side effects caused by Plenity, a number of potentially significant consequences could result, including:

•

the FDA or European notified bodies may withdraw or limit their marketing approval of the product;

​

•

the FDA or European notified bodies may require the addition of labeling statements, such as a black box warning or a contraindication;

​

•

we may be required to change the way the product is distributed or administered, conduct additional clinical trials or change the labeling of the product;

​

•

we may decide to remove the products from the marketplace;

​

•

we could be sued and held liable for injury caused to individuals using our product; and

​

•

our reputation may suffer.

​

Any of these events could prevent us from achieving or maintaining market acceptance of Plenity and could substantially increase the costs of commercializing the product and/or significantly impact our ability to successfully commercialize and generate product sales.

 

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The broad prescription pharmaceutical and medical device market for overweight and obesity is strictly regulated.

Even though we obtained the required regulatory approval in the United States, our ability to generate product sales is dependent on our ability to market and sell Plenity, which depends upon the awareness and acceptance of Plenity among the medical community, including physicians and patients. If Plenity does not achieve an adequate level of acceptance by patients and physicians, we will not generate sufficient product sales of Plenity to become or remain profitable. Our efforts to educate the medical community about the benefits of Plenity may require significant resources and may never be successful.

We are, and will continue to be, subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

We are, and will continue to be, subject to ongoing FDA requirements and continued regulatory oversight and review, including routine inspections by the FDA of our manufacturing facilities and compliance with requirements such as the Quality System Regulation, or QSR, which establishes extensive requirements for quality assurance and control as well as manufacturing procedures; requirements pertaining to the registration of our manufacturing facilities and the listing of Plenity with the FDA; continued complaint, adverse event and malfunction reporting; corrections and removals reporting; and labeling and promotional requirements. The promotional claims we are, and will continue to be, able to make for Plenity are limited to the approved indications for use. We may also be subject to additional FDA post-marketing requirements. If we are not able to maintain regulatory compliance, we may not be permitted to market Plenity and/or may be subject to enforcement by the FDA such as the issuance of warning or untitled letters, the imposition of fines, injunctions, and civil penalties; the recall or seizure of products; the imposition of operating restrictions; and the institution of criminal prosecution. In addition, we will be subject to similar regulatory regimes in Europe for Plenity. Adverse EU Competent Authority or FDA action in any of these areas could significantly increase our expenses and limit our product sales and profitability.

The FDA and other regulatory authorities actively enforce the laws and regulations pertaining to the advertising and promotion of healthcare products. If we are found to have improperly promoted off-label uses, including for the use of an unapproved indication or in an unapproved age group or dosage, we may become subject to significant liability and corresponding litigation.

The FDA and European regulatory authorities strictly regulate the promotional claims that may be made about prescription products, such as Plenity. In particular, a medical device may not be promoted for uses that are not approved by the FDA or other regulatory authorities as reflected in the product’s approved labeling. For example, we are not allowed to make claims for Plenity pertaining to diabetes management or glycemic control in prediabetic and type 2 diabetic patients without approval of specific labeling regarding such use. Even though we received marketing approval for Plenity to aid in weight management in overweight and obese adults with a body mass index (kg/m2), or BMI, of 25 – 40, when used in conjunction with diet and exercise, physicians may nevertheless prescribe Plenity to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to enforcement action by the FDA, including warning or untitled letters. In addition, the federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of Plenity, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

Healthcare laws and regulations expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings, and our direct marketing strategy could enhance such exposure.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of Plenity. Any arrangements with third party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and

 

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relationships through which we market, sell and distribute Plenity. Restrictions under applicable federal and state healthcare laws and regulations include the following:

•

The federal anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid.

​

•

The federal False Claims Act imposes criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.

​

•

The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

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•

The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.

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•

The federal transparency requirements, sometimes referred to as the “Sunshine Act,” under the Patient Protection and Affordable Care Act, require manufacturers of drugs, medical devices, biologics and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests.

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•

Analogous state laws and regulations, such as state anti-kickback and false claims laws and transparency laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers. Some state laws require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring device manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing, with the reported information to be made publicly available on a searchable website.

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•

Ensuring that our future business arrangements with third parties comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including current or future activities to be conducted by our or a collaborator’s sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

​

Plenity is currently regulated as a medical device by the FDA and may become subject to similar or other therapeutic regulatory requirements outside the United States.

Plenity is currently regulated by the FDA as a medical device, and may become subject to similar or other therapeutic regulatory requirements outside of the United States. We expect to expand the sales of

 

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Plenity internationally, and as we do so we will also become subject to similar regulations by foreign governments. Government regulations specific to medical devices are wide ranging and govern, among other things:

•

product design, development and manufacture;

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•

laboratory, preclinical and clinical testing, labeling, packaging, storage, and distribution;

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•

premarketing clearance or approval or de novo authorization;

​

•

record keeping;

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•

product marketing, promotion and advertising, sales and distribution; and

​

•

post-marketing surveillance, including reporting of deaths, serious injuries and product malfunctions, recalls, corrections and removals.

​

Before a new medical device, or a new intended use for a device in commercial distribution, can be marketed in the United States, a company must first submit and receive either 510(k) clearance pursuant to section 510(k) of the Federal Food, Drug, and Cosmetic Act, or FDCA, unless an exemption applies; approval of a premarket approval, or PMA, application from the FDA; or de novo classification or authorization. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, in order to clear the proposed device for marketing. To be substantially equivalent, the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence. Failure to demonstrate substantial equivalence to a predicate device to the FDA’s satisfaction will require the submission and approval by the FDA of a PMA application. However, the FDA can reclassify, or use “de novo classification” for, a device for which there was no predicate device if the device is low or moderate risk. The FDA will identify “special controls” that the manufacturer must implement, which often include labeling and other restrictions. Subsequent applicants can rely on the de novo product as a predicate for a 510(k) clearance. The FDA’s 510(k) clearance process usually takes from three to 12 months, but may last longer. The process for obtaining a PMA approval takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or failure to obtain necessary regulatory approvals, authorizations, or clearances for new product offerings, if any, could have a material adverse effect on our business, financial condition and results of operations. Material modifications to the intended use or technological characteristics of Plenity may also require new 510(k) clearances, premarket approvals, or de novo authorizations prior to implementing the modifications, or require us to recall or cease marketing Plenity until these clearances, approvals or authorizations are obtained.

In addition, we are required to timely submit various reports with the FDA, including reports that Plenity may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not filed in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business, financial condition and results of operations. Any corrective actions can be costly, time-consuming, and divert resources from other portions of our business. Furthermore, the submission of these reports could be used by competitors against us, which could harm our reputation.

The FDA and the FTC also regulate the advertising and promotion of Plenity and services to ensure that the claims we make are consistent with our marketing authorizations, that there is adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising are neither false nor misleading. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

Recently enacted and future legislation may increase the difficulty and cost for us to further commercialize Plenity and any other products we may develop in the future and decrease the prices we may obtain for our approved products.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay

 

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marketing approval of our products, restrict or regulate post-approval activities, and affect our ability to profitably sell our approved products and any product candidates for which we obtain marketing approval.

In March 2010, the Patient Protection and Affordable Care Act, or ACA, was enacted into law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

Among the provisions of the ACA of importance to Plenity and other product candidates are the following:

•

expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for non-compliance;

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•

extension of manufacturers’ Medicaid rebate liability;

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•

expansion of eligibility criteria for Medicaid programs;

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•

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

​

•

requirements to report financial arrangements with physicians and teaching hospitals; and

​

•

a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

​

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to reform through legislation and executive orders by the previous U.S. presidential administration and to judicial challenges. In 2012, the U.S. Supreme Court heard challenges to the constitutionality of the individual mandate and the viability of certain provisions of the ACA. The U.S. Supreme Court’s decision upheld most of the ACA and determined that requiring individuals to maintain “minimum essential” health insurance coverage or pay a penalty to the Internal Revenue Service was within Congress’s constitutional taxing authority. However, as a result of tax reform legislation enacted into law in late December 2017, the individual mandate has been eliminated, effective January 1, 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the 2017 Tax Reform Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review this case, and held oral arguments on November 10, 2020. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the U.S. Supreme Court’s decision, President Biden issued an executive order that initiated a special enrollment period from February 15, 2021 through August 15, 2021 for the purpose of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact our business.

Other legislative changes have also been proposed and adopted since the ACA was enacted that, directly or indirectly, affect or are likely to affect, the pharmaceutical industry and the commercialization of our products, including the Budget Control Act of 2011, or BCA, the American Taxpayer Relief Act of 2012, or ATRA, and the Middle Class Tax Relief and Job Creation Act of 2012. In August 2011, the BCA, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to

 

26

 

providers averaging 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2031 unless additional Congressional action is taken.

However, the Medicare sequester reductions under the BCA have been suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. The ATRA, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for our products that obtain marketing approval. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost-containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare. The implementation of cost-containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from our products and product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop future product candidates. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

•

the demand for our product and product candidates, if approved;

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•

our ability to receive or set a price that we believe is fair for our products;

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•

our ability to generate revenue and achieve or maintain profitability;

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•

the amount of taxes that we are required to pay; and

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•

the availability of capital.

​

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for our approved products. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product and product candidates, if approved. Litigation and legislative efforts to change or repeal the ACA are likely to continue, with unpredictable and uncertain results.

We are responsible for manufacturing Plenity and currently has a validated and active commercial scale manufacturing facility that it is currently expanding, a fully functional pilot manufacturing site that can be quickly activated and land owned and zoned for commercial capacity expansion. We will continue to invest in manufacturing capacity at these sites and possibly build additional manufacturing sites to meet increased demand as Plenity is launched through new channels or in new markets. Our inability to produce an adequate supply of Plenity, due to the loss of these facilities or other future facilities or any material limitation of production at these facilities, could materially and adversely impact the commercial growth and success of Plenity and, consequently, could cause our revenue, earnings or reputation to suffer.

We have developed proprietary processes and manufacturing technologies for the production of Plenity. Our subsidiary, Gelesis S.r.l., operates manufacturing and research and development facilities in

 

27

 

southern Italy that produce Plenity. These facilities are currently our sole supplier of Plenity and while we currently plan to quadruple the output of this facility in 2022 to meet the near term demands associated with the commercialization of Plenity there are no assurances that we will be able to do so successfully or at all. Any performance failure by us could delay or otherwise adversely affect the commercialization of Plenity and we may encounter difficulties involving the production yields, regulatory compliance, lot release, quality control and quality assurance, as well as shortages of qualified personnel. Moreover, the ability to manufacture and supply Plenity adequately and in a timely manner is dependent on the uninterrupted and efficient operation of Gelesis S.r.l., which may be impacted by many manufacturing variables, including, but not limited to:

•

availability of raw materials from suppliers;

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•

contamination of raw materials and components used in the manufacturing process;

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•

capacity of our facilities or those of our contract manufacturers, if any;

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•

the ability to adjust to changes in actual or anticipated use of the facility, including with respect to having sufficient capacity and a sufficient number of qualified personnel;

​

•

facility contamination by microorganisms or viruses or cross contamination;

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•

compliance with regulatory requirements, including inspectional notices of violation and warning letters;

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•

changes in actual or forecasted demand;

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•

timing and number of production runs;

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•

production success rates; and

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•

timing and outcome of product quality testing.

​

In addition, we may encounter delays and problems in manufacturing Plenity for a variety of reasons, including accidents during operations, failure of equipment, delays in receiving materials, natural or other disasters, political or governmental unrest or changes, social unrest, epidemics and pandemics, intentional misconduct or other factors inherent in operating complex manufacturing facilities. We may not be able to operate our manufacturing facility in a cost-effective manner or in a time frame that is consistent with manufacturing needs. If we cease or interrupt production or if other third parties fail to supply materials, products or services to us for any reason, such interruption could delay the commercial supply of Plenity, with the potential for additional costs and lost product sales. If this were to occur, we may also need to seek alternative means to fulfill our manufacturing needs. If we encounter unexpected failures or difficulties in our manufacturing process or require amounts of Plenity in excess of our current estimates we may be unable to manufacture sufficient supplies to support its commercialization, which will adversely impact the growth and success of Plenity and, consequently, could cause our revenue, earnings or reputation to suffer.

Furthermore, we will also be subject to ongoing periodic inspection, which may be unannounced, by the FDA, corresponding state authorities and European regulatory authorities to ensure strict compliance with QSR requirements and other applicable government regulations and corresponding foreign standards. If we fail to maintain compliance or otherwise experience setbacks, we could be subject to enforcement action, including warning or untitled letters or civil or criminal penalties, the production of Plenity could be interrupted or suspended, or Plenity could be recalled or withdrawn, resulting in delays, additional costs and potentially lost product sales.

There is no guarantee that we will be able to successfully commercialize Plenity through the channels or in the markets it is targeting or at all.

The commercial success of Plenity depends upon the awareness and acceptance of Plenity among the medical community, including physicians and patients. Market acceptance of Plenity depends on a number of factors, including, among others:

Plenity’s demonstrated ability to aid in weight management in overweight and obese patients;

 

28

 

•

the perceived advantages and disadvantages of Plenity over existing products and other competitive treatments and technologies for weight management in overweight and obese patients;

​

•

the prevalence and severity of any adverse side effects associated with Plenity, such as bloating, flatulence, abdominal pain and diarrhea;

​

•

limitations or warnings contained in the labeling approved for Plenity by the FDA or certain European notified bodies;

​

•

availability of alternative treatments, including a number of competitive obesity therapies already approved or expected to be commercially launched in the near future;

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•

the extent to which physicians prescribe Plenity;

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•

the willingness of the target patient population to try new therapies;

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•

the strength of marketing and distribution support and timing of market introduction of competitive products;

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•

publicity concerning our products or competing products and treatments;

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•

pricing and cost effectiveness;

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•

the effectiveness of our sales and marketing strategies; and

​

•

the willingness of patients to pay out-of-pocket in the absence of third party reimbursement.

​

If Plenity does not achieve an adequate level of acceptance by patients and physicians, we will not generate sufficient product sales of Plenity to become or remain profitable. Our efforts to educate the medical community about the benefits of Plenity may require significant resources and may never be successful.

The telehealth market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if it encounters negative publicity, our ability to fully commercialize Plenity and grow our business will be harmed.

Our ability to fully commercialize Plenity and grow our business will depend, to a certain extent, upon the willingness of patients to use, and extent of their utilization of, telehealth services. The telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. The outbreak of the COVID-19 pandemic has increased utilization of telehealth services, but it is uncertain whether such increase in demand will continue post-pandemic. Negative publicity concerning the telehealth market as a whole could limit market acceptance of, or ability to generate sales of, Plenity. If patients do not engage with Plenity through telehealth services then our ability to access potential patients and, accordingly, our market, may be limited, may develop more slowly than we expect, or may not develop at all. Similarly, individual and healthcare industry concerns or negative publicity regarding patient confidentiality and privacy in the context of telehealth could limit the use of telehealth services to access Plenity. If any of these events occurs, it could have a material adverse effect on our business, financial condition and results of operations.

Our ability to market and sell Plenity through telehealth services in a particular jurisdiction is directly dependent on the applicable laws that govern remote healthcare and the practice of medicine and healthcare delivery in general in such jurisdiction, which are subject to changing political, regulatory and other influences that may restrict our use of telehealth services or otherwise negatively impact our business model and growth.

The ability of our qualified distributors to market and sell Plenity through telehealth services in a particular jurisdiction is directly dependent upon the applicable laws in such jurisdiction that govern remote healthcare and the practice of medicine and healthcare delivery in general in such jurisdictions, which are subject to changing political, regulatory and other influences. Some state medical boards have established rules or interpreted existing rules in a manner that may limit or restrict the ability of our qualified distributors to use telehealth services in connection with providing patients with access to Plenity or otherwise negatively impact our business model and growth.

 

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Telehealth offers patients the ability to see a licensed medical professional for advice, diagnosis and treatment of routine health conditions on a remote basis, which has been particularly important during the COVID-19 pandemic. Due to the nature of this service and the provision of medical care and treatment by licensed medical professionals, certain of our qualified distributors and their physicians and healthcare professionals who prescribe our products via telehealth are and may in the future be subject to complaints, inquiries and compliance orders by national and state medical boards. Such complaints, inquiries or compliance orders may result in disciplinary actions taken by these medical boards against the licensed physicians who provide Plenity through these telehealth services, which could include suspension, restriction or revocation of the physician’s medical license, probation, required continuing medical education courses, monetary fines, administrative actions and other conditions and would, in turn, limit the distribution of Plenity and slow our commercialization efforts.

Due to the uncertain regulatory environment, certain states may determine that our qualified distributors and their affiliated physicians or healthcare professionals are in violation of their laws and regulations or such laws and regulations may change. In the event that we must remedy such violations, we may be required to modify how we utilize telehealth services, if at all, in connection with the distribution of Plenity in such states in a manner that undermines our business, we may become subject to fines or other penalties or, if we determine that the requirements to operate in compliance in such states are overly burdensome, we may elect to terminate our operations in such states. In each case, our revenue may decline and our business, financial condition and results of operations could be materially adversely affected.

In order to sell, market and distribute Plenity, we may enter into additional strategic collaborations with third parties. We have limited experience with such collaborations and if we have problems establishing these relationships, the commercialization of Plenity could be impaired.

We are continually evaluating changing consumer preferences and the competitive environment of the weight management industry and seeking out opportunities to improve our performance through the implementation of selected strategic collaborations. The goal of these efforts is to develop and implement a comprehensive and competitive business strategy that addresses those changes and drives the sale and distribution of Plenity. We may not be able to successfully implement our strategic collaborations and realize the intended business opportunities, growth prospects, including new business channels, and competitive advantages. Our efforts to capitalize on business opportunities may not bring the intended results. Assumptions underlying expected financial results or consumer demand and receptivity may not be met or economic conditions may deteriorate. We also may be unable to attract and retain highly qualified and skilled personnel to implement our strategic collaborations and we have limited experience implementing such arrangements with third parties. If we have problems establishing these relationships or executing thereunder, the commercialization of Plenity could be impaired.

Successful commercialization of Plenity is dependent on the willingness of the ultimate patient to pay out-of-pocket. If there is not sufficient patient demand for Plenity, our financial results and future prospects will be harmed.

We cannot be certain that third party reimbursement will be available for Plenity, and, if reimbursement is available, the amount of any such reimbursement. As a result, we expect that our success will be dependent on the willingness of patients to pay out-of-pocket for Plenity. The decision by a patient to elect to undergo treatment with Plenity may be influenced by a number of factors, such as:

•

the success of any sales and marketing programs, including direct-to-consumer marketing efforts, that we, or any third parties we engage, undertake, and as to which we have limited experience;

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•

the extent to which physicians prescribe Plenity for their patients;

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•

the extent to which Plenity satisfies patient expectations;

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•

the cost, safety, and effectiveness of Plenity as compared to other treatments; and

​

•

general consumer confidence, which may be impacted by economic and political conditions.

​

Our financial performance will be materially harmed if we cannot generate significant patient demand for Plenity.

 

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Competing products and technologies could emerge, including pharmaceuticals, devices and surgical procedures, that adversely affect our opportunity to generate sales of Plenity and achieve profitability.

The biotechnology, pharmaceutical and medical device industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Competitors may invest heavily to quickly discover and develop products that could make Plenity obsolete or economically disadvantageous. Competitors may also choose to develop a substantial equivalent of Plenity and obtain clearance through the FDA’s 510(k) clearance process, taking advantage of our investment and work. A new product that competes with Plenity may need to demonstrate that it is substantially equivalent to Plenity or that it has compelling advantages in efficacy, convenience, tolerability and safety to be commercially successful, which if demonstrated, could adversely affect our sales of Plenity and, therefore, our profitability. Competing products, whether substantially equivalent or not, may also be sold at lower prices. This and other competitive factors could force us to lower prices or could result in reduced sales. In addition, products developed by others could emerge as competitors to Plenity. If we are not able to compete effectively against our competitors, our financial condition and operations will suffer.

Our competitors in the obesity market include drugs that are FDA-approved and currently marketed for the treatment of obesity. Plenity primarily competes with orlistat, phentermine/topiramate and naltrexone/ bupropion, three orally administered, marketed pharmaceutical products in the United States for the treatment of obesity, and several older products, indicated for short-term administration, including phentermine, phendimetrazine, benzphetamine and diethylpropion. Orlistat is marketed in the United States by Roche Group under the brand name Xenical and over-the-counter under the brand name alli, at half the prescribed dose, by GlaxoSmithKline. Vivus, Inc. also has a combination product, phentermine/ topiramate, which is marketed under the trade name Qsymia, Further, Orexigen Therapeutics, Inc. received FDA approval of naltrexone/bupropion which is marketed under the brand name Contrave in the United States and has also received marketing approval under the name Mysimba in the European Union. Plenity also competes with injectable pharmaceutical obesity therapies, including Saxenda and Wegovy marketed by Novo Nordisk. In addition, other approaches which utilize various implantable devices or surgical tools marketed by Apollo EndoSurgery, Inc., Obalon Therapeutics, Inc., Aspire Bariatrics, Inc., Scientific Intake Limited Co., and BioEnterics Corporation.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we have. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitors also may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

Risks Related to Intellectual Property Rights

If we are unable to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect Plenity, or if competitors are able to market competitive products without infringing our protected intellectual property rights, others could compete against us in ways that would have a material adverse impact on our business, results of operations, financial condition and prospects.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies without infringing on our intellectual property rights and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability.

As of March 31, 2022, we own nine families of patents and patent applications relating to our hydrogel technology, two of which are directed to methods of treating obesity and reducing caloric intake using certain hydrogels, the hydrogel composition in Plenity and methods of producing hydrogels. The issued U.S.

 

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patents in these two families have expiration dates or projected expiration dates ranging from 2028 to 2033. We cannot provide any assurances that competitors will not practice the claims in our issued patents, or that claims in our issued patents are valid. Further, we cannot provide any assurances that the scope of the claims is sufficient to protect Plenity or its uses or that competitors will practice the claims. In Europe, there are additional issued patents directed to the hydrogel in Plenity, its production and uses of certain hydrogels to treat obesity and reduce caloric intake. In one of the seven other patent families, we have pending applications directed to treating overweight and obesity with certain hydrogels that are projected to expire in 2035.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect Plenity, that they will be sufficient to prevent competitors from marketing competitive products or that any indications obtained for Plenity, now or in the future, will be protected by any issued or future claim. Other parties have developed technologies that may be related or competitive to our approach and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate our patent position. The patent positions of biotechnology, pharmaceutical and medical device companies, including our patent position, involve complex legal and factual questions and, therefore, the issuance, scope, validity, and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patent law is continually evolving and rapidly changing, creating uncertainty and risk. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented or it may be determined that competitive products do not infringe upon our rights. U.S. patents and patent applications may also be subject to interference proceedings, ex parte reexamination, inter partes review proceedings, post-grant review proceedings and challenges in district court. Patents may also be subjected to opposition, post-grant review, or comparable proceedings lodged in various foreign, both national and regional, patent offices.

These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we own may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize Plenity.

Furthermore, though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability, and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar or equivalent products. Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees and current employees. We also may encounter significant problems in protecting our proprietary rights in foreign countries. If these developments were to occur, they could have a material adverse effect on our sales.

Our ability to enforce our patent rights depends on the scope of our claims and our ability to detect infringement. It is difficult to detect infringers who do not advertise the components of their products or how they are made. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s potential competitor’s product or methods of production. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. Third parties may also assert claims that they do not practice our patents and seek a determination of non-infringement.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering Plenity are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted.

 

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The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

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any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect Plenity;

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any of our pending patent applications will issue as patents;

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we will be able to successfully commercialize Plenity, before our relevant patents expire;

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we were the first to make the inventions covered by each of our patents and pending patent applications;

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we were the first to file patent applications for these inventions;

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others will not develop similar or alternative technologies that do not infringe our patents;

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any of our patents will be found to ultimately be infringed;

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any of our patents will be found to ultimately be valid and enforceable;

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any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

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we will develop additional proprietary technologies or product candidates that are separately patentable; or

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that our commercial activities or products will not infringe upon the patents of others.

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We also rely upon unpatented trade secrets, unpatented know-how, and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us and have non-compete agreements with some, but not all, of our consultants. It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwise become known or be independently discovered by our competitors, which could adversely affect our business, financial condition and results of operations.

We have licensed Plenity to third party partners (e.g. for launch in Greater China, including Mainland China, Hong Kong, Macau, and Taiwan) and have also granted limited licenses to practice patent rights for noncommercial, research purposes. We may continue to out-license our intellectual property and may agree under certain circumstances to grant limited exclusive or non-exclusive commercial rights as well. There can be no guarantee that the third party’s activities will not in any way overlap or interfere with the commercialization of Plenity. Additionally, there is always the possibility that we may become dependent on obtaining access to third party intellectual property in connection with the commercialization of Plenity or for other new product candidates in the future.

We have acquired certain patent rights that cover Plenity and these rights impose various obligations on us, including a requirement to make certain milestone and royalty payments and to prosecute and maintain the patent rights. We have also granted a non-exclusive license to practice the patent rights for noncommercial, research purposes, and we have agreed under certain circumstances to grant an additional non-blocking license for the development and commercialization of certain drug delivery products that do not include any composition of matter that is claimed by the patent rights, exclusive of products relating to obesity, weight loss, diabetes, metabolic diseases, GI disorders, laxatives and liquid removal. While we believe that the scope of any non-blocking license will be clearly distinct from our field of interest, there can be no guarantee that a disagreement will not arise over a particular product area, or that such a disagreement could not materially and adversely impact our business. In addition, we have also granted an exclusive, transferable, sublicensable, and royalty-bearing license of our intellectual property to develop, import, register, manufacture, and commercialize Plenity in Greater China (including Mainland China, Hong Kong, Macau, and Taiwan), Singapore and United Arab Emirates.

 

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Additionally, under these agreements, such third parties have agreed to assign to us certain future technology relating to food products that they develop during the term of the agreements, as well as other improvements to our existing intellectual property rights that result from activities they perform under the agreements. There can be no guarantee, however, such third parties will not attempt to act contrary to such obligations or that, if they do, we would succeed in a legal action to stop them from doing so.

We may be required to enter into additional license(s) to use third party intellectual property that we find necessary or useful to our business, or because that third party owner asserts we are infringing on such third party intellectual property. In such a case, even if we are successful in obtaining terms that are commercially reasonable, such a future licensor might also allege that we have breached our license agreement and may accordingly seek to terminate our license with them, or may insist on the right to terminate such a license at will. If successful, any such termination could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize a product candidate or product, if approved, as well as harm our competitive business position and our business prospects.

We may infringe the intellectual property rights of others, which may prevent or delay our development efforts or stop us from commercializing or increase the costs of commercializing Plenity.

Our success will depend in part on our ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products and methods do not or will not infringe the patents or other intellectual property rights of third parties.

The medical device, pharmaceutical and biotechnology industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that Plenity or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing Plenity or our other product candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:

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cease selling or otherwise commercializing Plenity;

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pay substantial damages for past use of the asserted intellectual property;

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obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

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in the case of trademark claims, redesign or rename Plenity to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.

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Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may also be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other intellectual property. For example, each of our patents and patent

 

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applications names one or more inventors affiliated with other institutions, any of whom may assert an ownership claim. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Common Stock.

Issued patents covering Plenity could be found invalid or unenforceable if challenged in court.

If we initiated legal proceedings against a third party to enforce a patent covering our product candidate, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness, indefiniteness or non-enablement.

Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions, e.g., opposition proceedings. Such proceedings could

 

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result in revocation or amendment of our patents in such a way that they do not cover Plenity or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on Plenity. Such a loss of patent protection would have a material adverse impact on our business.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time, and if we do not obtain protection under the Hatch-Waxman Amendments and similar non-United States legislation for extending the term of patents covering each of our product candidates, our business may be materially harmed.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our United States patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent may be extended, and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced and could have a material adverse effect on our business.

We do not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on Plenity and any other product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and we did not pursue intellectual property rights in some countries outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as in other jurisdictions. Consequently, we may not be able to prevent third parties from practicing our inventions in all jurisdictions, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where enforcement is limited. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals and medical devices, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

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Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

The United States has implemented the America Invents Act of 2011, which was wide-ranging patent reform legislation. Further, the Federal Circuit and the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations, such as with respect to patent claims using “consisting essentially of” transitional language. In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents or future patents.

We may be subject to damages resulting from claims that we, our employees, consultants or third parties we engage to manufacture our products have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

Many of our employees were previously employed at pharmaceutical companies and other medical device companies, including our potential competitors, in some cases until recently. We may be subject to claims that we, our employees, consultants or third parties have inadvertently or otherwise used or disclosed alleged trade secrets or proprietary information of these former employers or competitors. In addition, we may be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction for our management. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with third parties. A loss of key personnel or their work product could have an adverse effect on our business, results of operations and financial condition.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

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we or our licensors or our other collaboration partners might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license;

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we or our licensors or our other collaboration partners might not have been the first to file patent applications covering certain of the patents or patent applications that we or they own or have obtained a license, or will own or will have obtained a license;

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we may not be able to generate sufficient data to support full patent applications that protect the entire breadth of developments in one or more of our programs;

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it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents;

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it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours;

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our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

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countries other than the U.S. may, under certain circumstances, force us or our licensors to grant a license under our patents to a competitor, thus allowing the competitor to compete with us in that jurisdiction or forcing us to lower the price of our product in that jurisdiction;

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we have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents;

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we may not successfully commercialize the product candidates, if approved, before our relevant patents expire; and

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we may not develop additional proprietary technologies for which we can obtain patent protection.

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Risks Related to Our Business and Strategy

We will need to continue to develop and expand, and if we fail to manage such development and expansion effectively, our expenses could increase more than expected, our revenue may not increase sufficiently to generate sustainable profits and we may be unable to successfully execute on our growth initiatives, business strategies or operating plans.

As of March 31, 2022, we had 103 full-time employees and 10 consultants and we expect to continue to increase the number of our administrative employees. We also plan to continue to expand the scope of our operations including the development of a commercial-scale manufacturing line and hiring manufacturing staff. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage such development and the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the commercialization of Plenity, and we may not be able to sufficiently increase our revenue to generate sustainable profits. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our product sales could be reduced, and we may not be able to successfully execute on our growth initiatives, business strategies or operating plans. Our future financial performance and our ability to commercialize Plenity and compete effectively will depend in part on our ability to effectively manage the future development and expansion of our company.

Our estimated addressable market is subject to inherent challenges and uncertainties. If we have overestimated the size of our addressable market generally or markets in which we intend to offer Plenity, our future growth opportunities may be limited.

Data regarding the size and potential growth of the addressable market for weight management and weight loss solutions, generally, and the size of the target market for Plenity, specifically in the United States, is based upon, in part, internal estimates, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources, proprietary research studies and management’s knowledge of the industry, and is subject to significant uncertainty and is based on assumptions that may not prove accurate. While these estimates are made in good faith and are based on assumptions and estimates we believe to be reasonable, they may not be accurate and are subject to change. If we have overestimated the size of the addressable market for Plenity, including within the markets in which we intend to offer Plenity, our future growth opportunities may be limited.

Our ability to identify, engage with and retain Plenity patients is essential to our ability to grow and sustain our sales.

Sales of Plenity are our sole source of revenue, and our future growth depends upon our ability to identify, engage with, retain and grow our patient base and audience. To do so will require us to address changing consumer demands and developments in technology and improve Plenity, including by developing additional indications, while continuing to provide our distributors and patients with guidance and

 

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inspiring them on their weight management journeys by providing a product that provides meaningful results. We have invested and will continue to invest significant resources in these efforts, but there is no assurance that we will be able to successfully maintain and increase our patient base or that we will be able to do so without taking steps such as reducing pricing or incurring manufacturing costs that would affect our revenues, margin and/or profitability.

We depend on a limited number of third-party suppliers, and the loss of any of these suppliers or their inability to provide us with an adequate supply of materials or distribution could harm our business.

We rely on a limited number of third party suppliers to provide certain components for the hydrogel technology utilized in the manufacture of Plenity as well as related packaging for Plenity. The supply and price of these components are subject to market conditions and are influenced by many factors beyond our control, including pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases, weather patterns affecting component production, governmental programs and regulations, labor disruptions, and inflation. Although we strive to maintain relationships with suppliers with the objective of ensuring that we have adequate sources for the supply of such components and packaging materials, increases in demand for such items, both within our industry and in general, can result in shortages and higher costs. Our suppliers may not be able to meet our delivery schedules, we may lose a significant supplier, a supplier may not be able to meet performance and quality specifications and we may not be able to purchase such items at a competitive cost. Our freight costs may increase due to factors such as limited carrier availability, increased fuel costs, increased compliance costs associated with new or changing government regulations, pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases and inflation. Higher prices for natural gas, propane, electricity and fuel also may increase our component, production and delivery costs. The prices charged for Plenity may not reflect changes in our component, packaging material, freight, tariff and energy costs at the time they occur, or at all.

The loss of key supply sources, for any reason, our inability to obtain necessary quantities of components and packaging materials or changes in freight or energy costs may limit our ability to maintain existing margins and may have a material adverse effect on our business, financial condition, results of operations and cash flows. If we fail or are unable to hedge and prices subsequently increase, or if we institute a hedge and prices subsequently decrease, our costs may be greater than anticipated or greater than our competitors’ costs, and our business, financial condition, results of operations and cash flows could be adversely affected.

We rely on a limited number of channels for the distribution of Plenity, with a few qualified distributors currently accounting for substantially all of our revenue. The loss of one or more of such qualified distributors would materially harm our business.

For the years ended December 31, 2020 and 2021, respectively, and for the three months ended March 31, 2022, we relied on three customers or distributors for the distribution of Plenity accounting for 100% of our revenue. We also rely on our reputation and recommendations from key qualified distributors in order to promote Plenity to potential new patients. The loss of any of our key qualified distributors, or a failure of some of them to renew or expand their relationships with us, could have a significant impact on the growth rate of our revenue, reputation and our ability to obtain new users. In addition, mergers and acquisitions involving our qualified distributors could lead to cancellation or non-renewal of our contracts with those distributors or by the acquiring or combining companies, thereby reducing the number of our existing and potential distributors, which would materially harm our business.

If our existing qualified distributors do not continue or renew their contracts with us, renew at lower price levels or decline to purchase additional amounts of Plenity from us, it could have a material adverse effect on our business, financial condition and results of operations.

We derive a significant portion of our revenue from renewal of existing qualified distributor contracts and sales of Plenity to existing distributors. As part of our growth strategy, for instance, we have recently focused on the distribution of Plenity through telehealth services as well as using our sales force to drive sales of Plenity. As a result, increasing sales of Plenity is critical to our future business, revenue growth and results of operations.

 

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Factors that may affect our ability to increase sales of Plenity include, but are not limited to, the following:

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the price, performance and safety of Plenity;

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the availability, price, performance and functionality of competing solutions;

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changes in healthcare laws, regulations, enforcement of such laws and regulations, or other trends; and

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the business environment of our qualified distributors.

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We enter into exclusive supply and distribution agreements with our qualified distributors. Most of our distributors have no obligation to renew their contracts with us after the initial term expires. In addition, our distributors may negotiate terms less advantageous to us upon renewal, which may reduce our revenue from these distributors. Our future results of operations also depend, in part, on our ability to expand the number of our distributors. If our distributors fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels or fail to purchase new products and services from us, our revenue may decline, or our future revenue growth may be constrained.

Our future success depends on our ability to retain our senior executive officers and to attract and keep senior management and key scientific and commercial personnel.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We are highly dependent upon our senior management, particularly Yishai Zohar, our Chief Executive Officer and President, as well as other employees and consultants. Although none of these individuals has informed us to date that he intends to retire or resign in the near future, the loss of services of any of these individuals or one or more of our other members of senior management could delay or prevent the successful commercialization of Plenity and the development of future product candidates.

Although we have not historically experienced unique difficulties attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the biotechnology, pharmaceutical and medical device field is intense, and we face competition for the hiring of scientific and clinical personnel from other biotechnology and pharmaceutical companies, as well as universities and research institutions. In addition, the consultants and advisors, including scientific and clinical advisors, upon whom we rely to assist us in formulating our research development and commercialization strategy, may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. In addition, we will need to hire additional personnel as we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, if at all.

We may not be successful in our efforts to identify or discover additional product candidates.

The success of our business depends primarily upon our ability to identify, develop and commercialize products using our proprietary hydrogel technology. Although Plenity is currently in the early stages of commercialization, our research programs may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

Our employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and European regulatory authorities,

 

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provide accurate information to the FDA and applicable non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, as well as the Foreign Corrupt Practices Act, or FCPA, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

We face potential product liability exposure and if claims are brought against us, we may incur substantial liability.

The sale of Plenity exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with Plenity. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities.

In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

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withdrawal of patients from our clinical trials;

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substantial monetary awards to patients or other claimants;

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decreased demand for Plenity or any future product candidates following marketing approval, if obtained;

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damage to our reputation and exposure to adverse publicity;

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increased FDA warnings on product labels;

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litigation costs;

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distraction of management’s attention from our primary business;

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loss of sales; and

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the inability to successfully commercialize Plenity or any future product candidates, if approved.

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Our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer.

Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive.

Significant judgments have been awarded in class action lawsuits based on drugs and medical devices that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline, and if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

 

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If the weight management industry is subject to adverse publicity, our business could be harmed.

Unfavorable publicity regarding, for example, the weight management industry, the healthcare industry, litigation or regulatory activity, the actions of the entities included or otherwise involved in our platform, negative perceptions of Plenity, our hydrogel technology, pricing, our data privacy or data security practices, telehealth services or our revenue could materially adversely affect our reputation. Such negative publicity also could have an adverse effect on our ability to attract and retain consumers, patients, business partners or employees, and result in decreased revenue, which would materially adversely affect our business, financial condition and results of operations.

If the perception of our brands or business reputation is damaged, customers and the ultimate user may not purchase Plenity, which could materially and adversely affect our business, financial condition and results of operations.

We are building our reputation on the efficacy of Plenity and the high-quality nature of the product, its availability and the limited side effects. We must protect and expand on the value of Plenity to continue to be successful in the future. Any incident that erodes consumer or patient affinity for Plenity could significantly reduce our value and damage our business. For example, negative third-party reports regarding Plenity, related side effects or the quality and availability of the product generally, whether accurate or not, may adversely affect consumer and patient perceptions, which could cause our value to suffer and adversely affect our business. In addition, if we are forced or voluntarily elect to recall Plenity or there are other regulatory actions taken with respect to Plenity, the public perception of the quality, safety and efficacy of Plenity may be diminished. We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as public health concerns, illness, safety, security breaches of personal information or employee information, employee-related claims relating to alleged employment discrimination, health care and benefits issues or government or industry findings about our retailers, distributors, manufacturers or others across the industry supply chain.

As part of our marketing initiatives, we have contracted with certain public figures to market and endorse our products. While we maintain specific selection criteria and are diligent in our efforts to seek out public figures that resonate genuinely and effectively with our consumer audience, the individuals we choose to market and endorse Plenity may fall into negative favor with the general public. Because our consumers may associate the public figures that market and endorse Plenity with us, any negative publicity on behalf of such individuals may cause negative publicity about us and Plenity. This negative publicity could materially and adversely affect our brands and reputation and our revenue and profits.

A significant interruption in the operations of our third party partners could potentially disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

We rely on Roman Health Pharmacy LLC to provide our members with access to telehealth services and we partner with GoGoMeds to provide online pharmacy access to Plenity for non-telehealth patients. Although our ability to attract, retain, and serve our members is significantly dependent upon the reliable performance of our third party partners and their respective underlying information technology, we have limited control over their operations. Any significant disruption of their operations, whether as a result of general market or economic conditions, the failure of their equipment or information technology systems, a breach of data security or unauthorized disclosures of sensitive data, such as personally identifiable information or individually identifiable health information, could result in a decrease in consumer demand for Plenity. In addition, any disruption in the operations of our business partners could subject us to reputational damage and have a material adverse effect on our business, financial condition and results of operations.

Negative information, including inaccurate information about us on social media, which may include information attributable to spokespersons with whom we have a relationship, may harm our reputation and brand, which could have a material adverse effect on our business, financial condition and results of operations.

There has been a marked increase in the use of social media platforms and similar channels, including the use of celebrity endorsements or spokespersons with whom we may have a relationship with, that provide individuals with access to a broad audience of consumers and other interested persons. The availability of

 

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information on social media platforms is virtually immediate, as is its effect. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information about our business and Plenity may be posted on such platforms at any time. Negative views regarding Plenity and its efficacy may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brand. The harm may be immediate without affording an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity cannot be eliminated or completely mitigated and may materially and adversely affect our business, financial condition and results of operations.

We must expend resources to maintain consumer awareness of Plenity, build brand loyalty and generate increasing sales. Our marketing strategies and channels will evolve and our programs may or may not be successful.

To remain competitive and expand, we may need to increase our marketing and advertising spending to maintain and increase consumer awareness of Plenity, protect and grow our existing market share or promote new products, which could affect our operating results. Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market or new indications for Plenity, when and if available, and participants in our industry are increasingly engaging with non-traditional media, including consumer outreach through social media, celebrity promotions and web-based channels, which may not prove successful and may have a negative impact on perception of Plenity or reduce market acceptance of Plenity. An increase in our marketing and advertising efforts may not maintain or increase our current reputation, or lead to increased brand awareness. Moreover, we may not maintain current awareness of our brand due to any potential fragmentation of our marketing efforts as we continue to focus on a particular target market for weight management patients. Our inability to increase or maintain sales of Plenity could negatively impact our ability to develop other indications for Plenity as well as other product offerings, which may have an adverse effect on our business, financial condition and results of operations.

If we do not continually enhance our brand recognition, increase distribution of Plenity, attract new patients and introduce new and innovative products, either on a timely basis or at all, our business may suffer.

The weight management industry is subject to rapid and frequent changes in consumer demands and preferences. Because consumers are constantly seeking new products and strategies to achieve their weight goals, our success relies heavily on our ability to enhance our brand awareness through the increased distribution of Plenity, by attracting new patients and by continuing to develop and market new and innovative products that build on Plenity’s commercialization. Since Plenity is currently our only product offering, our ability to generate sales of Plenity and for it to achieve widespread market acceptance is essential to the success of our business. To respond to new and evolving consumer demands and preferences, continue to enhance brand recognition and keep pace with new weight management, technological and other developments, we must constantly introduce new and innovative products into the market, after regulatory approval, some of which may not be accepted by consumers, or may not be achieved in a timely manner that allows us to build off of the commercialization of Plenity. If we cannot commercialize Plenity or other new products, our revenue may not grow as expected, which would materially and adversely affect our business, financial condition and results of operations.

If our security measures fail or are breached and unauthorized access to personal information and data is obtained, we may incur significant liabilities, our reputation may be harmed and we could lose sales, customers and patients.

Breaches of data security, website defacements and other malicious acts, which are increasingly negatively impacting companies, could result in unauthorized access to personal information or data, or cause interruptions to our manufacturing and supply chain for Plenity and therefore, limited supply of Plenity and access thereto. Such unauthorized access or interruptions could cause us to incur significant liabilities, harm our reputation, and may result in a decrease in sales and/or the loss of existing or potential customers and patients. We rely upon sophisticated information technology systems to operate our business. In the

 

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ordinary course of business, we collect, store and utilize personal information and data, and it is critical that we do so in a secure manner to maintain the integrity of such personal information and data as well as to comply with applicable regulatory requirements and contractual obligations.

We also have outsourced the majority of elements that comprise our information technology infrastructure and, as a result, we manage multiple independent vendor relationships with third parties who may or could have access to the personal information and data that we collect. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to security breaches. While we have invested, including by maintaining cybersecurity insurance coverage, and developed systems and processes designed to protect such proprietary or customer information or data, these measures are costly, and there can be no assurance that our efforts will prevent service interruptions or security breaches.

Existing, proposed or new data privacy legislation and regulations, including interpretations thereof, could also significantly affect our business. Data protection and privacy laws have been enacted by the U.S. federal and state governments, including the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020, the Health Insurance Portability and Accountability Act (HIPAA), and other relevant statutes, as well as in Europe, including the European Genera Data Protection Regulation, which took effect in May 2018. These laws also typically include notification obligations and impose significant penalties and potential liability for non-compliance. The data privacy and security regulatory regime continues to evolve and is increasingly demanding. Many U.S. states are considering privacy and security legislation and there are ongoing discussions regarding a national privacy law. Variations in requirements across U.S. and foreign jurisdictions could present compliance challenges, and any failures to comply with such requirements may have an adverse effect on our business or results of operations.

Further, many jurisdictions require that customers be notified if a security breach results in the disclosure of their personal financial account or other information, and additional jurisdictions and governmental entities are considering such laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience, or in certain cases suspect, a security breach and such notice or public disclosure is required in the future, our reputation, brands and business may be harmed.

Prospective and existing customers and patients may have concerns regarding our use of personal information or data collected on our website, such as weight management information, financial data, email addresses and home addresses. These privacy concerns could keep customers and patients from using our website or purchasing Plenity, and third parties from partnering with us.

While no cybersecurity breach or attack to date has had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of our information technology networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. In addition, the transmission of computer viruses, or similar malware, could adversely affect our information technology systems and harm our business operations. As a result, it may become necessary to expend significant additional amounts of capital and other resources to protect against, or to alleviate, problems caused by security breaches. These expenditures, however, may not prove to be a sufficient protection or remedy and our business, financial condition and results of operations could be materially and adversely impacted.

Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our business.

We rely on software, hardware, network systems and similar technology, including cloud-based technology, that is licensed from or maintained by third parties to operate our websites, to access Plenity and other services and products to support our business operations, including our manufacturing and supply chain operations. As much of this technology is complex, there may be future errors, defects or performance problems, including when we update our technology or integrate new technology to expand and enhance our capabilities. Our technology may malfunction or suffer from defects that become apparent only after extended use. The integrity of our technology may also be compromised as a result of third-party cyber-attacks, such as hacking, spear phishing campaigns and denial of service attacks, which are increasingly negatively impacting companies. In addition, our operations depend on our ability to protect our

 

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information technology systems against damage from third-party cyber-attacks, fire, power loss, water, earthquakes, telecommunications failures and similar unexpected adverse events. Disruptions in our websites, services and products or network systems could result from a number of factors, including unknown technical defects, insufficient capacity and the failure of our third-party providers to provide continuous and uninterrupted service. Such disruptions would be most impactful if they reduced accessibility to Plenity, including by delaying or halting the manufacture of Plenity and access to our supply chain. While we maintain disaster recovery capabilities to return to normal operation in a timely manner and we deploy multiple parallel instances of our applications across multiple computer resources, we do not have a fully redundant system that includes an instantaneous recovery capability. In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner, which could have an adverse impact on our business.

As a result of such possible defects, failures, interruptions or other problems, Plenity could be rendered unreliable or be perceived as unreliable by customers, which could result in harm to our reputation and brands. Any failure of our technology or systems could result in an adverse impact on our business.

We may acquire businesses or products or form strategic alliances in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that following any such acquisition we will achieve the expected synergies to justify the transaction.

Our international operations for the supply chain and manufacture of Plenity pose certain political, legal and compliance, operational, regulatory, economic and other risks to our business that may be different from or more significant than risks associated with our U.S. operations.

The international nature of our operations for the supply chain and manufacture of Plenity involves a number of risks, including changes in U.S. and foreign regulations, tariffs, taxes and exchange controls; economic downturns; inflation and political and social instability in the countries in which we operate; weakening or loss of the protection of intellectual property rights in some countries and limitations on our ability to enforce our intellectual property rights under some local laws; and our dependence on foreign personnel. Foreign regulations may also restrict our ability to operate in some countries, acquire new businesses or repatriate cash from foreign subsidiaries back to the United States. If we expand our operations into additional foreign countries, we may be subject to additional risks, including the ability to successfully adapt to local culture and navigate regulatory, economic, political, social and intellectual property risks. We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate.

Inflation could adversely affect our financial results.

If inflation continues or worsens, it could negatively impact us by increasing our operating expenses. Inflation may lead to cost increases in multiple areas across our business, for example, rises in the prices of raw materials and manufactured goods, increased energy rates, as well as increased wage pressures and other expenses related to our employees. In particular, where we have agreed to undertake infrastructure build outs on a fixed budget for our carrier customers or by accepting government grants, inflation may result in build costs that exceed our original budget given the long delays experienced in procuring equipment and materials due to global supply chain delays. To the extent that we are unable to pass on these costs through increased prices, revised budget estimates, or offset them in other ways, they may impact our financial condition and cash flows.

 

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Foreign currency exchange rate fluctuations could adversely affect our business, financial condition and results of operations.

A significant portion of our operating costs are denominated in foreign currencies. We are therefore exposed to fluctuations in the exchange rates between the U.S. dollar and the currencies in which our foreign operations pay expenses. We do not currently hedge, and have not historically hedged, our exposure to foreign currency fluctuations. Our consolidated financial results are presented in U.S. dollars and therefore, the assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Expenses are translated into U.S. dollars at the average exchange rate for the period. Translation adjustments arising from the use of differing exchange rates from period to period are recorded in shareholders’ equity as accumulated other comprehensive income (loss). Translation adjustments arising from intercompany receivables and payables with our foreign subsidiaries are generally recorded as a component of other expense (income). Accordingly, changes in currency exchange rates will cause our operating costs, net income and shareholders’ equity to fluctuate and could adversely affect our business, financial conditions and results of operations.

Competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods could result in decreased demand for Plenity.

The weight management and wellness industry is highly competitive. We compete against a wide range of providers of weight management services and products and wellness industry participants. Our competitors include: commercial weight management programs; weight loss and wellness apps; surgical procedures; the pharmaceutical industry; the genetics and biotechnology industry; self-help weight management regimens and other self-help weight management products, services and publications, such as books, magazines, websites and social media influencers and groups; dietary supplements and meal replacement products; healthy living services, coaching, products, content and publications; weight management services administered by doctors, nutritionists and dieticians; government agencies and non-profit groups that offer weight management services; fitness centers; and national drug store chains. As we or others develop new or different weight management services, products, methods or technologies, additional competitors may emerge. Furthermore, existing competitors may enter new markets or expand their current offerings or advertising and marketing programs. More effective or more favorably perceived diet and weight management methods, including pharmaceutical treatments, fat and sugar substitutes or other technological and scientific advancements in weight management methods, also may be developed. This competition may reduce demand for Plenity.

The purchasing decisions of weight management and healthy living consumers are highly subjective and can be influenced by many factors, such as brand image, marketing programs, cost, social media presence and sentiment, consumer trends, the digital platform, content and user experience and perception of the efficacy of the product offerings. Moreover, consumers can, and frequently do, change approaches easily and at little cost. Any decrease in demand for Plenity may adversely affect our business, financial condition or results of operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental

 

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liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions, which could have a material adverse effect on our operations.

Changes in federal, state, local or foreign tax law or interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition, results of operations or cash flows.

We are subject to taxation at the federal, state and local levels in the U.S. and other countries and jurisdictions. Our future effective tax rate could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, or changes in determinations regarding the jurisdictions in which we are subject to tax. From time to time, the U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher taxes than would be incurred under existing tax law or interpretation and could adversely affect our profitability, financial condition, results of operations or cash flows. State and local tax authorities have also increased their efforts to increase revenues through changes in tax law and audits. Such changes and proposals, if enacted, could increase our future effective income tax rates. We are subject to ongoing and periodic tax audits and disputes in various jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.

Global economic, political and social conditions and uncertainties in the markets that we serve, including risks and uncertainties caused by the COVID-19 pandemic, may adversely impact our business.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including risks and uncertainties caused by the COVID-19 pandemic, including, weakened demand for any of our future products and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also result in supply disruption or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Natural or man-made disasters and other similar events may significantly disrupt our business and negatively impact our business, financial condition and results of operations.

Our ability to make, move and sell products in coordination with our suppliers, manufacturer and business partners is critical to our success. Damage or disruption to our collective supply, manufacturing or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, pandemics (such as the COVID-19 pandemic) or other outbreaks of contagious diseases, fire, explosion, cyber-attacks, terrorism, strikes, repairs or enhancements at facilities manufacturing or delivering Plenity or other reasons could impair our ability to manufacture, sell or timely deliver Plenity to customers and patients.

We rely on a limited number of third party suppliers to provide certain components and packaging materials, and currently have two manufacturing facilities in southern Italy. Adverse events affecting such suppliers or manufacturers may limit our ability to obtain such raw materials, or alternatives for these raw materials, at competitive prices, or at all. Competitors can be affected differently by weather conditions and natural disasters depending on the location of their suppliers and operations. Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a component or packaging material is sourced from a single location or supplier or produced by a single manufacturer, could adversely affect our business, financial condition, results of operations and/or require additional resources to restore our supply chain or manufacturing capabilities, as applicable.

 

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Risks Related to Financial Position and Financing Needs

We are a commercial stage biotherapeutic company, but to date have generated limited product sales. We have incurred significant operating losses since our inception and anticipate that we will continue to incur continued losses for the next several years.

We are a commercial stage biotherapeutics company and to date we have funded our operations through proceeds from collaborations, the issuance of Common Stock and convertible preferred stock, the issuance of convertible and non-convertible debt and non-dilutive grants received from government agencies. We have incurred losses in each year since our inception, other than fiscal 2013. Our net loss was $93.3 million and $25.9 million for the years ended December 31, 2021 and 2020, respectively, and we had an accumulated deficit of $265.5 million and $171.8 million as of December 31, 2021 and 2020, respectively. Our net loss was $5.7 million for the three months ended March 31, 2022. As of March 31, 2022, we had an accumulated deficit of $271.3 million. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. We expect to incur increasing levels of operating losses over at least the next several years. We expect to continue to incur significant sales and marketing expenses and additional costs associated with operating as a public company. Because of the numerous risks and uncertainties associated with commercializing Plenity and developing any future product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Our ability to become profitable depends upon our ability to generate product sales. To date, we have generated limited product sales of Plenity, and we do not know when or if we will generate meaningful product sales from Plenity. Our ability to generate product sales depends on a number of factors, including, but not limited to, our ability to:

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commercialize Plenity by developing a sales force or entering into collaborations with third parties;

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achieve market acceptance of Plenity in the medical community and with patients, many of whom could be required to pay out-of-pocket for Plenity; and

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supplement our clinical scale to meet demand in a facility owned or leased by us or by a strategic collaboration partner or third-party manufacturer.

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We expect to incur significant sales and marketing costs as we commercialize Plenity and we may not achieve profitability soon after generating product sales, if ever, and we may be unable to continue operations without continued funding. Failure to successfully commercialize Plenity would materially harm our business, financial condition and results of operations.

We may be unable to accurately forecast revenue and appropriately plan our expenses in the future.

We base our current and future expense levels on our operating forecasts and estimates of future income. Income and results of operations are difficult to forecast because they generally depend on our ability to fully commercialize Plenity, including our ability to quickly and efficiently scale production thereof, which remains uncertain. Additionally, our business is affected by general economic and business conditions around the world, including the impact of the COVID-19 pandemic. A softening in income, whether caused by changes in consumer preferences or a weakening in global economies, may result in decreased demand for Plenity or our ability to generate adequate supply of Plenity, which in turn would negatively impact our revenue levels and make it increasingly difficult to achieve and maintain profitability. If so, and we are unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in the commercialization of Plenity, we could experience lower net income or greater net loss in a given quarter than expected.

The financial and operational projections and commercialization and product candidate development timelines that we may provide from time to time are subject to inherent risks.

The projections and timelines that our management may provide from time to time (including with respect to financial or operational matters, commercialization efforts or product candidate development) reflect numerous assumptions made by our management with respect to our specific, as well as general

 

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business, economic, market and financial conditions, including our ability to raise additional capital, and other matters, all of which may be difficult to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate or, in the event we do not successfully raise additional capital, that our commercialization or product development activities may be curtailed. You should be prepared for differences between actual and projected results from time to time. Our future actual results may be materially different from those contained in our projections, both as to amounts and as to timing. Further, if our commercialization or product development activities are slowed or stopped, we will likely be unable to meet the timelines and projections we have previously provided. The inclusion of projections or timelines in (or incorporated by reference in) this prospectus or any other filing we make with the SEC periodically should not be regarded as an indication that we or our management or representatives considered or consider such projections and timelines to be a reliable prediction of future events, and the projections and timelines should not be relied upon as such.

In order to support our business, we have and may need to incur additional indebtedness or seek capital through new equity or debt financings, which sources of additional indebtedness or capital may not be available on acceptable terms, if at all, and the failure to obtain this additional funding when needed may force us to delay, limit or terminate our product development efforts or other operations.

We are currently commercializing Plenity. Manufacturing and marketing our hydrogel technology is expensive and, accordingly, we expect our manufacturing and marketing expenses to increase substantially in connection with our ongoing commercialization activities. Depending on the progress we make in manufacturing and selling Plenity, we may require additional capital to fund our growth and operating needs. We will also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for Plenity or otherwise expand more rapidly than we presently anticipate.

As of December 31, 2021, our cash and cash equivalents and marketable securities were $28.4 million. Upon the close of the Business Combination in January 2022, we received approximately $105 million of gross proceeds to fund our operations and as of March 31, 2022, our cash and cash equivalents were $34.0 million. Due to a significant number of redemptions associated with the Business Combination, we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these sources. We will require additional capital to commercialize Plenity and to develop and commercialize any future product candidates. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital through debt or equity financings if market conditions are favorable or if we have specific strategic considerations. There can be no assurance that such debt or equity financings will be available on acceptable terms or will be able to be completed at all. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further information.

If we are unable to obtain funding on a timely basis, or at all, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of Plenity or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

There were a significant number of redemptions in connection with the Business Combination and if we are not successful in implementing an alternative business plan and/or raising additional capital in a timely manner, we may have insufficient cash and liquidity to pay operating expenses and other obligations. Any such event would have a material adverse effect on our business and financial condition.

Prior to the Closing of the Business Combination, holders of 26,844,777 shares of CPSR Class A Common Stock exercised their right to redeem such shares for cash at a price of approximately $10.00 per share for aggregate payments of $268,646,943. Due to the significant number of redemptions, we expect to implement an alternative business plan, prioritizing short-term working capital needs such as investments in raw materials and finished goods as well as investments in sales and marketing, and delaying certain long-term capital expenditures in commercial infrastructure and certain research and development expenses. We expect to reduce and optimize investments in sales and marketing, prioritizing investments in high

 

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return and high exposure mediums. We may seek out alternative commercial arrangements or geographic distribution partnerships to finance certain investments in sales and marketing associated with the full commercial launch of Plenity. We expect these actions will enable appropriate liquidity to manage risk and uncertainty over the next year and beyond and enable us to execute our business plan based on the level of our financial resources at Closing and available financing alternatives and further enable us to direct funding to the full commercial launch of Plenity. These changes to the execution of our business plan based on the significant number of redemptions made in connection with the Closing of the Business Combination may impact the growth of Plenity sales and the pace of acquisition and retention of consumers. We may need to raise additional capital to fund our operations and our business plan. There can be no assurance that we will be successful in obtaining capital sufficient to meet our operating needs on terms or a timeframe acceptable to us or at all. Further, in the event that market conditions preclude our ability to consummate such a transaction, we may be required to evaluate additional alternatives in restructuring our business and our capital structure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further information.

Raising additional funding in the future may cause dilution to our stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity and debt offerings, government or other third party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these sources. To the extent that we raise additional capital through the sale of Common Stock or securities convertible or exchangeable into Common Stock, your ownership interest in us will be diluted. In addition, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations and 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 partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to Plenity, our intellectual property or future revenue streams or grant licenses on terms that are not favorable to us.

Our ability to use our net operating loss carryforwards and certain tax credit carry forwards may be subject to limitation.

We had federal and state net operating loss carryforwards of $184.6 million (federal) and $168.4 million (state), as of December 31, 2021. Our federal net operating loss carryforwards begin to expire in 2027, and our state net operating loss carryforwards began to expire in 2015. Under Section 382 of the Code, changes in our ownership may limit the amount of our net operating loss carryforwards and research and development tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and research and development tax credit carryforwards before they expire. These limitations, whether as the result of the Business Combination, the PIPE Financing, prior private placements, sales of our Common Stock by our existing stockholders or additional sales of our Common Stock by us hereafter, could have a material adverse effect on the amount of net operating losses we can utilize to offset future taxable income.

The unaudited pro forma financial information included elsewhere in this prospectus may not be indicative of what our actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information in this prospectus has been prepared to illustrate the effect of the Transactions and has been prepared for informational purposes only. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). We have elected not to present Management’s Adjustments and have only presented Transaction Accounting Adjustments in the

 

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unaudited pro forma condensed combined financial information. As such, the unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination.

The unaudited pro forma adjustments reflecting the consummation of the Transactions are based on certain currently available information and certain assumptions and methodologies that our management believes are reasonable under the circumstances. The unaudited pro forma adjustments, which are described in the notes to the unaudited pro forma condensed combined financial information, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the unaudited pro forma adjustments, and it is possible the difference may be material. Our management believes that these assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transactions based on information available to management at this time and that the unaudited pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Transactions taken place on the dates indicated therein, nor are they indicative of our future consolidated results of operations or financial position. They should be read in conjunction with the historical financial statements and notes thereto of CPSR and Gelesis contained elsewhere in this prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information.”

Risks Related to Ownership of Our Common Stock

An active trading market for our Common Stock may not continue or may not be sustained, which may make it difficult to sell the shares of our Common Stock you purchase.

An active trading market for our Common Stock may not continue or may not be sustained, which would make it difficult for you to sell your shares of our Common Stock at an attractive price (or at all). The market price of our Common Stock may decline below your purchase price, and you may not be able to sell your shares of our Common Stock at or above the price you paid for such shares (or at all).

The price of our Common Stock has been and may continue to be volatile, and you could lose all or part of your investment.

The trading price of our Common Stock has been and may continue to be highly volatile and could be attributable, among others, to factors beyond our control, including limited trading volume. For example, our stock traded within a range of a high price of $6.62 and a low price of $2.75 per share for the period of January 14, 2022, our first day of trading on the New York Stock Exchange through June 6, 2022. Factors which affect the volatility of the market price of our Common Stock include, without limitation:

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any delay in our regulatory filings or any adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;

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changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;

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adverse developments concerning our manufacturers or its manufacturing plans;

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our ability to generate sufficient patient demand for our product and product candidates;

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our inability to establish collaborations, if needed;

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our failure to commercialize our product candidates;

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departures of key scientific, commercial or management personnel;

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unanticipated serious safety concerns related to the use of our product candidates;

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introduction of new products or services offered by us or our competitors;

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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

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our ability to effectively manage its growth;

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actual or anticipated variations in quarterly operating results;

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our cash position;

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our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

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publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

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changes in the market valuations of similar companies;

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overall performance of the equity markets;

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sales of our Common Stock by us or our shareholders in the future;

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trading volume of our Common Stock;

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changes in accounting practices;

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ineffectiveness of our internal controls;

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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

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significant lawsuits, including patent or shareholder litigation;

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general political and economic conditions; and

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other events or factors, many of which are beyond our control.

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In addition, the stock market in general, and the NYSE and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our Common Stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, financial condition and results of operations.

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE.

Our Common Stock and Public Warrants are listed on the NYSE. If we fail to satisfy the continued listing requirements of the NYSE, such as the round lot holders requirements, the NYSE may take steps to delist our Common Stock and/or Public Warrants. If the NYSE delists our securities for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

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limited availability of market quotations for our securities;

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a determination that our Common Stock is a “penny stock” which will require brokers trading in its our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Common Stock;

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a limited amount of analyst coverage; and

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a decreased ability to issue additional securities or obtain additional financing in the future.

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Such a delisting would impair your ability to sell or purchase our securities when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, or prevent future non-compliance with NYSE’s listing requirements.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our stock price and trading volume could decline.

The trading market our Common Stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We will not have any control over these analysts. If one

 

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or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

Future sales and issuances of our Common Stock or rights to purchase our Common Stock, including pursuant to the Gelesis Holdings, Inc. 2021 Stock Option and Incentive Plan and future exercise of warrants or registration rights, could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.

We expect that significant additional capital may be needed in the future to continue our planned operations, including expanding commercial operations, self-commercialization of our products in new markets, conducting clinical trials, expanded research and development activities, and costs associated with operating as a public company. To raise capital, we may sell shares of our Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell shares of our Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders, and new investors could gain rights, preferences, and privileges senior to existing holders of our Common Stock.

Sales of a substantial number of shares of our Common Stock in the public market, including the resale of the shares of common stock held by our stockholders, could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our Common Stock. Of the 72,437,647 shares of our Common Stock outstanding as of June 7, 2022, approximately 42,668,860 and 4,917,221 shares are currently subject to restrictions on transfer under 180-day and 360-day lock-up under agreements, respectively, entered into between us and the holders of those shares. These restrictions are due to expire on July 13, 2022 and January 13, 2023, respectively, resulting in these shares becoming eligible for public sale on July 14, 2022 and January 14, 2023, respectively. Sales of such shares may be made under the registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), of which this prospectus is a part or in reliance upon an exemption from registration under the Securities Act. Pursuant to our Amended and Restated Registration and Stockholder Rights Agreement, dated January 13, 2021, by and among the us and the stockholders party thereto (the “Registration Rights Agreement”), those stockholders are entitled to have the registration statement under the Securities Act of which this prospectus is a part kept effective for a prolonged period of time such that registered resales of their shares of Common Stock can be made.

Pursuant to our obligations under the Registration Rights Agreement and the Subscription Agreements with PIPE Investors, we have agreed to register on the registration statement of which this prospectus is a part include 132,857,109 shares of our Common Stock, 24,333,365 warrants to purchase shares of our Common Stock, and the 24,333,365 shares of our Common Stock issuable upon exercise of such warrants. Such securities represent approximately 81.9% of the shares of our Common Stock currently outstanding as of the date of this prospectus, including those shares of common stock issuable upon exercise of the Warrants. After it is effective and until such time that it is no longer effective, the registration statement registering such securities will permit the resale of these shares. The resale, or expected or potential resale, of a substantial number of shares of our Common Stock in the public market could adversely affect the market price for our Common Stock and make it more difficult for you to sell your holdings at times and prices that you determine are appropriate. Furthermore, we expect that, because there is a large number of shares being registered pursuant to the registration statement of which this prospectus forms a part, the Selling Securityholders thereunder will continue to offer the securities covered thereby for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to the registration statement may continue for an extended period of time.

We have also registered all shares of common stock that we may issue under our equity compensation plans or that are issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates and the lock-up agreements described above. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our Common Stock could decline.

 

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In addition, our Common Stock is also subject to potential dilution from the exercise of up to 24,333,365 warrants, the exercise of up to 15,077,515 stock options, the issuance of common stock pursuant to the vesting of up to 5,267,519 restricted stock units, the issuance of up to 23,482,845 earnout shares pursuant to the triggering events in the Business Combination Agreement, and the potential Common Stock is also subject to potential dilution issuance of common stock in connection with future equity and or convertible debt financings. Sales of substantial numbers of such shares in the public market, including the resale of the shares of common stock held by our stockholders, could adversely affect the market price of our Common Stock, the impact of which is increased as the value of our stock price increases.

If certain holders of our Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of our Common Stock and such holders still may receive significant proceeds.

As of the date of this prospectus, the market price of our Common Stock is below $10.00 per share, which was the price per unit sold in the initial public offering of our predecessor, CPSR, the per-share price of the 9,000,000 shares of CPSR Class A Common Stock our predecessor sold to certain investors in connection with our Business Combination in a private placement for an aggregate amount of $90.0 million (the “PIPE Financing”) and also the per share value of the consideration issued to Legacy Gelesis shareholders upon consummation of our Business Combination. However, certain of our shareholders who hold shares of our Common Stock that were (i) originally purchased by our predecessor’s sponsor, Capstar Sponsor Group, LLC, in a private placement prior to our predecessor’s initial public offering (the “Founder Shares”) or (ii) originally issued by CPSR in a private placement in connection with Backstop Agreement, dated December 30, 2021 (the “Backstop Agreement”), between CPSR and certain investors (the “Backstop Shares”), may nonetheless be inclined to sell such Founder Shares or Backstop Shares as they were originally purchased at an effective price significantly less than $10.00 per share. The currently outstanding 4,916,250 Founder Shares were purchased at an effective price of $0.0051 per share. Holders of the Backstop Shares purchased an aggregate of 744,217 shares of CPSR Class A Common Stock in a private placement at a price of $10.00 per share, for an aggregate purchase price of $7.4 million and such holders also received an aggregate of 1,983,750 shares of CPSR Class A Common Stock as additional consideration, resulting in an effective purchase price for the currently outstanding 2,727,967 Backstop Shares of approximately $2.73 per share. Accordingly, holders of the Founder Shares and Backstop Shares could sell their securities at a per-share price that is less than $10.00 and still realize a significant profit from the sale of those securities that could not be realized by our other shareholders. On June 6, 2022, the closing price of our Common Stock was $3.80. Based on this closing price, the aggregate sales price of the Founder Shares would be approximately $18.7 million and the aggregate sales price of the Backstop Shares would be approximately $10.4 million.

The Founder Shares and 1,983,750 of the Backstop Shares are currently subject to restrictions on transfer under applicable lock-up agreements; however, these restrictions are due to expire on January 13, 2023 and July 13, 2022, respectively, resulting in these shares becoming eligible for public sale on July 14, 2022 and January 14, 2023, respectively, if they are registered under the Securities Act, or if they qualify for an exemption from registration under the Securities Act. Pursuant to our Registration Rights Agreement, certain of our stockholders, including holders of the Founder Shares and holders of the Backstop Shares, are entitled to registration rights requiring us to register such securities for resale.

We do not intend to pay dividends on our Common Stock, so any returns will be limited to the value of our Common Stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, we may enter into agreements that prohibit us from paying cash dividends without prior written consent from our contracting parties, or which other terms prohibit or limit the amount of dividends that may be declared or paid on our Common Stock. Any return to shareholders will therefore be limited to the appreciation of their shares of Common Stock, which may never occur.

We are an emerging growth company, and it cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements

 

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that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Further, even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our share price may be more volatile.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management has and will be required to devote substantial time to new compliance initiatives.

As a public company, we have incurred and will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC, and the NYSE to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, such as “say-on-pay” and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five (5) years following the year in which CPSR completed its initial public offering. We intend to take advantage of this new legislation but cannot guarantee that it will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

These rules and regulations applicable to public companies have increased and will continue to substantially increase our legal and financial compliance costs and to make some activities more

 

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time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition, and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees, or as executive officers.

Pursuant to Section 404, in our second annual report due to be filed with the SEC after becoming a public company, we will be required to furnish a report by our management on our internal control over financial reporting. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate consolidated financial statements on a timely basis may harm the market price of our shares.

If we fail to maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate consolidated financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles. We will continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to document, review and improve our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act and applicable United States laws, which will require annual management assessment of the effectiveness of our internal control over financial reporting. As we continue to grow, we expect to recruit additional finance and accounting personnel with certain skill sets that it will need as a public company.

Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes, and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate consolidated financial statements on a timely basis, could increase our operating costs and harm our business. In our efforts to maintain proper and effective internal control over financial reporting, we may discover significant deficiencies or material weaknesses in our internal control over financial reporting, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our consolidated financial statements. If we identify one or more material weaknesses in our internal control over financial reporting in the future, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements, which may harm the market price of our Common Stock.

As previously disclosed in Part II, Item 9A of our 2021 Annual Report, CPSR’s management prior to the Business Combination concluded that CPSR’s management prior to Business Combination did not maintain effective internal control over financial reporting as of December 31, 2021, due to a material

 

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weakness related to CPSR’s historical consolidated financial statements issued prior to the Business Combination. The material weakness related to CPSR prior to the Business Combination not having adequate controls over accounting for complex financial instruments associated with the accounting for warrants issued in connection with CPSR’s initial public offering. During the fiscal quarter ended March 31, 2022, we completed the Business Combination, which resulted in a change in management responsible for the preparation and review of our consolidated financial statements. Effective as of the closing of the Business Combination, the management of Legacy Gelesis is responsible for internal control over financial reporting and the former management of CPSR no longer participates in financial reporting. Additionally, the internal controls of Legacy Gelesis became our internal controls. Subsequent to the Business Combination, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, who serve as our principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. Our assessment is that, post-Business Combination, we have a sufficiently staffed and technically experienced finance and accounting team to address the financial reporting requirements of a public company. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded the conditions causing the material weakness no longer existed, and are not expected to exist. Accordingly, we determined the material weakness did not exist in internal control over financial reporting as of March 31, 2022.

We cannot assure you that there will not be additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once we begins our Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities. Failure to remediate any material weakness in our internal control over financial reporting on a timely basis, if at all, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Delaware law and our Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our Bylaws and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock, and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, the Organizational Documents include provisions regarding:

•

the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

​

•

our Board being classified into three classes, with only one class being elected each year to serve three-year terms. As a result, in most circumstances, a person can gain control of our Board only by successfully engaging in a proxy contest at two or more annual stockholders meetings;

​

•

the Certificate of Incorporation’s prohibition on cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

​

•

the limitation of the liability of, and the indemnification of, our directors and officers;

​

•

the ability of our Board to amend the Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and

​

 

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•

advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

​

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.

Our Bylaws will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers, or other employees.

Our Bylaws require, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware.

Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Our Bylaws provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations promulgated thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.

The exercise of our Warrants for shares of our Common Stock would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

Pursuant to the registration statement of which this prospectus is a part, we are registering (i) 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our Common Stock exercisable at an exercise

 

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price of $11.50 per share; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share and (iii) 3,013,365 currently exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $4.26 and 1,660,303 of which are exercisable at an exercise price of $0.02.To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock, the impact of which is increased as the value of our stock price increases.

We may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to holders thereof, thereby making such warrants worthless.

We will have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of our Common Stock equals or exceeds $18.00 per share for any twenty (20) trading days within a thirty (30) trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when such warrants become redeemable, we may exercise the redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of such warrants could force holders to (i) exercise the Warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the Warrants at the then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the Warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.

In addition, we may redeem the Public Warrants after they become exercisable for a number of shares of our Common Stock determined based on the redemption date and the fair market value of our Common Stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the Warrants are “out-of-the-money,” in which case holders of such warrants would lose any potential embedded value from a subsequent increase in the value of our Common Stock had such warrants remained outstanding.

Our Private Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our Common Stock.

Under GAAP, we are required to evaluate our Warrants to determine whether they should be accounted for as a warrant liability or as equity. We have concluded that the Private Warrants contain provisions requiring liability classification. Therefore, we are accounting for the Private Warrants as a warrant liability and are recording that liability at fair value upon issuance. We will record any subsequent changes in fair value as of the end of each period for which earnings are reported. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Common Stock and may cause fluctuations in our results of operations based on factors that are outside of our control.

There can be no assurance that the Warrants will be in the money at the time they become exercisable; they may expire worthless and therefore we may not receive cash proceeds from the exercise of warrants.

As of the date of this prospectus, we have 13,800,000 outstanding Public Warrants to purchase 13,800,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier to occur of January 13, 2027 or redemption; (ii) 7,520,000 outstanding Private Warrants to purchase 7,520,000 shares of our Common Stock, exercisable at an exercise price of $11.50 per share, which expire on the earlier to occur of January 13, 2027 or redemption and (iii) 3,013,365 exercisable Rollover Warrants, 1,353,062 of which are exercisable at an exercise price of $4.26 and expire on October 21, 2030 and 1,660,303 of which are exercisable at an exercise price of $0.02 and expire on February 15, 2025.

The exercise of Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the Warrant and the price of our Common Stock at the time of exercise. For example, to the extent that the price of our Common Stock

 

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exceeds $11.50 per share, it is more likely that holders of our Public Warrants and Private Warrants will exercise their warrants. If the price of our Common Stock is less than $11.50 per share, it is unlikely that such holders will exercise their warrants. As of June 6, 2022, the closing price of our Common Stock was $3.80 per share. There can be no assurance that all of our Warrants will be in the money prior to their expiration. Our Public Warrants under certain conditions, as described in the warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis. Our Private Warrants are not redeemable so long as they are held by the initial stockholders and are exercisable on a cashless basis. Our Rollover Warrants are not redeemable and are exercisable on a cashless basis only with respect to the 1,660,303 warrants that have an exercise price of $0.02. As such, it is possible that we may never generate any cash proceeds from the exercise of our Warrants.

 

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USE OF PROCEEDS

All of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales, except with respect to amounts received by us upon exercise of the Warrants to the extent such Warrants are exercised for cash.

We could receive up to an aggregate of $251.0 million if all of the Warrants registered hereunder are exercised for cash. The exercise of the Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the Warrant and the price of our Common Stock at the time of exercise. For example, to the extent that the price of our Common Stock exceeds $11.50 per share, it is more likely that holders of our Public Warrants and Private Warrants will exercise their warrants. If the price of our Common Stock is less than $11.50 per share, it is unlikely that such holders will exercise their warrants. As of June 6, 2022, the closing price of our Common Stock was $3.80 per share. There can be no assurance that all of our Warrants will be in the money prior to their expiration. Our Public Warrants under certain conditions, as described in the warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis. Our Private Warrants are not redeemable so long as they are held by the initial stockholders and are exercisable on a cashless basis. Our Rollover Warrants are not redeemable and are exercisable on a cashless basis only with respect to the 1,660,303 warrants that have an exercise price of $0.02. As such, it is possible that we may never generate any cash proceeds from the exercise of our Warrants. We expect to use the net proceeds we receive from the exercise of the Warrants, if any, for general corporate purposes, including the commercialization of our product Plenity.

The Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by them for brokerage, accounting, tax or legal services or any other expenses incurred in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, NYSE listing fees and fees and expenses of our counsel and our independent registered public accounting firm.

 

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DIVIDEND POLICY

We currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We have never declared or paid any cash dividends on our capital stock. We do not intend to pay cash dividends to our stockholders in the foreseeable future. Investors should not purchase our Common Stock with the expectation of receiving cash dividends.

Any future determination to declare dividends will be made at the discretion of our Board and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board may deem relevant

 

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MARKET INFORMATION

Our Common Stock and Public Warrants are listed on the NYSE under the symbol “GLS” and “GLS WS,” respectively. As of June 7, 2022, there were approximately 39 registered holders of Common Stock and no registered holders of the Public Warrants. These numbers do not include beneficial owners holding our securities through nominee names.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this section to “Legacy Gelesis” refers to Gelesis, Inc. and its subsidiaries prior to the Closing, and the term “CPSR” refers to Capstar Special Purpose Acquisition Corp. prior to the Closing. Unless otherwise indicated or the context otherwise requires, all references in this section to “the Company” refers to Gelesis Holdings, Inc. and its wholly-owned subsidiaries after giving effect to the Business Combination. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with (i) the audited historical financial statements of Legacy Gelesis and the notes thereto, the unaudited condensed consolidated financial statements of the Company and the notes thereto, and the disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, each included elsewhere in this prospectus and (ii) the audited historical financial statements of CPSR, and the notes thereto included elsewhere in this prospectus, and the disclosures contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in the Company’s Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 1, 2022.

Introduction

Gelesis, Inc. (“Legacy Gelesis”) was incorporated on February 15, 2006 as a Delaware corporation and is a biotherapeutics company built for consumer engagement and focused on advancing first-in-class superabsorbent hydrogel therapeutics for chronic gastrointestinal diseases.

Capstar Special Purpose Acquisition Corp. (“CPSR”) was a special purpose acquisition corporation incorporated on February 14, 2020 as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination.

The following unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 and the year ended December 31, 2021 present the combination of the financial information of the Company, Legacy Gelesis and CPSR after giving effect to the Business Combination, PIPE Financing, Bridge Financing, Backstop Agreement and related adjustments described in the accompanying notes referred to herein as the “Transactions”. Legacy Gelesis and CPSR are collectively referred to herein as the “Companies” and the Companies, subsequent to the Business Combination, are referred to herein as “the Company” or Gelesis Holdings, Inc.

The unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 combines the historical unaudited condensed consolidated statements of operations and consolidated statements of comprehensive loss of the Company for the three months ended March 31, 2022 and the results of operations for CPSR for the period from January 1, 2022 to January 13, 2022, giving effect to the Transactions as if they had been consummated on January 1, 2021. The unaudited pro forma condensed combined statement of operations and comprehensive loss for the year ended December 31, 2021 combines the historical audited consolidated statements of operations and consolidated statements of comprehensive loss of Legacy Gelesis for the year ended December 31, 2021 and the historical audited consolidated statements of operations of CPSR for the year ended December 31, 2021 giving effect to the Transactions as if they had been consummated on January 1, 2021.

The pro forma condensed combined balance sheets is not included because the Business Combination was consummated on January 13, 2022 and the impact of the Business Combination is included in the Gelesis Holdings, Inc. unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022 and related notes appearing elsewhere in this prospectus.

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not necessarily reflect what the Company’s financial condition or results of operations would have been had the Transactions occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of the merged entities. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The Company’s

 

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results of operations and actual financial position may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Accounting for the Business Combination

The Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded in connection with the Transactions. Legacy Gelesis was the accounting acquirer based on evaluation of the following facts and circumstances:

•

The former owners of Legacy Gelesis hold a majority equity interest in the Company;

​

•

Legacy Gelesis and its former owners appointed a majority of the board of directors of the Company;

​

•

Legacy Gelesis’ existing management comprises the management of the Company; and

​

•

The operations of the Company will represent the operations of Legacy Gelesis.

​

Legacy Gelesis is the predecessor entity to the Company based on the same considerations listed above. Under this method of accounting, CPSR was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Gelesis issuing stock for the net assets of CPSR, accompanied by a recapitalization. The net assets of CPSR were stated at historical cost, with no goodwill or other intangible assets recorded in connection with the Transactions. Operations prior to the reverse recapitalization will be those of Legacy Gelesis.

Description of the Transactions

Pursuant to the Business Combination Agreement dated July 19, 2021, CPSR, CPSR Gelesis Merger Sub, Inc., a wholly-owned Subsidiary of CPSR (“Merger Sub”), and Legacy Gelesis consummated the Business Combination on January 13, 2022. Upon Closing, Merger Sub merged with and into Legacy Gelesis (the “Merger”), with Legacy Gelesis surviving the merger as a wholly owned subsidiary of CPSR. At the Effective Time, by virtue of the Business Combination and without any action on the part of CPSR, Merger Sub, Legacy Gelesis or the holders of any of Legacy Gelesis’ securities:

•

the CPSR Sponsor forfeited 1,983,750 shares of CPSR Class B Common Stock held by the CPSR Sponsor (the “Forfeited Sponsor Shares”) to CPSR immediately prior to Closing and a corresponding number of additional shares of CPSR Class A Common Stock were issued to the Backstop Purchasers.

​

•

each share of CPSR Class A Common Stock and CPSR Class B Common Stock issued and outstanding immediately prior to the Effective Time converted into one share of the Company’s Common Stock;

​

•

each share of Legacy Gelesis Common Stock and Preferred Stock outstanding as of immediately prior to the Effective Time was converted into a right to receive shares of the Company’s Common Stock;

​

•

each share of capital stock of Merger Sub issued and outstanding as of immediately prior to the Effective Time was converted into one share of the Company’s Common Stock;

​

•

all Legacy Gelesis Options were assumed by the Company and thereafter are settleable or exercisable for shares of the Company’s Common Stock;

​

•

all Legacy Gelesis Warrants were exchanged for comparable warrants to purchase shares of the Company’s Common Stock; and

​

•

CPSR was renamed “Gelesis Holdings, Inc.” and the directors and officers of Legacy Gelesis immediately prior to the close of the Business Combination became the directors and officers of the Company.

​

Earnout Shares

In addition, each holder of Legacy Gelesis Common Stock, Legacy Gelesis Options and Legacy Gelesis Warrants will receive its pro rata portion of 23,483,250 restricted Earnout Shares of the Company’s

 

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Common Stock, which will be issued and vest in equal thirds if the trading price of the Company’s Common Stock is greater than or equal to $12.50, $15.00 and $17.50, respectively, for any twenty (20) trading days within any thirty (30)-trading day period on or prior to the date that is five years following the Closing (the “Earnout Period”) and will also vest in connection with any Change of Control Transaction with respect to the Company if the applicable thresholds are met in such Change of Control Transaction during the Earnout Period (each a “Triggering Event”). The market value of the shares to be issued could vary significantly from the market value of the shares as of the date of this filing.

PIPE Financing

In connection with the foregoing and concurrently with the execution of the Business Combination Agreement, CPSR entered into Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors subscribed for and purchased an aggregate of 9,000,000 shares of CPSR Class A Common Stock at a price of $10.00 per share, for aggregate gross proceeds of $90.0 million. The PIPE Financing closed concurrently with the Closing of the Business Combination.

Bridge Financing

On December 13, 2021, Legacy Gelesis entered into a bridge financing arrangement (the “Bridge Financing”), executing convertible promissory note agreements with two existing investors in the aggregate amount of $27.0 million. These convertible promissory notes bear interest at 10.0% and were settled in cash for the principal plus accrued interest by the third business day following the Closing of the Business Combination.

Backstop Agreement

Pursuant to the Backstop Agreement dated December 30, 2021 (the “Backstop Agreement”), between CPSR and the purchasers party thereto (the “Backstop Purchasers”), the Backstop Purchasers purchased an aggregate of 744,217 shares of CPSR Class A Common Stock immediately prior to Closing for an aggregate purchase price of $7.4 million (the “Backstop Purchase Shares”). In addition, subject to the terms and conditions of the Backstop Agreement, at the closing of the sale of the shares of CPSR Class A Common Stock purchased by the Backstop Purchasers, CPSR issued to the Backstop Purchasers an additional 1,983,750 shares of CPSR Class A Common Stock, equal to the Forfeited Sponsor Shares (the “Backstop Sponsor Shares”).

The following represents the aggregate Business Combination consideration paid to Legacy Gelesis Equityholders upon the consummation of the Business Combination:

a)

The value of common stock issued to Legacy Gelesis included in the consideration is reflected at $10.00 per share (with no fractional shares) as defined in the Business Combination Agreement.

​

b)

The total 67,490,310 consideration shares issued for all outstanding Legacy Gelesis common and preferred stock, includes unexercised vested stock options and warrants to purchase 9,485,972 and 3,189,491 shares of the Company’s Common Stock, respectively.

​

c)

Amount excludes the issuance of 23,482,845 Earnout Shares to certain eligible Legacy Gelesis Equityholders as a result of the Company satisfying certain conditions described above within the Earnout Period.

​

The following summarizes the unaudited pro forma common stock shares outstanding immediately after giving effect to the consummation of the Transactions:

 

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a)

Total consideration issued to Legacy Gelesis is $675.0 million or 67,490,310 shares ($10 per share price with no fractional shares). The total shares issued includes Legacy Gelesis common and preferred stock plus unexercised vested stock options and warrants to purchase common stock. Accordingly, the consideration shares outstanding in the above table has been adjusted to exclude the portion of consideration shares that will be unissued at Closing. The Legacy Gelesis - Remaining Consideration Shares reflect a conversion ratio of 2.59.

​

b)

Amount excludes the issuance of 23,482,845 Earnout Shares to certain eligible Legacy Gelesis Equityholders as a result of the Company satisfying certain performance conditions described above within the Earnout Period.

​

The following unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 and unaudited pro forma condensed combined statement of operations and comprehensive loss for the year ended December 31, 2021 are based on the historical financial statements of the Company, CPSR and Legacy Gelesis. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments and are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(in thousands, except share data)

See accompanying notes to unaudited pro forma condensed combined financial information.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS AND
COMPREHENSIVE LOSS
FOR THE YEAR ENDED DECEMBER 31, 2021
(in thousands, except share data)

See accompanying notes to unaudited pro forma condensed combined financial information.

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1.

Basis of Presentation

​

The Business Combination was accounted for as a “reverse recapitalization” in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Under this method of accounting, Legacy Gelesis was treated as the accounting acquirer, while CPSR was treated as the accounting acquiree for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Gelesis issuing shares for the net assets of CPSR, accompanied by a recapitalization. The net assets of CPSR were stated at historical costs. No goodwill or other intangible assets were recorded in conjunction with the Transactions.

The unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 give effect to the Transactions as if they had occurred on January 1, 2021. The unaudited pro forma condensed combined statement of operations and comprehensive loss for the year ended December 31, 2021 give effect to the Transactions as if they had occurred on January 1, 2021.

The unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 has been prepared using, and should be read in conjunction with, the following:

•

Gelesis Holdings, Inc.’s unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2022, and the related notes.

​

The unaudited pro forma condensed combined statement of operations and comprehensive loss for the year ended December 31, 2021 has been prepared using, and should be read in conjunction with, the following:

•

Legacy Gelesis’ audited consolidated statements of operations and audited consolidated statements of comprehensive loss for the year ended December 31, 2021 and the related notes; and

​

•

CPSR’s audited consolidated statements of operations for the year ended December 31, 2021, and the related notes.

​

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Transactions and has been prepared for informational purposes only. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). The Company has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. As such, the unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination.

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Company.

2.

Transaction Accounting Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022

​

The transaction accounting adjustments included in the unaudited pro forma condensed combined statement of operations and comprehensive loss for the three months ended March 31, 2022 are as follows:

a)

Reflects reclassification of historical CPSR operating costs to general and administrative expenses of the Company. This is a non-recurring item.

​

 

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b)

Reflects the reversal of transaction costs of $2.7 million that were considered not direct and incremental to the Transactions and were expensed in the Company’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2022. For the purpose of the unaudited pro forma condensed combined financial information the transaction costs were excluded from the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 and reflected as if incurred on January 1, 2021, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.

​

c)

Reflects the reversal of stock-based compensation expense with respect to the incremental compensation provided to holders of vested Legacy Gelesis Options (the “Vested Equity Awards”) who were granted the approximately 3,456,567 Earnout Shares pursuant to the Business Combination Agreement. The fair value of the 3,465,567 Earnout Shares issuable to holders of Vested Equity Awards of $11.4 million was reflected as a one-time stock-based compensation charge in the Company’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2022, of which $7.0 million and $4.4 million was recognized as selling, general, administrative expense and research and development expense, respectively, based on the holder’s employment classification, as such holders’ right to these Earnout Shares is not contingent upon provision of future service. The one-time stock-based compensation charge associated with the Earnout Shares underlying the Vested Equity Awards is a non-recurring item. For the purpose of the unaudited pro forma condensed combined financial information these stock-based compensation costs were excluded from the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 and reflected as if incurred on January 1, 2021, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations.

​

In addition to the 3,465,567 Earnout Shares issuable to holders of Vested Equity Awards, 1,259,037 Earnout Shares are issuable to holders of unvested Legacy Gelesis Options. Due to the post-combination service required by holders of Unvested Equity Awards, the preliminary estimated fair value of the associated Earnout Shares is recognized over the remaining requisite service period of the respective holder’s underlying equity award. On a pro forma basis as of January 1, 2021, there was approximately $3.4 million of total unrecognized stock-based compensation costs related to the Earnout Shares associated with Unvested Equity Awards. Approximately $3.0 million was reflected in adjustment 3(c) for the year ended December 31, 2021, of which $2.2 million and $0.8 million was recognized as selling, general, administrative expense and research and development expense, respectively, based on the holder’s employment classification. The Company’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2022 already reflected approximately $0.3 million in stock-based compensation expense with respect to the to the Earnout Shares associated with Unvested Equity Awards, of which $0.2 million and $0.1 million was recognized as selling, general, administrative expense and research and development expense, respectively, based on the holder’s employment classification. On a pro forma basis as of March 31, 2022, there was approximately $0.1 million in unamortized stock-based compensation costs with respect to the Earnout Shares associated with Unvested Equity Awards.

d)

Reflects elimination of the change in fair value of the convertible promissory notes issued in connection with the Bridge Financing. These notes were repaid in cash for the principal plus accrued interest by the third business day following the Closing of the Business Combination.

​

e)

Reflects elimination of the change in fair value of the CPSR Public Warrants and Legacy Gelesis Warrants Exercisable for Redeemable Convertible Preferred Stock which were reclassed to equity upon Closing. This is a non-recurring item.

​

f)

Reflects elimination of interest income and unrealized gains earned on the Trust Account. This is a non-recurring item.

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3.

Transaction Accounting Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss for the Year Ended December 31, 2021

​

The transaction accounting adjustments included in the unaudited pro forma condensed combined statement of operations and comprehensive loss for the year ended December 31, 2021 are as follows:

a)

Reflects reclassification of historical CPSR operating costs to general and administrative expenses of the Company. This is a non-recurring item.

​

b)

Reflects $2.7 million of transaction costs that were not considered direct and incremental to the Transactions, as if incurred on January 1, 2021, the date the Transactions were deemed to have occurred for purposes of the unaudited pro forma condensed combined statements of operations and comprehensive loss. This is a non-recurring item.

​

c)

See adjustment 2(c).

​

d)

Reflects elimination of the change in fair value of the CPSR Public Warrants and Legacy Gelesis Warrants Exercisable for Redeemable Convertible Preferred Stock which were reclassed to equity upon Closing. This is a non-recurring item.

​

e)

Reflects elimination of interest income and unrealized gains earned on the Trust Account. This is a non-recurring item.

​

4.

Net Income (Loss) Per Share

​

As the Transactions have been reflected as if they occurred on January 1, 2021, the calculation of weighted average shares outstanding for pro forma basic and diluted net income (loss) per share assumes the shares issuable in connection with the Transactions had been outstanding as of such date. Pro forma basic and diluted net income (loss) per share for three months ended March 31, 2022 and the year ended December 31, 2021 is calculated as follows:

(a)

Excludes 12,675,463 Legacy Gelesis consideration shares that will be issued upon the occurrence of future events (i.e., exercise of stock options and warrants). Total consideration to be issued to Legacy Gelesis is $675.0 million or 67,490,310 shares ($10 per share price with no fractional shares issued). The total shares to be issued includes all issued and outstanding Legacy Gelesis common and preferred stock plus shares underlying unexercised vested stock options and warrants. Accordingly, the weighted average pro forma shares outstanding at close has been adjusted to exclude the portion of consideration shares that were unexercised at Closing.

​

 

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(b)

Amount excludes the issuance of 23,482,845 Earnout Shares to certain eligible Legacy Gelesis Equityholders as a result of the Company satisfying certain conditions described above within the Earnout Period.

​

(c)

For the purposes of applying the if converted method for calculating diluted earnings per share, it was assumed that all Legacy Gelesis stock options are exchanged for common stock. However, since this results in anti-dilution, the effect of such exchange was not included in calculation of diluted loss per share. Shares underlying these instruments include 12,675,463 Legacy Gelesis consideration shares for unexercised stock options and warrants.

​

 

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BUSINESS

Overview

Gelesis is a commercial stage biotherapeutics company built for consumer engagement. We are focused on advancing first-in-class superabsorbent hydrogel therapeutics for chronic gastrointestinal, or GI, diseases including excess weight, type 2 diabetes, NAFLD/NASH, functional constipation, and inflammatory bowel disease. Our biomimetic superabsorbent hydrogels are inspired by the composition and mechanical properties (e.g. firmness) of raw vegetables. They are conveniently administered in capsules taken with water to create a much larger volume of small, non-aggregating hydrogel pieces that become an integrated part of the meals, and act locally in the digestive system.

Our first product, Plenity, and our other product candidates are based on a proprietary hydrogel technology that works mechanically, as opposed to via a chemical mode of action, and exclusively in the gastrointestinal, or GI, tract rather than systemically or through surgical intervention. Plenity is indicated for over 150 million Americans, the largest number of adults struggling with excess weight (i.e., a body mass index (kg/m2), or BMI, of 25 – 40) of any prescription oral weight-management aid and the only one indicated for the entire range of overweight population, including those without co-morbidities such as diabetes and cardiovascular diseases. Plenity is marketed directly to potential members, who access it through telehealth and traditional healthcare provider services. We refer to those who are prescribed Plenity as our members — not customers — because we view our relationship with them as a long-term journey of support, not as a transactional relationship. This consumer-directed model is uniquely enabled by Plenity’s strong safety and tolerability profile. Our business is built on a subscription model, as monthly Plenity kits are delivered to our members’ homes. We leverage the latest technologies with telehealth, mail-order distribution, consumer engagement, and our native digital technology platform. Plenity is an orally administered capsule that employs multiple mechanisms of action along the GI tract to aid in weight management by creating small firm 3D structures, similar to ingested raw vegetables, which create a sensation of feeling fuller. Using a biomimetic approach, we developed the first-of-its-kind superabsorbent hydrogel technology, inspired by the composition (e.g., water and cellulose) and mechanical properties (e.g. elasticity or firmness) of ingested raw vegetables. We designed Plenity and our other hydrogels to address several critical challenges

 

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of the modern diet: portion size, caloric density, and food composition. For optimal safety and efficacy, these hydrogel particles are engineered to rapidly absorb and release water at specific locations in the GI tract. Plenity does not act systemically and is not absorbed by the body. Instead, it acts locally in the GI tract by changing the volume, firmness, and reducing the caloric density of ingested meals. Because it acts mechanically and it is the first of its kind, Plenity is regulated as a novel medical device (de novo pathway). Our product pipeline also includes multiple other potential therapeutic candidates for common chronic conditions affected by gut health that are currently in clinical and preclinical testing, including diabetes, nonalcoholic fatty liver disease, or NAFLD, nonalcoholic steatohepatitis, or NASH, and functional constipation, or FC, all based on our hydrogel technology.

Obesity and obesity-related metabolic diseases represent a global health challenge for which there are few safe and effective interventions. These conditions are associated with comorbidities such as type 2 diabetes, hypertension, and heart disease.

There are limited available treatments that address the overweight and obesity epidemic safely and effectively. Available therapies include pharmaceuticals and surgical interventions, including device implantation. These approaches are associated with safety concerns that limit their use. Conversely, we believe our hydrogel technology presents a breakthrough in material science as it is the first and only superabsorbent hydrogel that is constructed from building blocks used in foods and specifically engineered to achieve its medical purpose. Our first commercial product based on this technology, Plenity, is clinically validated and was granted de novo classification by the FDA to aid in weight management in adults with overweight or obesity, when used in conjunction with diet and exercise. The types of FDA marketing authorization available to a medical device are premarket notification (also called 510(k) when a predicate device exists) and premarket approval (also called PMA) for higher risk Class III devices. The de novo classification is a pathway to market for low to medium risk novel devices for which there is no predicate.

Plenity’s de novo clearance included clinical trials and other data that demonstrated assurance of safety and effectiveness. Plenity has the broadest label of any FDA-regulated weight management approach as it is indicated for the largest number of adults struggling with excess weight, offering a safe, convenient and effective oral treatment option.

Our biomimetic hydrogel, which is engineered to rapidly absorb and release water at specific locations in the GI tract, is synthesized through a multi-step, proprietary process using a specific form of modified cellulose and citric acid, both of which are generally recognized as safe, or GRAS, by the Food and Drug Administration, or FDA, and are commonly used in the food industry. In our manufacturing process, we crosslink the modified cellulose with citric acid to form a three-dimensional matrix, resulting in the desired properties of Plenity. Each Plenity capsule contains thousands of hydrogel particles, with each particle approximately the size of a grain of salt. We designed the Plenity capsule to be ingested with water before a meal. In the stomach, the hydrogel particles are released from the capsules and rapidly absorb water, hydrating to approximately 100 times their original size. When fully hydrated, each gel particle is, on average, approximately 2 mm in diameter and its elastic response (a measurement of the ability of matter to recover its original shape after deformation) is similar to that of ingested raw vegetables. The hydrogel particles mix homogeneously with food and travel through the GI tract and are designed to induce satiety and improve glycemic control through multiple mechanisms of action. Once in the large intestine, the particles partially degrade and release most of the water, which is reabsorbed by the body. The remaining degraded particles are then eliminated by the body in the same manner as raw vegetables.

Our Commercial Approach

Our first product, Plenity, is a prescription therapy delivered through a direct-to-consumer approach. It is the first weight management product to provide consumer access through a telehealth platform as well as through traditional healthcare provider services at launch. Our direct-to-consumer commercial approach

 

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integrates proven traditional and online consumer marketing strategies with our synergistic partnerships in telehealth and online pharmacy industries.

By allowing consumers to seek out our product on their own time, on their own terms, and from the privacy of their homes, we aim to drive consumer demand. Through our telehealth model in partnership with leading telehealth provider Ro, consumers can initiate an evaluation with a board certified, independent physician online at any time that is convenient to them. We anticipate that some consumers will want to see their own physician to discuss Plenity. We are undertaking a physician and healthcare provider education program to drive professional awareness of Plenity.

Plenity is affordably and transparently priced at $98 for a 28-day supply ($1.75/meal). Knowing the product cost when it is prescribed by a healthcare provider, not having to deal with the hurdles and hassle of payor, co-pays or reimbursement hoops further lowers the barrier to access. We have priced Plenity at an amount we believe will allow a large portion of the 150 million target population to afford to pay for the product out of pocket. We anticipate our commercial approach will also remove the significant and
ever-growing margin erosion forced on healthcare companies from payors and pharmaceutical benefit managers in order to gain access to their controlled patient pools. Our business model is driven by consumer demand with out-of-pocket consumer payment and is not dependent on reimbursement from third-party payors, such as government health programs and private insurance companies.

We are fully focused on our members and their needs: about half our members provide us with data about their weight management journey and this helps us tailor additional programs and content to support them in achieving their weight loss goals. Among the feedback we have received is that approximately fifty percent (50%) of our members surveyed indicated that they were unlikely to pursue Plenity outside of the online experience. We are building our partner ecosystem centered around Plenity to complement our members’ experience and provide the specific kinds of help they need including, for example, meal delivery, SMS adherence reminders and facilitating provider check-ins. This support also includes behavioral and educational programs from WW International, Inc. and Noom, as well as optional one-on-one lifestyle coaching. We see these organizations as complementary offerings that will support our members with their weight loss and wellness goals.

 

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We believe social support is essential in the weight loss journey. Our member experience features a robust private Facebook community where members can exchange tips, ask questions, and share progress with each other. About 80% of private community members actively participate in this platform.

Obesity is a chronic medical condition and we believe people require ongoing, often long-term, support to achieve and maintain weight loss. Given its safety profile and broad FDA label, Plenity can be taken without limitation to duration of therapy — addressing this long-term challenge. We view our relationship with our members as long term and anticipate that some people will take Plenity chronically, and some will stop or pause treatment. Of the data we have collected around the latter group, 70% said they would try Plenity again.

Pricing & Availability

Plenity is available by prescription via a telehealth consultation with a physician trained in weight management support, with free, unlimited follow-up visits as needed. Consumers may visit myplenity.com to start their online consultations or speak with their physician to determine if the Plenity prescription therapy is their best treatment option. A Plenity subscription costs $98 for a four-week supply ($1.75 per meal). Members may pause their subscription or delay shipment at any time.

Manufacturing the superabsorbent hydrogel used in Plenity and our other product candidates is a unique, proprietary process that is performed in-house by our subsidiary, Gelesis S.r.l., located in Italy. During 2020, we completed a limited manufacturing scale-up to enable the beta launch of Plenity in the U.S. market, while simultaneously constructing state-of-the-art commercial-scale facilities to enable the full launch of Plenity. Production at our first commercial-scale manufacturing facility commenced in the fourth quarter of 2021, with the facility designed to accommodate three commercial-scale manufacturing lines, which is equivalent to an aggregate manufacturing capacity of approximately 480,000 Plenity 28-day supply units produced on a monthly basis when development is complete. We expect we will be able to produce up to 160,000 Plenity 28-day supply units on a monthly basis beginning in the second quarter of 2022, scaling up to 320,000 Plenity 28-day supply units on a monthly basis by the third quarter of 2022 and rising up to 480,000 Plenity 28-day supply units on a monthly basis by the first half of 2023. We have also initiated construction of a second commercial-scale manufacturing facility. Our second commercial-scale facility is designed to accommodate six commercial-scale manufacturing lines, which is equivalent to an aggregate manufacturing capacity of approximately 960,000 Plenity 28-day supply units produced on a monthly basis when development is complete. To date, we have invested over $50 million in commercial manufacturing capabilities. We estimate each commercial scale manufacturing line, which is equivalent to an aggregate manufacturing capacity of approximately 160,000 Plenity 28-day supply units produced on a monthly basis, to cost approximately $15 million to $25 million to construct and at full capacity to support annual product revenue, net, of $125 million to $150 million. In addition to our existing know-how in manufacturing superabsorbent hydrogels, we continue to seek improvements in manufacturing efficiency through research and development in material science and commercial-scale real-world optimization.

We engage contract-manufacturing organizations in North America to perform ancillary finished-good packaging services as a means of controlling costs and enabling growth capabilities.

Our Competitive Strengths

•

Unmet Need.   In the United States, roughly 7 out of 10 Americans struggle with their weight. Our first product, Plenity, is indicated for the largest number of adults struggling with their weight (approximately 150 million Americans) as compared to any other weight management prescription product and has no limitation on duration of therapy. Seventy percent (70%) of our members have never tried a prescription weight management product before, indicating Plenity is bringing new people into the category of prescription weight management products.

​

•

Attractive Efficacy and Safety Profile.   In clinical trials, six out of ten people achieved clinically meaningful weight loss in six months on Plenity, averaging a loss 10% of their total body weight (or an average of 22 pounds), with a side effect profile similar to placebo, and no serious adverse events.

​

The strong safety, efficacy, and tolerability profile of Plenity provides a clinically validated option as a first line of defense after diet and exercise for people who are just overweight, before the onset of obesity, many of whom did not have any prescription option before.

 

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•

Consumer Focus and Engagement.   We leverage telehealth and traditional healthcare to provide members with easy access to Plenity. We are developing the infrastructure to directly engage with our members in a digital ecosystem designed to also provide behavioral and educational support for our members’ weight loss journey. Through our platform we provide our members with immediate access to physicians with real-time communications through telehealth. We believe this consumer-focused approach empowers our members to improve and change their diet, lifestyle and health. We offer our members transparent pricing and home delivery with two-day pharmacy direct shipping. Our reliance on direct-to-consumer marketing as our primary demand driver should allow us to improve the efficiency of our sales force investments. The consumer pull created reduces the need for typical high healthcare provider, or HCP, call frequencies and allows for efficient use of a limited sales force.

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•

Proven Early Success.   Our beta launch was successful, and we believe that it indicates strong future demand for Plenity given a broad label in the underserved weight loss market. We believe that our advanced data and analytics capabilities will help us optimize marketing. As weight management is a chronic medical condition, we see the potential for long-lived, recurring revenues if consumers make Plenity a part of their everyday weight management routine.

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•

Global Scalability.   Worldwide, more than 1.9 billion adults aged 18 years and older have unhealthy weight and of these over 650 million adults classified as having obesity. We believe our commercial infrastructure is purpose-built to scale quickly and efficiently to accommodate new geographies. We have partnered with China Medical System Holdings Limited for commercialization of Plenity in Greater China (including Mainland China, Hong Kong, Macau, and Taiwan), Singapore and United Arab Emirates. With our CE Mark authorization for Plenity in Europe, we intend to pursue expansion through strategic partnerships or direct commercialization.

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•

Profit Margin Potential.   We believe that our proprietary manufacturing process and agile distribution and supply chain networks will provide sustainable profit margins.

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•

New Product Pipeline.   We believe that our superabsorbent hydrogel technology can address large patient populations with chronic conditions related to obesity and have a pipeline of product candidates which we expect to advance through the FDA’s de novo 510(k) pathway as clinical data become available. We are developing manufacturing capacity for our hydrogels using a novel, proprietary process which we perform at our own facilities. We have nine families of patents and more than 130 individual patents and patent applications directed to compositions of matter and methods of production for Plenity, other product candidates and our hydrogel technology as well as methods of use for certain hydrogels.

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•

Management Team.   We are a founder-led team that combines innovative scientific thinkers and proven industry leaders in research and discovery, clinical development and product approval, and consumer driven commercialization.

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Market Overview

Global Epidemic: Overweight and Obesity

Obesity is a serious medical condition that is growing rapidly in prevalence worldwide. It has been designated by the American Medical Association, or AMA, as a “multi-metabolic and hormonal disease state.” Between 1988 and 1994, 23% of adults in the United States 20 years of age and older, or approximately 40 million, had obesity according to a CDC report. However, between 2017-2018, this number had risen to 42.5% or approximately 105 million, representing a 263% increase. Furthermore, the CDC reported that an additional 31% of adults in the United States 20 years of age and older, or approximately 75 million, were overweight, with many of these individuals expected to cross the threshold into obesity in the near future. Globally, there were more than 1.9 billion adults 18 years of age and older that had an unhealthy weight, of which approximately 650 million in 2016 had obesity, according to the WHO.

In addition to the adult population, the pediatric population is also suffering from an obesity epidemic. According to the CDC, by 2016, obesity in the United States has more than tripled in children and adolescents since the 1970s. In 2017-2018, more than one-third of children and adolescents had excess weight or

 

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obesity. According to a study by WHO, in 2016 over 340 million children and adolescents aged 5-19 had excess weight or obesity.

The designations “overweight” and “having obesity” are based on the thresholds of BMI, which measures weight on a height-adjusted basis. A person with a BMI of 30 or greater is typically classified as having obesity, while a person with a BMI of between 25 and 30 is typically classified as overweight. BMI is considered the standard within the medical community for measuring body fat and is recommended by the National Institutes of Health, or NIH, as a guide for the classification of people with excess weight and obesity.

There are a number of comorbidities caused by having either overweight or obesity. In the United States, obesity-related medical care costs were an estimated $147 billion in 2008 dollars. Approximately 300,000 people in the United States die each year as a result of obesity and its associated comorbidities, according to the Department of Health and Human Services, or HHS. According to the WHO, 44% of diabetes diagnoses, 23% of ischemic heart disease diagnoses, and a significant percentage of certain cancer diagnoses can be attributed to being either having overweight or obesity.

The Covid-19 pandemic has placed even greater focus on the need to urgently address obesity. Unfortunately Covid-19-related lockdowns appear to have exacerbated the problem, as an estimated 71 million Americans gained weight during the pandemic. Further, the World Obesity Federation (WOF) reported that 2.2 million of the 2.5 million (or 90%) of global Covid-19 deaths were in countries with high levels of obesity. In fact, people with obesity are 48% more likely to die of Covid-19.

Barriers to Weight Management

Despite over 70% of adults in the United States having a BMI greater than 25, with a higher risk for serious medical complications, only 2% of this population are prescribed drug therapy. In contrast, more than 80% of patients with type 2 diabetes are prescribed anti-diabetes pharmacotherapy. Considering that obesity is a major cause of type 2 diabetes, we believe these realities are paradoxical. Multiple studies have indicated that therapeutic inertia is high in the management of weight, particularly in patients with lower BMI. The highest rates of weight management interventions by primary care physicians occur for patients with BMI larger than 40 and the lowest for patients in the overweight category. A 2019 study of several large healthcare organizations reported that patients with a BMI greater than 35 accounted for 50.3% of all prescriptions for weight management pharmacotherapy, despite only making up 25.3% of the total patient sample. This study also found that the median BMI of a patient receiving weight management pharmacotherapy was 37.2. These results suggest that prescribers restrict the use of drug therapy to only patients in whom the benefit justifies the risk.

Other barriers to weight management include shorter health care provider visits allowing for limited time to educate patients on injection techniques (required of some pharmacotherapy options), titration of medication dose, signs and symptoms to monitor to prevent serious adverse events, how to manage milder drug-related symptoms such as nausea, etc.

In addition, we believe much of the inertia in addressing weight management can be attributed to the prevailing societal bias that obesity is a matter of personal responsibility and the false belief that “eat less and move more” will work for most people. A large number of people will not achieve meaningful and/or
long-lasting weight loss simply by dieting and exercising on their own. Without help from drug, device or surgery, many people will fail. Finally, cost is a significant barrier for the majority of the population. Few weight management options are covered by third party payors and these drugs or interventions can be very costly and remain unaffordable.

Limitations of Current Treatments

Current treatments for patients with excess weight or obesity include lifestyle interventions (dietary changes, behavioral modification, increased physical activities, etc.), pharmacotherapies, endoscopic applications of intragastric balloons, and bariatric surgery that creates permanent changes in the GI tract anatomy. Lifestyle interventions focused on diet, and exercise and behavioral modification are typically prescribed as an initial treatment for a patient with overweight or obesity. However, lifestyle interventions

 

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frequently fail to produce adequate and durable weight loss due to poor compliance and other limiting factors. In conjunction with lifestyle interventions, pharmacotherapies are approved for use by patients with a BMI of 27 or greater with at least one comorbidity, and all patients with a BMI of 30 or greater. Bariatric surgery, including gastric bypass and gastric banding procedures, is typically limited to patients with severe obesity, a BMI of greater than 40 or greater than 35 with at least one comorbidity. Although these procedures can produce dramatic weight loss results in this population, they come with a multitude of risks, including those inherent in surgery, such as an increased risk of death.

There are currently five pharmaceutical products approved in the United States for long-term weight management in people with excess weight and obesity, including products such as Orlistat, a combination product of phentermine and extended release topiramate, a combination product of naltrexone extended release and bupropion extended release; a higher dose subcutaneous injection of liraglutide, and a weekly subcutaneous injection of semaglutide. Each of these products act through mechanisms that require the product to be absorbed into the patient’s blood stream. As a result, these products carry the risk of systemic side effects, such as adverse gastrointestinal, cardiovascular and central nervous system effects, some of which can be serious or even life-threatening. Each of these approvals has also been accompanied by requirements for post-marketing safety studies to assess the safety of long-term treatment, with an emphasis on potential adverse cardiovascular side effects. In addition, Qsymia has been designated a Schedule IV controlled substance due to their potential for abuse. Furthermore, in connection with its approval of Qsymia, the FDA required a Risk Evaluation and Mitigation Strategy, or REMS, program to inform prescribers and women with the potential to become pregnant about the increased risk of congenital malformation in infants exposed to Qsymia in early pregnancy, as well as limiting access to certified pharmacies. The label for Contrave includes a black box warning from the FDA to alert health care professionals and patients to the increased risk of suicidal thoughts and behaviors, as well as serious neuropsychiatric events, associated with bupropion. These drugs also compete against generic forms of phentermine, topiramate, naltrexone, and bupropion. None of these products have been approved for use in pediatric patients and phentermine is only approved for short term use of no longer than 12 weeks.

All current prescribed pharmacotherapies are indicated only for individuals with BMI ≥ 30 or individuals with BMI ≥ 27 with existing health conditions brought on by extra weight such as diabetes, blood pressure or heart disease. More invasive treatment options include intragastric balloons, which reduce gastric volume via a foreign object such as a balloon that, in most cases, is placed by an endoscopic procedure similar to a gastroscopy in the stomach. The balloon is left in place for 6-12 months and then removed via endoscopy.

Long-term data is limited and weight loss is not anticipated to be maintained once the balloon is removed. Endoscopic procedures needed for placement and removal, in addition to the potential associated complications, limit their adoption. As of April 2020, the FDA has received reports of a total of 18 deaths that occurred in patients with liquid-filled intragastric balloon systems worldwide. Eight of these 18 deaths were patients in the United States.

We believe there is an urgent demand for affordable therapies that result in clinically meaningful weight loss with little or no additional safety risk, opening the possibility to treat people earlier at a lower BMI and potentially prevent or delay the progression of complications related to weight gain.

 

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Our Approach to Weight Management

Plenity — A Biomimetic Approach.   There are many lifestyle related drivers that contributed to the dramatic increase in obesity in the developed world over the last 50 years. One major contributor is the significant increase in the portion size of meals and another major contributor is the quality and composition of food, which has shifted to calorie dense and heavily processed. In addition there is a significant reduction in the consumption of hypocaloric foods, especially foods rich with fiber like vegetables and fruits. One of the reasons vegetables and fruits are so important to a healthy diet — in addition to their nutritional value — is that they provide bulk and texture to a meal and maintain their shape, structure, and firmness, through nearly the entire digestive process. They are also known to have important effect on the gut health. That’s why you tend to feel fuller when you eat a big salad with a meal, and thereby desire to eat less. We wanted to use science to create the same effect.

 

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Plenity was designed using the principles of biomimicry. Biomimicry is the design of materials modeled on biologic structures — thereby leveraging natural designs that have evolved to work favorably in the body. Many modern inventions were developed by studying and mimicking the natural designs of plants and animals. Taking a biomimetic approach and therefore leveraging on “nature’s R&D,” Plenity is a
first-of-its-kind superabsorbent hydrogel technology, specifically engineered to have the composition (i.e. large amount of water held by cellulose) and mechanical properties (i.e., elasticity or firmness) as ingested raw vegetables.

Our hydrogels are designed to address several critical challenges of the modern diet: portion size, caloric density, and food composition. Our solution to this challenge: the first super absorbent hydrogel technology based on naturally-derived building blocks, creating small firm 3D structures, similar to ingested raw vegetables, designed to create a sensation of feeling fuller. In the stomach the hydrogel particles form small solid non-aggregating gel pieces consisting of water held by 3D cellulose structures, similar to raw vegetables. There, they are homogeneously mixed with ingested foods, increasing volume and firmness while reducing the caloric density of meals. Like vegetables, the hydrogel pieces are not absorbed and ultimately partially degrade in the large intestine, releasing their water before leaving the body naturally. In clinical trials, 6 out of 10 people achieved clinically meaningful weight loss without serious side effects — losing an average of 10% of their total body weight or approximately 22 pounds.

The technology is non-invasive (taken by capsule, not an injectable), easy to use (the dosing is simple), and straightforward (with minimal clinical follow up). Plenity is non-systemic, not absorbed, and non-habit forming, giving consumers an option that is scientifically proven and clinically validated, FDA cleared, and rooted in nature.

 

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The packaging for Plenity is designed for convenience and to be discrete: each pod contains one dose and is small enough to fit in your pocket. By having Plenity in pods it makes it easier to carry the dose needed for the day. Additionally, a week supply comes in a separate container of 14 pods so it makes it easy to travel with or keep at work for lunch and the rest at home.

Plenity is not a drug, so it does not negatively impact the brain as stimulants do, or affect other internal organs. It is non-systemic, and does not use hormones or require injections. It is also not habit forming and there is no limit on how long you can take Plenity.

We believe Plenity provides the following safety advantages over currently available therapies:

•

acts mechanically in the GI tract and is not absorbed into the blood stream, avoiding acute and chronic side effects caused by systemically acting therapies;

​

•

passes with food through the GI tract with no procedure required for introduction or removal;