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As filed with the Securities and Exchange Commission on July 27, 2023
Registration No. 333-                
 
 
 
UNITED STATES
SECURITIES
AND EXCHANGE
COMMISSION
Washington
, D.C. 20549
 
 
Form
S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
Frequency Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
2834
 
47-2324450
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
75 Hayden Avenue, Suite 300
Lexington, MA 02421
(781)
315-4600
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
David L. Lucchino
President and Chief Executive Officer
75 Hayden Avenue, Suite 300
Lexington, MA 02421
(781)
315-4600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies to:
 
Bradley C. Faris
John H. Chory
Jennifer A. Yoon
Latham & Watkins LLP
200 Clarendon Street
Boston, MA 02116
(617)
948-6000
 
Ram Aiyar
President and Chief Executive Officer
Korro Bio, Inc.
One Kendall Square, Building
600-700
Suite
6-401
Cambridge, MA 02139
(617)
468-1999
 
Kingsley L. Taft
Marianne C. Sarrazin
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
(617)
570-1000
 
 
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a
post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule
13e-4(i)
(Cross-Border
Issuer Tender Offer)  ☐
Exchange Act Rule
14d-1(d)
(Cross-Border
Third-Party
Tender Offer)  ☐
 
 
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 


The information in this proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JULY 27, 2023

 

 

LOGO

 

LOGO

 

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

 

 

To the Stockholders of Frequency Therapeutics, Inc. and Korro Bio, Inc.,

Frequency Therapeutics, Inc., a Delaware corporation, or Frequency, and Korro Bio, Inc., a Delaware corporation, or Korro Bio, entered into an Agreement and Plan of Merger, or the Merger Agreement, on July 14, 2023, pursuant to which a direct, wholly owned subsidiary of Frequency, Frequency Merger Sub, Inc., or Merger Sub, will merge with and into Korro Bio, with Korro Bio surviving as a direct, wholly owned subsidiary of Frequency, and the surviving corporation of the merger, which transaction is referred to herein as the Merger. Frequency following the Merger is also referred to herein as the combined company.

At the time the certificate of merger is filed with and accepted by the Secretary of State of the State of Delaware, or the Effective Time, as described in more detail in the section titled “The Merger—Effective Time of the Merger” beginning on page 185 of the accompanying proxy statement/prospectus, each share of Korro Bio common stock will be converted into the right to receive a number of shares of Frequency common stock equal to the total number of shares of Frequency common stock to be issued in the Merger multiplied by the applicable Korro Bio stockholder’s percentage interest in Korro Bio as set forth in the allocation certificate to be provided by Korro Bio, or the Allocation Certificate, and as described in more detail in the section titled “The Merger Agreement—Allocation Certificate” beginning on page 191 of the accompanying proxy statement/prospectus. The Korro Bio common stock that will be converted in the Merger includes Korro Bio common stock issued pursuant to the subscription agreement by and among Korro Bio and certain parties to purchase shares of Korro Bio’s common stock for an aggregate purchase price of approximately $117.3 million, which transaction is referred to as the Pre-Closing Financing. If any Korro Bio common stock outstanding immediately prior to the Effective Time is unvested or is subject to a repurchase option or a risk of forfeiture under any applicable agreement with Korro Bio, then the shares of Frequency common stock issued in exchange for such shares of Korro Bio common stock will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and such shares of Frequency common stock will be marked with appropriate legends.

In connection with the Merger, each option to purchase shares of Korro Bio common stock outstanding as of immediately prior to the Effective Time shall automatically be converted, at the Effective Time, into an option to acquire the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such option as of immediately prior to the Effective Time multiplied by the exchange ratio formula in the Merger Agreement and rounding that result down to the nearest whole number of shares.

Each share of Frequency common stock that is issued and outstanding at the Effective Time will remain issued and outstanding and such shares, subject to a proposed reverse stock split of Frequency’s issued and outstanding common stock at a ratio ranging from any whole number between 1-for-     and 1-for-     as determined by the Frequency board of directors in its discretion, or Reverse Stock Split, as described in the section titled “Matters Being Submitted to a Vote of Frequency Stockholders—Proposal No. 2: Approval of the Amendment to the Restated Certificate of Incorporation of Frequency Effecting the Reverse Stock Split” beginning on page 234 will be unaffected by the Merger. Each outstanding option to purchase shares of Frequency common stock, which is referred to as a Frequency Option, will remain outstanding and such options, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan or


2014 Stock Incentive Plan, as applicable, to reflect the Reverse Stock Split and the issuance of the contingent value rights, or CVRs, will be unaffected by the Merger, provided that each Frequency Option that is outstanding and unvested will vest in full immediately prior to the Effective Time. Each restricted stock unit covering shares of Frequency common stock that is outstanding will remain outstanding and such restricted stock units, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan to reflect the Reverse Stock Split and issuance of the CVRs, will be unaffected by the Merger, provided that each restricted stock unit award that vests solely based on the holder’s continued employment or service will vest in full immediately prior to the Effective Time.

Immediately after the Merger, Frequency securityholders as of immediately prior to the Merger are expected to own approximately 8% of the outstanding shares of the combined company on a fully-diluted basis and former Korro Bio securityholders (including purchasers in the Pre-Closing Financing) are expected to own approximately 92% of the outstanding shares of the combined company on a fully-diluted basis, subject to certain assumptions, including, but not limited to, Frequency’s net cash as of closing being equal to $25 million.

Shares of Frequency common stock are currently listed on The Nasdaq Global Select Market, or Nasdaq, under the symbol “FREQ.” Frequency intends to file an initial listing application for the combined company with the Nasdaq Stock Market LLC. After completion of the Merger, Frequency will be renamed “Korro Bio, Inc.” and it is expected that the common stock of the combined company will trade on Nasdaq under the symbol “KRRO.” On             , 2023, the last trading day before the date of the accompanying proxy statement/prospectus, the closing sale price of Frequency common stock was $             per share.

Frequency stockholders are cordially invited to attend the annual meeting of Frequency stockholders, or the Frequency Annual Meeting. Frequency is holding the Frequency Annual Meeting, on             ,             2023, at             Eastern Time, unless postponed or adjourned to a later date, in order to obtain the stockholder approvals necessary to complete the Merger or other matters. The Frequency Annual Meeting will be held entirely online. Frequency stockholders will be able to attend and participate in the Frequency Annual Meeting online by visiting www.proxydocs.com/FREQ where they will be able to listen to the meeting live, submit questions and vote. At the Frequency Annual Meeting, Frequency will ask its stockholders:

 

1.

To approve the issuance of shares of common stock of Frequency to stockholders of Korro Bio, Inc. pursuant to the terms of the Agreement and Plan of Merger dated as of July 14, 2023, by and among Frequency, Korro Bio, and Merger Sub, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus, pursuant to which Merger Sub will merge with and into Korro Bio, with Korro Bio surviving as a wholly owned subsidiary of Frequency, and the surviving corporation of the merger and the change of control resulting from the merger;

 

2.

To approve an amendment to the Restated Certificate of Incorporation of Frequency, a copy of which is attached as Annex H to the accompanying proxy statement/prospectus, to effect a reverse stock split of Frequency’s issued and outstanding common stock at a ratio ranging from any whole number between 1-for-     and 1-for-    , as determined by the Frequency board of directors in its discretion, subject to the Frequency board of directors’ authority to abandon such amendment;

 

3.

To elect David L. Lucchino as a Class I director to hold office until the annual meeting of stockholders to be held in 2026 and until his respective successor has been duly elected and qualified;

 

4.

To ratify, in a non-binding vote, the appointment of RSM US LLP as Frequency’s independent registered public accounting firm for the fiscal year ending December 31, 2023;

 

5.

To approve the 2023 Stock Option and Incentive Plan, a copy of which is attached as Annex I to the accompanying proxy statement/prospectus;

 

6.

To approve the 2023 Employee Stock Purchase Plan, a copy of which is attached as Annex J to the accompanying proxy statement/prospectus;

 

7.

To consider and vote upon an adjournment of the Frequency Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 and 2; and

 

8.

To transact such other business as may properly come before the stockholders at the Frequency Annual Meeting or any adjournment or postponement thereof.


As described in the accompanying proxy statement/prospectus, certain Frequency stockholders who in the aggregate owned approximately 3.5% of the outstanding shares of Frequency as of July 14, 2023, and certain Korro Bio stockholders who in the aggregate owned approximately 98% of the outstanding shares of Korro Bio common stock as of July 14, 2023, are parties to stockholder support agreements with Frequency and Korro Bio, respectively, whereby such stockholders have agreed to vote in favor of the approval of the transactions contemplated therein, including, with respect to such Korro Bio stockholders, adoption of the Merger Agreement and approval of the Merger and, with respect to such Frequency stockholders, the issuance of Frequency common stock in the Merger pursuant to the Merger Agreement, subject to the terms of the support agreements. Following the effectiveness of the registration statement on Form S-4 of which the accompanying proxy statement/prospectus is a part and pursuant to the Merger Agreement, Korro Bio stockholders holding a sufficient number of shares of Korro Bio common stock to adopt the Merger Agreement and approve the Merger and related transactions will execute written consents providing for such adoption and approval.

After careful consideration, each of the Frequency and Korro Bio boards of directors have approved the Merger Agreement and have determined that it is advisable to consummate the Merger. The Frequency board of directors has approved the proposals described in the accompanying proxy statement/prospectus and unanimously recommends that its stockholders vote “FOR” the director nominee and “FOR” the other proposals described in the accompanying proxy statement/prospectus.

 

 

More information about Frequency, Korro Bio, the Merger Agreement and transactions contemplated thereby and the foregoing proposals is contained in the accompanying proxy statement/prospectus. Frequency urges you to read the accompanying proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 32 OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.

Frequency and Korro Bio are excited about the opportunities the Merger brings to Frequency’s and Korro Bio’s stockholders and thank you for your consideration and continued support.

Sincerely,

 

David L. Lucchino

President and Chief Executive Officer

Frequency Therapeutics, Inc.

        

Ram Aiyar

President and Chief Executive Officer

Korro Bio, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the accompanying proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated             , 2023 and is first being mailed to Frequency stockholders on or about             , 2023.


FREQUENCY THERAPEUTICS, INC.

75 HAYDEN AVENUE, SUITE 300

LEXINGTON, MA 02421

(781) 315-4600

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the stockholders of Frequency Therapeutics, Inc., or Frequency:

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Frequency, or the Frequency Annual Meeting, will be held on                 , 2023, at                 Eastern Time, unless postponed or adjourned to a later date. The Frequency Annual Meeting will be held entirely online. You will be able to attend and participate in the Frequency Annual Meeting online by visiting www.proxydocs.com/FREQ where you will be able to listen to the Frequency Annual Meeting live, submit questions and vote.

The Frequency Annual Meeting will be held for the following purposes:

 

1.

To approve the issuance of shares of common stock of Frequency to stockholders of Korro Bio, Inc., or Korro Bio, pursuant to the terms of the Agreement and Plan of Merger dated as of July 14, 2023, by and among Frequency, Korro Bio, and Frequency Merger Sub, Inc., a direct, wholly owned subsidiary of Frequency, or Merger Sub, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus, pursuant to which Merger Sub will merge with and into Korro Bio, with Korro Bio surviving as a wholly owned subsidiary of Frequency, and the surviving corporation of the merger, or the Merger, and the change of control resulting from the Merger;

 

2.

To approve an amendment to the Restated Certificate of Incorporation of Frequency, a copy of which is attached as Annex H to the accompanying proxy statement/prospectus, to effect a reverse stock split of Frequency’s issued and outstanding common stock at a ratio ranging from any whole number between 1-for-                 and 1-for-                , as determined by the Frequency board of directors in its discretion subject to the Frequency board of directors’ authority to abandon such amendment;

 

3.

To elect David L. Lucchino as a Class I director to hold office until the annual meeting of stockholders to be held in 2026 and until his respective successor has been duly elected and qualified;

 

4.

To ratify, in a non-binding vote, the appointment of RSM US LLP as Frequency’s independent registered public accounting firm for the fiscal year ending December 31, 2023;

 

5.

To approve the 2023 Stock Option and Incentive Plan a copy of which is attached to this proxy statement/prospectus as Annex I.

 

6.

To approve the 2023 Employee Stock Purchase Plan a copy of which is attached to this proxy statement/prospectus as Annex J.

 

7.

To consider and vote upon an adjournment of the Frequency Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1 and 2; and

 

8.

To transact such other business as may properly come before the stockholders at the Frequency Annual Meeting or any adjournment or postponement thereof.

 

Record Date:

Frequency’s board of directors has fixed                 , 2023 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Frequency Annual Meeting and any adjournment or postponement thereof. Only holders of record of shares of Frequency common stock at the close of business on the record date are entitled to notice of, and to vote at, the Frequency Annual Meeting. At the close of business on the record date, Frequency had              shares of common stock outstanding and entitled to vote.


Your vote is important. The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon, assuming a quorum is present, is required for approval of Proposal Nos. 1, 4, 5, 6 and 7. The affirmative vote of the holders of a majority of the outstanding shares of Frequency common stock entitled to vote thereon is required for approval of Proposal No. 2. The plurality of the votes cast by the holders of shares present in attendance or represented by proxy at the Frequency Annual Meeting and entitled to vote on the matter, assuming a quorum is present, is required for approval of Proposal No. 3. Approval of Proposal No. 1 is a condition to the completion of the Merger. Therefore, the Merger cannot be consummated without the approval of Proposal Nos. 1 and 2.

Even if you plan to attend the Frequency Annual Meeting, Frequency requests that you sign, date and promptly return the enclosed proxy card or vote by mail or online to ensure that your shares will be represented at the Frequency Annual Meeting. You may change or revoke your proxy at any time before it is voted at the Frequency Annual Meeting.

FREQUENCY’S BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS FAIR TO, IN THE BEST INTERESTS OF, AND ADVISABLE TO FREQUENCY AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. FREQUENCY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FREQUENCY STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

By Order of Frequency’s Board of Directors,

David L. Lucchino

President and Chief Executive Officer

Lexington, MA

                , 2023


ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission, or the SEC, by Frequency Therapeutics, Inc., or Frequency, constitutes a prospectus of Frequency under the Securities Act of 1933, as amended, or the Securities Act, with respect to the shares of common stock of Frequency to be issued (or reserved for issuance) to the securityholders of Korro Bio, Inc., or Korro Bio, pursuant to the Agreement and Plan of Merger dated as of July 14, 2023, by and among Frequency, Korro Bio and Frequency Merger Sub, Inc., a direct, wholly owned subsidiary of Frequency, or Merger Sub, as it may be amended from time to time, or the Merger Agreement, pursuant to which Merger Sub will merge with and into Korro Bio, with Korro Bio surviving as a wholly owned subsidiary of Frequency, and the surviving corporation of the merger, or the Merger. This document also constitutes a proxy statement of Frequency under Section 14(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. It also constitutes a notice of meeting with respect to the annual meeting of Frequency stockholders, or the Frequency Annual Meeting, at which Frequency stockholders will be asked to consider and vote, among other matters, on the issuance of the shares of Frequency common stock pursuant to the Merger Agreement and the change of control resulting from the Merger. Frequency following the Merger is referred to in this proxy statement/prospectus as the combined company.

Frequency has supplied all information contained in this proxy statement/prospectus relating to Frequency. Korro Bio has supplied all information contained in this proxy statement/prospectus relating to Korro Bio.

You should rely only on the information contained in this proxy statement/prospectus. Frequency and Korro Bio have not authorized anyone to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated                 , 2023, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date. Neither the mailing of this proxy statement/prospectus to Frequency stockholders nor the issuance by Frequency of shares of Frequency common stock pursuant to the Merger Agreement will create any implication to the contrary.

Except where otherwise noted, the information contained in this proxy statement/prospectus does not give effect to the proposed reverse stock split of Frequency’s issued and outstanding common stock at a ratio ranging from any whole number between 1-for-     and 1-for-     as determined by the Frequency board of directors in its discretion, or the proposed Reverse Stock Split, described in the section titled “Matters Being Submitted to a Vote of Frequency Stockholders — Proposal No. 2: Approval of the Amendment to the Restated Certificate of Incorporation of Frequency Effecting the Reverse Stock Split” beginning on page 234 of this proxy statement/prospectus.

Frequency and Korro Bio have proprietary rights to trademarks, trade names and service marks appearing in this proxy statement/prospectus that are important to their respective businesses. Solely for convenience, the trademarks, trade names and service marks may appear in this proxy statement/prospectus without the ® and TM symbols, but any such references are not intended to indicate, in any way, that Frequency or Korro Bio forgo or will not assert, to the fullest extent under applicable law, their rights or the rights of the applicable licensors to these trademarks, trade names and service marks. All trademarks, trade names and service marks appearing in this proxy statement/prospectus are the property of their respective owners.

 

i


TABLE OF CONTENTS

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     1  

QUESTIONS AND ANSWERS

     2  

Questions and Answers About the Merger

     2  

Questions and Answers About the Frequency Annual Meeting and Voting

     6  

PROSPECTUS SUMMARY

     13  

The Companies

     13  

The Merger

     18  

Reasons for the Merger

     19  

Opinion of Frequency’s Financial Advisor

     20  

Interests of Certain Directors and Executive Officers of Frequency and Korro Bio

     20  

Management Following the Merger

     26  

Overview of the Merger Agreement and Agreements Related to the Merger Agreement

     22  

Material U.S. Federal Income Tax Consequences of the Merger

     26  

Nasdaq Stock Market Listing

     27  

Anticipated Accounting Treatment

     27  

Appraisal Rights and Dissenters’ Rights

     27  

Comparison of Stockholder Rights

     27  

Risk Factors

     28  

MARKET PRICE AND DIVIDEND INFORMATION

     31  

Dividends

     31  

RISK FACTORS

     32  

Risks Related to the Merger

     32  

Risks Related to the Proposed Reverse Stock Split

     36  

Risks Related to the Combined Company

     37  

Risks Related to Frequency’s Business

     46  

Risks Related to Korro Bio’s Business

     96  

THE MERGER

     153  

Background of the Merger

     153  

Frequency Reasons for the Merger

     165  

Korro Bio Reasons for the Merger

     169  

Opinion of Frequency’s Financial Advisor

     171  

Financial Forecasts

     176  

Interests of Frequency Directors and Executive Officers in the Merger

     178  

Interests of Korro Bio Directors and Executive Officers in the Merger

     183  

Indemnification and Insurance for Directors and Officers

     185  

Effective Time of the Merger

     185  

Regulatory Approvals

     186  

Anticipated Accounting Treatment

     186  

Nasdaq Stock Market Listing

     186  

Appraisal Rights and Dissenters’ Rights

     186  

THE MERGER AGREEMENT

     190  

Structure

     190  

Completion and Effectiveness of the Merger

     190  

Merger Consideration

     190  

Allocation Certificate

     191  

Korro Merger Shares

     192  

Pre-Closing Financing Merger Shares

     192  

Calculation of Frequency’s Final Net Cash

     193  

Treatment of Korro Bio Warrants

     194  

Treatment of Korro Bio Options

     194  

 

ii


Treatment of Frequency Common Stock, Frequency Options, Frequency Restricted Stock Units and Frequency Performance Stock Units

     195  

Frequency Employee Stock Purchase Plan

     195  

Procedures for Exchanging Korro Bio Stock Certificates

     195  

Directors and Officers of Frequency Following the Merger

     196  

Amendment of the Restated Certificate of Incorporation of Frequency

     196  

Potential Asset Sale

     196  

Representations and Warranties

     197  

Covenants; Conduct of Business Pending the Merger

     197  

Contingent Value Rights

     201  

Non-Solicitation

     201  

Board Recommendation Change

     203  

Meeting of Frequency’s Stockholders and Written Consent of Korro Bio’s Stockholders

     204  

Regulatory Approvals

     205  

Indemnification and Insurance for Directors and Officers

     205  

2023 Plan and 2023 ESPP

     206  

Frequency 401(k) Plan

     206  

Additional Agreements

     206  

Conditions to the Completion of the Merger

     207  

Termination and Termination Fees

     209  

Amendment and Waiver

     210  

Fees and Expenses

     211  

AGREEMENTS RELATED TO THE MERGER

     212  

Support Agreements

     212  

Lock-Up Agreements

     213  

Contingent Value Rights Agreement

     214  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     223  

THE ANNUAL MEETING OF FREQUENCY STOCKHOLDERS

     227  

Date, Time and Place

     227  

Purposes of the Frequency Annual Meeting

     227  

Recommendation of the Frequency Board of Directors

     227  

Record Date and Voting Power

     228  

Voting and Revocation of Proxies

     228  

Required Vote

     229  

Solicitation of Proxies

     232  

Other Matters

     232  

MATTERS BEING SUBMITTED TO A VOTE OF FREQUENCY STOCKHOLDERS

     233  

PROPOSAL NO. 1: APPROVAL OF THE ISSUANCE OF COMMON STOCK IN THE MERGER AND THE CHANGE OF CONTROL RESULTING FROM THE MERGER

     233  

PROPOSAL NO. 2: APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF FREQUENCY EFFECTING THE REVERSE STOCK SPLIT

     234  

PROPOSAL NO. 3: TO ELECT DAVID L. LUCCHINO AS A CLASS I DIRECTOR

     246  

PROPOSAL NO. 4: TO RATIFY, IN A NON-BINDING VOTE, THE APPOINTMENT OF RSM US LLP AS FREQUENCY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR DECEMBER 31, 2023

     250  

PROPOSAL NO. 5: APPROVAL OF 2023 STOCK OPTION AND INCENTIVE PLAN

     253  

PROPOSAL NO. 6: APPROVAL OF 2023 EMPLOYEE STOCK PURCHASE PLAN

     259  

PROPOSAL NO. 7: APPROVAL OF ADJOURNMENT OF THE FREQUENCY ANNUAL MEETING

     263  

FREQUENCY’S BUSINESS

     264  

Overview

     264  

Frequency’s multiple sclerosis (MS) program

     264  

Intellectual property

     265  

 

iii


Competition

     267  

Government regulation

     268  

Foreign regulation

     274  

Coverage and reimbursement

     277  

Healthcare reform

     278  

Data privacy and security laws

     279  

Cybersecurity

     279  

Environmental, Social, and Governance Initiatives

     279  

Frequency’s Corporate Information

     281  

KORRO BIO’S BUSINESS

     282  

Overview

     282  

Korro Bio’s Team

     285  

Korro Bio’s Strategy

     285  

Expanding the Frontiers of Genetic Medicines: RNA Editing

     287  

ADAR-mediated RNA editing

     287  

Key advantages of Oligonucleotide-based ADAR-mediated RNA editing as a therapeutic modality

     288  

Korro Bio’s OPERA – Oligonucleotide Promoted Editing of RNA – Platform

     290  

Korro Bio’s Pipeline Demonstrates the Versatility of the OPERA Platform

     293  

Korro Bio’s AATD Program: RNA Editing to Repair Pathogenic Missense Variant

     296  

Korro Bio’s Parkinson’s Disease Program: Repairing Pathogenic Variants

     308  

Korro Bio’s Severe Alcoholic-Associated Hepatitis Program: Disrupting Protein-Protein Interactions

     308  

Korro Bio’s Amyotrophic Lateral Sclerosis Program: Disrupting Protein Aggregation

     309  

Korro Bio’s Pain Program: Selective Modulation of Ion Channels

     310  

Korro Bio’s Cardiometabolic Disease Program: Activating Kinases

     311  

Pioneering RNA Editing to Deliver the Future of Medicine

     311  

Manufacturing

     311  

Competition

     311  

Intellectual Property

     312  

Governmental Regulation

     314  

Employees and Human Capital Resources

     330  

Facilities

     330  

Legal Proceedings

     330  

FREQUENCY MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     331  

Overview

     331  

License and collaboration agreements

     332  

Components of Frequency’s results of operations

     333  

Results of operations

     335  

Liquidity and capital resources

     339  

Critical accounting policies and use of estimates

     344  

Recent accounting pronouncements

     344  

Emerging growth company status

     344  

Frequency’s quantitative and qualitative disclosures about market risk

     344  

KORRO BIO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     345  

Overview

     345  

Recent Developments

     346  

Financial Operations Overview

     347  

Results of Operations

     349  

Liquidity and Capital Resources

     352  

Critical Accounting Policies and Estimates

     355  

 

iv


Off-Balance Sheet Arrangements

     356  

Recent Accounting Pronouncements

     356  

MANAGEMENT FOLLOWING THE MERGER

     357  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     362  

FREQUENCY DIRECTORS, OFFICERS AND CORPORATE GOVERNANCE

     374  

FREQUENCY EXECUTIVE AND DIRECTOR COMPENSATION

     382  

KORRO BIO EXECUTIVE AND DIRECTOR COMPENSATION

     391  

CERTAIN RELATED PERSON TRANSACTIONS OF FREQUENCY

     397  

CERTAIN RELATED PERSON TRANSACTIONS OF THE COMBINED COMPANY

     400  

FREQUENCY’S DESCRIPTION OF CAPITAL STOCK

     404  

COMPARISON OF RIGHTS OF HOLDERS OF FREQUENCY CAPITAL STOCK AND KORRO BIO CAPITAL STOCK

     408  

PRINCIPAL STOCKHOLDERS OF FREQUENCY

     418  

PRINCIPAL STOCKHOLDERS OF KORRO BIO

     420  

PRINCIPAL STOCKHOLDERS OF COMBINED COMPANY

     423  

LEGAL MATTERS

     426  

EXPERTS

     426  

OTHER MATTERS

     427  

INDEX TO FINANCIAL STATEMENTS

     F-1  

Annex A—Agreement and Plan of Merger

Annex B—Opinion of Cowen and Company, LLC

Annex C—Form of Frequency Stockholder Support Agreement

Annex D—Form of Korro Bio Stockholder Support Agreement

Annex E—Form of Contingent Value Rights Agreement

Annex F—Form of Frequency Lock-Up Agreement

Annex G—Form of Korro Bio Lock-Up Agreement

Annex H—Certificate of Amendment Effecting the Reverse Stock Split

Annex I—2023 Stock Option and Incentive Plan

Annex J—2023 Employee Stock Purchase Plan

Annex K—Appraisal Rights (Section 262 of the Delaware General Corporation Law)

 

v


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements relating to Frequency, Korro Bio, the Merger, the combined company, and the other proposed transactions.

These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as Frequency and Korro Bio cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements include, but are not limited to, any statements regarding the strategies, prospects, plans, expectations or objectives of management of Frequency or Korro Bio for future operations of the combined company, the progress, scope or timing of the development of the combined company’s product candidates, the benefits that may be derived from any future products or the commercial or market opportunity with respect to any future products of the combined company, the ability of the combined company to protect its intellectual property rights, the anticipated operations, financial position, ability to raise capital to fund operations, revenues, costs or expenses of Frequency, Korro Bio or the combined company, statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. Forward-looking statements may also include any statements regarding the approval and closing of the Merger, including the timing of the consummation of the Merger, Frequency’s ability to solicit a sufficient number of proxies to approve the Merger, satisfaction of conditions to the completion of the Merger, the expected benefits of the Merger, the ability of Frequency and Korro Bio to complete the Merger and any statement of assumptions underlying any of the foregoing.

For a discussion of the factors that may cause Frequency, Korro Bio or the combined company’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risks associated with the ability of Frequency and Korro Bio to complete the Merger and the effect of the Merger on the business of Frequency, Korro Bio and the combined company, see the section titled “Risk Factors” beginning on page 32 of this proxy statement/prospectus.

If any of these risks or uncertainties materialize or any of these assumptions prove incorrect, the results of Frequency, Korro Bio or the combined company could differ materially from the forward-looking statements. All forward-looking statements in this proxy statement/prospectus are current only as of the date of this proxy statement/prospectus. Frequency and Korro Bio do not undertake any obligation to (and expressly disclaim any such obligation to) publicly update any forward-looking statement to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

1


QUESTIONS AND ANSWERS

The following section provides answers to frequently asked questions about the Merger, general information about the Frequency Annual Meeting and voting. For some questions, this section provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

Questions and Answers About the Merger

Q:    What is the Merger?

A: Frequency and Korro Bio have entered into the Merger Agreement, dated as of July 14, 2023, a copy of which is attached as Annex A to this proxy statement/prospectus. The Merger Agreement contains the terms and conditions of the proposed business combination of Frequency and Korro Bio. Pursuant to the Merger Agreement, Merger Sub, a direct, wholly owned subsidiary of Frequency, will merge with and into Korro Bio, with Korro Bio surviving as a wholly owned subsidiary of Frequency and the surviving corporation. In connection with the Merger, Frequency will change its corporate name to “Korro Bio, Inc.”

At the Effective Time, each share of Korro Bio common stock will be converted into the right to receive a number of shares of Frequency common stock equal to the total number of shares of Frequency common stock to be issued in the Merger multiplied by the applicable Korro Bio stockholder’s percentage interest in Korro Bio as set forth in the Allocation Certificate, and as described in more detail in the section titled “The Merger Agreement—Allocation Certificate” beginning on page 191 of the accompanying proxy statement/prospectus. If any Korro Bio common stock outstanding immediately prior to the Effective Time is unvested or is subject to a repurchase option or a risk of forfeiture under any applicable agreement with Korro Bio, then the shares of Frequency common stock issued in exchange for such shares of Korro Bio common stock will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and such shares of Frequency common stock will be marked with appropriate legends. Each option to purchase shares of Korro Bio common stock outstanding as of immediately prior to the Effective Time shall automatically be converted, at the Effective Time, into an option to acquire, on the same terms and conditions (including the same vesting and exercisability terms and conditions), the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such option as of immediately prior to the Effective Time multiplied by the exchange ratio formula in the Merger Agreement and rounding that result down to the nearest whole number of shares, as described in more detail in the sections titled “The Merger Agreement—Treatment of Korro Bio Warrants” and “The Merger Agreement—Treatment of Korro Bio Options” beginning on page 194 of this proxy statement/prospectus.

Each outstanding Frequency Option will remain outstanding and such options, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan or 2014 Stock Incentive Plan, as applicable, to reflect the Reverse Stock Split and the issuance of the CVRs, will be unaffected by the Merger, provided that each such Frequency Option that is unvested will vest in full immediately prior to the Effective Time. Each restricted stock unit award covering shares of Frequency common stock that is outstanding will remain outstanding and such restricted stock unit awards, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan to reflect the Reverse Stock Split and issuance of the CVRs, will be unaffected by the Merger, provided that each restricted stock unit award that vests solely based on the holder’s continued employment or service will vest in full immediately prior to the Effective Time.

Q:    Why are the two companies proposing to combine?

A: Frequency and Korro Bio believe that combining the two companies will result in a company with a robust pipeline, strong leadership team and substantial capital resources, positioning it to become a leading company researching, developing and commercializing therapies for diseases. For a more complete description of the

 

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reasons for the Merger, please see the sections titled “The Merger—Frequency Reasons for the Merger” and “The Merger—Korro Bio Reasons for the Merger” beginning on pages 165 and 169, respectively, of this proxy statement/prospectus.

Q:    What will Korro Bio stockholders and optionholders receive in the Merger?

A: Korro Bio stockholders will receive shares of Frequency common stock, and Korro Bio optionholders will receive options to purchase Frequency common stock. The Korro Bio securityholders as of immediately before the Merger (including purchasers in the Pre-Closing Financing) are expected to own approximately 92% of the aggregate number of shares of the combined company’s common stock on a fully-diluted basis, and Frequency securityholders immediately before the Merger are expected to own approximately 8% of the aggregate number of shares of the combined company common stock on a fully-diluted basis, in each case subject to certain assumptions, including, but not limited to, Frequency’s net cash as of closing being equal to $25 million. If any Korro Bio common stock outstanding immediately prior to the Effective Time is unvested or is subject to a repurchase option or a risk of forfeiture under any applicable agreement with Korro Bio, then the shares of Frequency common stock issued in exchange for such shares of Korro Bio common stock will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and such shares of Frequency common stock will be marked with appropriate legends.

In connection with the Merger, each option to purchase shares of Korro Bio common stock outstanding as of immediately prior to the Effective Time shall automatically be converted, at the Effective Time, into an option to acquire, on the same terms and conditions (including the same vesting and exercisability terms and conditions), the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such option as of immediately prior to the Effective Time multiplied by the exchange ratio formula in the Merger Agreement and rounding that result down to the nearest whole number of shares, and will be eligible to be registered on Form S-8.

For a more complete description of what Korro Bio stockholders and optionholders will receive in the Merger, please see the sections titled “The Merger Agreement—Merger Consideration,” “The Merger Agreement—Treatment of Korro Bio Warrants” and “The Merger Agreement—Treatment of Korro Bio Options” beginning on pages 190, and 194, respectively, of this proxy statement/prospectus.

Q:    Will the common stock of the combined company trade on an exchange?

A: Shares of Frequency common stock are currently listed on The Nasdaq Global Select Market, or Nasdaq, under the symbol “FREQ.” Frequency intends to file an initial listing application for the combined company with the Nasdaq Stock Market LLC. After completion of the Merger, Frequency will be renamed “Korro Bio, Inc.” and it is expected that the common stock of the combined company will trade on Nasdaq under the symbol “KRRO.”

Q:    Who will be the directors of the combined company following the Merger?

A: Immediately following the Merger, the combined company’s board of directors will be composed of seven members, consisting of (i) four current Korro Bio board members, namely Ram Aiyar,             ,             , and             , (ii) two members to be determined by mutual agreement of the Frequency board designee and the Korro Bio board designees, namely              and             , each of whom shall meet Nasdaq’s independence requirements, and (iii) one current Frequency board member, namely David L. Lucchino. The staggered structure of the Frequency board of directors will remain in place for the combined company following the completion of the Merger. The Frequency board of directors has determined that each of the directors other than Ram Aiyar and David L. Lucchino meet the Nasdaq independence requirements.

It is anticipated the director classes of the combined company board of directors will be as follows:

 

   

Class I directors (term ending 2026):                    .

 

   

Class II directors (term ending 2024):                   .

 

   

Class III directors (term ending 2025):                  .

 

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Q:    Who will be the executive officers of the combined company immediately following the Merger?

A: Immediately following the Merger, the executive management team of the combined company is expected to consist of members of the Korro Bio executive management team prior to the Merger, including:

 

Name    Title
Ram Aiyar    President and Chief Executive Officer
Steve Colletti    Chief Scientific Officer
Vineet Agarwal    Chief Financial Officer
Todd Chappell    Senior Vice President, Strategy and Portfolio Planning
Shelby Walker    General Counsel

Q:    When do you expect the Merger to be consummated?

A: The Merger is anticipated to close in the fourth quarter of 2023, but the exact timing cannot be predicted. For more information, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 207 of this proxy statement/prospectus.

Q:    As a Frequency stockholder, how does Frequency’s board of directors recommend that I vote?

A: After careful consideration, Frequency’s board of directors unanimously recommends that Frequency stockholders vote “FOR” the director nominee and “FOR” all of the proposals.

Q:    What risks should I consider in deciding whether to vote in favor of the Merger?

A: You should carefully review the section titled “Risk Factors” beginning on page 32 of this proxy statement/prospectus, which set forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Frequency and Korro Bio, as independent companies, are subject.

Q:    What are the CVRs being issued to Frequency stockholders?

A: Prior to the Effective Time, unless (i) the disposition of any of Frequency’s assets related to its multiple sclerosis program, or the MS Asset Disposition, has been consummated prior to or on the closing date of the Merger and (ii) all proceeds from the MS Asset Disposition are taken into account in the final Frequency Net Cash and there are no contingent payments, licenses, fees or royalties, equity securities or other non-cash assets or rights that may be payable by any acquiror of any of Frequency’s assets related to its multiple sclerosis program, or MS Assets, or otherwise as a result of the MS Asset Disposition after the closing of the Merger, Frequency and Computershare Trust Company, N.A. and Computershare Inc., collectively as the Rights Agent, as rights agent, will enter into a Contingent Value Rights Agreement, or the CVR Agreement, pursuant to which Frequency stockholders of record as of the close of business on the last business day prior to the day on which the Effective Time occurs will receive one CVR for each outstanding share of Frequency common stock held by such stockholder on such date. A copy of the form of CVR Agreement is included as Annex E to this proxy statement/prospectus.

The CVRs represent the contractual right to receive payments from Frequency upon the actual receipt by Frequency or its subsidiaries of cash consideration that is paid to or received by Frequency or its subsidiaries as a result of any MS Asset Disposition or revenue received from the license of its MS Assets, or as a result of Frequency’s equity ownership in any subsidiary that is established to hold such assets or the subsequent disposition of any such equity securities, or, collectively, the CVR Milestones, net of certain income taxes required to be paid in cash, transaction costs and certain other expenses.

The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no CVR Milestones occur, holders

 

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of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that any CVR Milestones will be achieved or that any holders of CVRs will receive payments with respect thereto.

The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in Frequency or the combined company or any of its subsidiaries. No interest will accrue on any amounts payable in respect of the CVRs.

For a more detailed description of the CVRs and the CVR Agreement, see “Agreements Related to the Merger—Contingent Value Rights Agreement” beginning on page 214 of this proxy statement/prospectus.

Q:    What are the material U.S. federal income tax consequences of the issuance of the CVRs and of the receipt of payments on the CVRs (if any) to holders of Frequency common stock?

A: The U.S. federal income tax treatment of the CVRs and payments (if any) thereon is uncertain. Except to the extent otherwise required pursuant to a change in applicable law after the date of the CVR Agreement, neither Frequency nor the Rights Agent will report the issuance of the CVRs as a current distribution and will report each payment (if any) on the CVRs as a distribution by Frequency for U.S. federal income tax purposes. This position may be challenged by the Internal Revenue Service, or the IRS, in which case holders of Frequency common stock could be required to recognize taxable income in respect of the issuance of the CVRs without a corresponding receipt of cash. See the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs to Holders of Frequency Common Stock” beginning on page 218 for a discussion of the material U.S. federal income tax consequences of the issuance of the CVRs and the receipt of payments (if any) thereon to holders of Frequency common stock.

Q:    What are the material U.S. federal income tax consequences of the Merger to holders of Korro Bio common stock?

A: Frequency and Korro Bio intend the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Assuming the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, subject to the limitations and qualifications described in the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 223, holders of Korro Bio common stock that exchange their Korro Bio stock for Frequency common stock in the Merger generally should not recognize gain or loss for U.S. federal income tax purposes on such exchange. However, if the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the Merger would be a taxable transaction to U.S. Holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences of the Merger”), but Non-U.S. Holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences of the Merger”) generally would not be subject to U.S. federal income tax on any gain realized in connection with the Merger.

The closing of the Merger is not conditioned upon the receipt of an opinion of counsel or a ruling from the IRS regarding the U.S. federal income tax treatment of the Merger, and no opinion of counsel or ruling from the IRS will be requested regarding such treatment. Accordingly, there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code or that a court will not sustain such a challenge by the IRS.

The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your tax advisor as to the tax consequences of the Merger in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws. For a more detailed discussion of the material U.S. federal income tax consequences of the Merger, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 223.

 

 

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Questions and Answers About the Frequency Annual Meeting and Voting

Q:    Who is entitled to vote at the Frequency Annual Meeting?

A: Holders of record of shares of Frequency common stock as of the close of business on     , 2023, or the Record Date, are entitled to notice of and to vote at the Frequency Annual Meeting and any continuation, postponement or adjournment thereof. At the close of business on the Record Date, there were                     shares of Frequency common stock issued and outstanding and entitled to vote. Each share of Frequency common stock is entitled to one vote on any matter presented to stockholders at the Frequency Annual Meeting.

Q:    How do I attend the Frequency Annual Meeting?

A: The Frequency Annual Meeting will be held on      , 2023 at      a.m.      Eastern Time via a live webcast. Prior registration at www.proxydocs.com/FREQ to attend the Frequency Annual Meeting is required by      a.m. Eastern Time on      ,     2023, or the Registration Deadline. You will need the control number that appears on your proxy card, or the Control Number, to register to attend the meeting. If your shares are held in “street name”, you should use your Control Number provided on your notice or voting instruction form, or otherwise vote through the bank, broker or other nominee. The meeting webcast will begin promptly at a.m. Eastern Time. We encourage you to access the meeting prior to the start time. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website by calling the technical support number provided by email one hour prior to the Frequency Annual Meeting. After completion of your registration by the Registration Deadline, further instructions, including a unique link to access the Frequency Annual Meeting, will be emailed to you. For any questions on how to register for the Frequency Annual Meeting, please contact our General Counsel, James P. Abely, at (781) 315-4623 or jabely@frequencytx.com.

Q:    What proposals will be voted on at the Frequency Annual Meeting in connection with the Merger?

A: Pursuant to the terms of the Merger Agreement, Proposal No. 1 to approve the issuance of shares of common stock of Frequency to stockholders of Korro Bio, pursuant to the terms of the Merger Agreement and the change of control resulting from the Merger must be approved by the requisite stockholder vote at the Frequency Annual Meeting in order for the Merger to close. Proposal No. 1 is referred to in this proxy statement/prospectus as the Merger Proposal. Approval of the Merger Proposal is a condition to completion of the Merger. Therefore, the Merger cannot be consummated without the approval of the Merger Proposal and Proposal No. 2.

In addition, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived for the Merger to close. For a more complete description of the closing conditions under the Merger Agreement, please see the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 207 of this proxy statement/prospectus.

Q:    What proposals are to be voted on at the Frequency Annual Meeting, other than in connection with the Merger?

A: At the Frequency Annual Meeting, the holders of Frequency common stock will also be asked to consider the following proposals:

 

   

Proposal No. 3 to elect David L. Lucchino as a Class I director to hold office until the annual meeting of stockholders to be held in 2026 and until his respective successor has been duly elected and qualified;

 

   

Proposal No. 4 to ratify, in a non-binding vote, the appointment of RSM US LLP as Frequency’s independent registered public accounting firm for the fiscal year ending December 31, 2023;

 

   

Proposal No. 5 to approve the 2023 Stock Option and Incentive Plan;

 

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Proposal No. 6 to approve the 2023 Employee Stock Purchase Plan; and

 

   

Proposal No. 7 to consider and vote upon an adjournment of the Frequency Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Merger Proposal and Proposal No. 2.

The approval of Proposal Nos. 3, 4, 5, 6 and 7. are not a condition to the Merger closing.

Q:    What are the material U.S. federal income tax consequences of the proposed Reverse Stock Split to U.S. Holders of Frequency common stock?

A: A U.S. Holder (as defined in the section titled “Matters Being Submitted to a Vote of Frequency Stockholders—Proposal No. 2: Approval of the Amendment to the Restated Certificate of Incorporation of Frequency Effecting the Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Reverse Stock Split to U.S. Holders of Frequency Common Stock” beginning on page 242) of Frequency common stock generally should not recognize gain or loss upon the proposed Reverse Stock Split, except to the extent such holder receives cash in lieu of a fractional share of Frequency common stock, and subject to the discussion in the section titled “Matters Being Submitted to a Vote of Frequency Stockholders—Proposal No. 2: Approval of the Amendment to the Restated Certificate of Incorporation of Frequency Effecting the Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Reverse Stock Split to U.S. Holders of Frequency Common Stock” beginning on page 242, which provides a more complete description of the material U.S. federal income tax consequences of the Reverse Stock Split to U.S. Holders of Frequency common stock, including possible alternative treatments.

Q:    As a Frequency stockholder, how does Frequency’s board of directors recommend that I vote?

A: After careful consideration, Frequency’s board of directors unanimously recommends that Frequency stockholders vote “FOR” the director nominee and “FOR” all of the proposals.

Q:    How do I vote my shares?

A: We recommend that stockholders vote by proxy even if they plan to attend the Frequency Annual Meeting and vote electronically. If you are a stockholder of record, there are three ways to vote by proxy:

 

   

by Telephone—You can vote by telephone by calling 1-866-390-5362 and following the instructions on the proxy card;

 

   

by Internet—You can vote over the Internet at www.proxypush.com/FREQ by following the instructions on the proxy card; or

 

   

by Mail—You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail.

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on             , 2023.

If your shares are held in “street name” by a bank, broker or other nominee, you will receive instructions on how to vote from the bank, broker or other nominee. You must follow the instructions of such bank, broker or other nominee in order for your shares to be voted.

 

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Q:    How can I vote my shares at the Frequency Annual Meeting?

A: If you have registered to attend the Frequency Annual Meeting, you may vote at the Frequency Annual Meeting through www.proxydocs.com/FREQ. To be admitted to the Frequency Annual Meeting and vote your shares, you must register by the Registration Deadline and provide the Control Number. Even if you plan to attend the Frequency Annual Meeting, we encourage you to vote in advance by Internet, telephone or mail so that your vote will be counted even if you later decide not to attend the Frequency Annual Meeting.

Q:    What is the difference between being a “record holder” and holding shares in “street name”?

A: A record holder (also called a “registered holder”) holds shares in his or her name. Shares held in “street name” means that shares are held in the name of a bank, broker or other nominee on the holder’s behalf.

Q:    What do I do if my shares are held in “street name”?

A: If your shares are held in a brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in “street name.” This proxy statement/prospectus has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote your shares by following their instructions for voting. Please refer to the information from your bank, broker or other nominee on how to submit your voting instructions. In addition, if you are a “street name” stockholder, you are invited to attend and vote your shares at the Frequency Annual Meeting live via webcast so long as you register to attend the Frequency Annual Meeting at www.proxydocs.com/FREQ by the Registration Deadline and have requested a legal proxy from your broker, bank, or nominee.

Q:    What are broker non-votes?

A: A “broker non-vote” occurs when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a proposal because (1) the broker has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker lacks the authority to vote the shares at their discretion.

Under current NYSE interpretations that govern broker non-votes, the Merger Proposal, Proposal No. 3 for the election of directors, Proposal No. 5 to approve the 2023 Stock Option and Incentive Plan, Proposal No. 6 to approve the 2023 Employee Stock Purchase Plan and Proposal No. 7 to adjourn the meeting to seek additional proxies are considered a non-discretionary matter, and a broker does not have the authority to vote uninstructed shares at its discretion on such proposals. Proposal No. 2 to amend Frequency’s Restated Certificate of Incorporation to effect a reverse stock split of Frequency common stock and Proposal No. 4 for the ratification of the appointment of RSM US LLP as Frequency’s independent registered public accounting firm are considered discretionary matters, and a broker is permitted to exercise its discretion to vote uninstructed shares on the proposal.

Q:    How many shares must be present to hold the Frequency Annual Meeting?

A: A quorum must be present at the Frequency Annual Meeting for any business to be conducted. The holders of a majority in voting power of Frequency capital stock issued and outstanding and entitled to vote, present by remote communication or represented by proxy, constitutes a quorum. If you sign and return your paper proxy card or authorize a proxy to vote electronically or telephonically, your shares will be counted to determine whether there is a quorum even if you abstain or fail to vote.

Broker non-votes will also be considered present for the purpose of determining whether there is a quorum for the Frequency Annual Meeting.

 

 

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Q:    What if a quorum is not present at the Frequency Annual Meeting?

A: If a quorum is not present or represented at the scheduled time of the Frequency Annual Meeting, (i) the chairperson of the Frequency Annual Meeting or (ii) a majority in voting power of the stockholders entitled to vote at the Frequency Annual Meeting, present by remote communication or represented by proxy, may adjourn the Frequency Annual Meeting until a quorum is present or represented.

Q:    How many votes are required to approve each proposal?

A: The table below summarizes the proposals that will be voted on, the vote required to approve each item and how votes are counted:

 

Proposal

 

Votes Required

 

Voting Options

 

Impact of
“Withhold”
or
“Abstain”
Votes

 

Broker
Discretionary
Voting

Allowed

Proposal No. 1: Approval of the Issuance of Common Stock in the Merger and the Change of Control Resulting from the Merger   The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

  None(1)   No(3)
Proposal No. 2: Approval of the Amendment to the Restated Certificate of Incorporation of Frequency Effecting the Reverse Stock Split   The affirmative vote of the holders of a majority of the outstanding shares of Frequency common stock entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

 

Have the same effect as votes “AGAINST” Proposal No. 2

  Yes(4)
Proposal No. 3: Election of David L. Lucchino as a Class I Director   The plurality of the votes cast by the holders of shares present in attendance or represented by proxy at the Frequency Annual Meeting and entitled to vote on the matter.  

“FOR ALL”

“WITHHOLD ALL”

“FOR ALL EXCEPT”

  None(2)   No(3)
Proposal No. 4: Ratification of Appointment of Independent Registered Public Accounting Firm   The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

  None(1)   Yes(4)
Proposal No. 5: Approval of the 2023 Stock Option and Incentive Plan   The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

  None(1)   No(3)

 

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Proposal No. 6: Approval of the 2023 Employee Stock Purchase Plan   The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

  None(1)   No(3)
Proposal No. 7: Approval of Adjournment of the Frequency Annual Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposals Nos. 1 and 2   The affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively at the Frequency Annual Meeting by the holders entitled to vote thereon.  

“FOR”

“AGAINST”

“ABSTAIN”

  None(1)   Yes(4)

 

(1)

A vote marked as an “Abstention” is not considered a vote cast and will, therefore, not affect the outcome of this proposal.

(2)

Votes that are “withheld” will have the same effect as an abstention and will not count as a vote “FOR” or “AGAINST” a director, because directors are elected by plurality voting.

(3)

As this proposal is not considered a discretionary matter, brokers lack authority to exercise their discretion to vote uninstructed shares on this proposal.

(4)

As this proposal is considered a discretionary matter, brokers are permitted to exercise their discretion to vote uninstructed shares on this proposal. We do not expect any broker non-votes in connection with this proposal.

The directors and certain executive officers of Frequency have entered into stockholder support agreements pursuant to which they have agreed to vote all shares of Frequency common stock owned by them as of the Record Date in favor of Proposal Nos. 1 and 2 and against any competing “acquisition proposal” (as defined in the support agreements). As of the Record Date, the directors and certain executive officers of Frequency owned or controlled     % of the outstanding shares of Frequency common stock entitled to vote at the Frequency Annual Meeting.

Q:    What happens if I do not vote or submit a proxy but do not provide voting instructions?

A: Failure to vote will have the same effect as a vote “AGAINST” Proposal No. 2 and no effect on Proposal Nos. 1, 3, 4, 5, 6 and 7. If you submit a proxy but do not provide any voting instructions, the persons named as proxies will vote in accordance with the recommendations of the Frequency board of directors. The Frequency board of director’s recommendations are set forth above, as well as with the description of each proposal in this proxy statement/prospectus.

Q:    Can I revoke or change my vote after I submit my proxy?

A: Yes. Whether you have voted by Internet, telephone or mail, if you are a stockholder of record, you may change your vote and revoke your proxy by:

 

   

sending a written statement to that effect to the attention of our Secretary at our corporate offices at 75 Hayden Avenue, Lexington, MA 02421, provided such statement is received no later than             , 2023;

 

   

voting again by Internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m. Eastern Time on             , 2023;

 

   

submitting a properly signed proxy card with a later date that is received no later than     , 2023; or

 

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attending the Frequency Annual Meeting, revoking your proxy and voting electronically, provided you have registered for the meeting by the Registration Deadline.

If you hold shares in “street name”, you may submit new voting instructions by contacting your bank, broker or other nominee. If you are a “street name” stockholder, you are invited to attend and vote your shares at the Frequency Annual Meeting live via webcast so long as you register to attend the Frequency Annual Meeting at www.proxydocs.com/FREQ by the Registration Deadline.

Your most recent proxy card or telephone or Internet proxy is the one that is counted. Your attendance at the Frequency Annual Meeting by itself will not revoke your proxy unless you give written notice of revocation to Frequency before your proxy is voted or you vote electronically at the Frequency Annual Meeting.

Q:    Who counts the votes?

A: A representative of Mediant Communications Inc. has been engaged as Frequency’s independent agent to tabulate stockholder votes.

Q:    Who is paying for this proxy solicitation?

A: Frequency will pay the cost of printing and filing of this proxy statement/prospectus and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Frequency common stock for the forwarding of solicitation materials to the beneficial owners of Frequency common stock. Frequency will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. Frequency has retained Morrow Sodali LLC, or Morrow Sodali, to assist it in soliciting proxies. Frequency will pay the fees of Morrow Sodali, which Frequency expects to be approximately $            , plus reimbursement of out-of-pocket expenses.

Q:     How can I find out the results of the voting at the Frequency Annual Meeting?

A: Preliminary voting results will be announced at the Frequency Annual Meeting. Final voting results will be published in a Current Report on Form 8-K, or Form 8-K, that Frequency will file with the SEC within four business days after the Frequency Annual Meeting. If final voting results are not available in time to file a Form 8-K within four business days after the Frequency Annual Meeting, Frequency intends to file a Form 8-K to publish preliminary results and, within four business days after the final results are known, file an additional Form 8-K to publish the final results.

Q:    What does it mean if I receive more than one set of proxy materials?

A: It means that your shares are held in more than one account at the transfer agent and/or with banks, brokers or other nominees in “street name” as described below. Please vote all of your shares. To ensure that all of your shares are voted, for each set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope.

 

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Q:    Who can help answer my questions?

A: If you are a Frequency stockholder and would like additional copies of this proxy statement/prospectus without charge or if you have questions about the Frequency Annual Meeting, including the procedures for voting your shares, you should contact:

Frequency Therapeutics, Inc.

75 Hayden Avenue, Suite 300

Lexington, Massachusetts 02421

Telephone: Tel: (781) 315-4600

Attn: James Abely

If your shares are held in street name, please contact the your bank, broker or other nominee.

To ensure timely delivery of documents prior to the Frequency Annual Meeting, any requests must be made no later than             , 2023.

 

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PROSPECTUS SUMMARY

This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the Merger and the proposals being considered at the Frequency Annual Meeting, you should read this entire proxy statement/prospectus carefully, including the Merger Agreement and the other annexes to which you are referred in this proxy statement/prospectus.

The Companies

Frequency Therapeutics, Inc.

75 Hayden Avenue, Suite 300

Lexington, MA 02421

Telephone: (781) 315-4600

Frequency’s business has focused on developing therapeutics that activate a person’s innate regenerative potential through its proprietary approach, called progenitor cell activation, or PCA. Frequency first applied its PCA approach for the restoration of the cochlea, with a focus on treating sensorineural hearing loss, or SNHL. Beginning in 2019, Frequency ran five clinical studies of FX-322 aimed at understanding safety as well as severities and etiologies that FX-322 might treat and the appropriate dose regime. In 2021, Frequency commenced its sixth study, a Phase 2b clinical trial of FX-322, or the FX-322-208 study, and introduced a second hearing program, FX-345, which Frequency believed might expand the opportunity to treat different types of SNHL. In February 2023, Frequency announced that the FX-322-208 study failed to achieve its primary endpoint of an improvement in speech perception. Frequency decided to discontinue the FX-322 development program and, given the similarities between the mechanisms of FX-322 and FX-345, decided to discontinue the FX-345 development program as well. Following this decision, Frequency focused its efforts on developing a product candidate designed to activate oligodendrocyte precursor cells with the goal of inducing remyelination and functional recovery for individuals living with multiple sclerosis, or the MS Program, and to explore strategic alternatives for the MS Program, including the sale of the MS Program. On July 14, 2023, Frequency entered into the Merger Agreement with Korro Bio and Merger Sub. Upon completion of the Merger, the business of Korro Bio will continue as the business of the combined company.

Frequency Merger Sub, Inc.

75 Hayden Avenue, Suite 300

Lexington, MA 02421

Telephone: (781) 315-4600

Attn: James Abely

Merger Sub is a direct, wholly owned subsidiary of Frequency and was formed solely for the purpose of carrying out the Merger.

Korro Bio, Inc.

One Kendall Square, Building 600-700, Suite 6-401

Cambridge, MA 02139

Korro Bio is a biopharmaceutical company with a mission to discover, develop and commercialize a new class of genetic medicines based on editing RNA, enabling treatment of both rare and highly prevalent diseases.

Korro Bio is generating a portfolio of differentiated programs that harness the body’s natural RNA editing

process to effect a precise yet transient single base edit. By editing RNA instead of DNA, Korro Bio is expanding the reach of genetic medicines by delivering additional precision and tunability, which has the potential for

 

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increased specificity and improved long-term tolerability. Using an oligonucleotide-based approach, Korro Bio expects to bring its life changing medicines to patients by leveraging its proprietary platform with precedented delivery modalities, manufacturing know-how, and established regulatory pathways of approved oligonucleotide drugs.

The Advances in Genetic Medicines

The advent of large-scale genome sequencing has progressively revealed causal genetic variation underlying several human diseases, both rare and highly prevalent. Genetic mutations, including single nucleotide variants, or SNVs, implicated in disease have been found to be diverse in nature and can affect the function of genes and its associated downstream biochemical pathways. These discoveries have driven tremendous advances in technologies designed to introduce specific yet permanent changes at the DNA level to treat diseases. While these DNA editing approaches offer great promise for the treatment of certain rare diseases, they present significant risks from potential permanent adverse “off-target” edits. Additionally, the complex nature of DNA editing drug products presents multiple challenges including lack of efficient delivery to target cells and scalable manufacturing, impeding their application to treat complex and highly prevalent diseases. These potential limitations have spurred exploration of alternative approaches to genetic medicine development, such as RNA editing.

Mammals and other lower species like cephalopods have an endogenous process of modifying single bases on RNA, referred to as RNA editing. RNA editing is a natural physiological process that occurs in cells, including a mechanism mediated by an enzyme called Adenosine Deaminase Acting on RNA, or ADAR. Korro Bio’s RNA editing approach involves co-opting this endogenous editing system via a proprietary engineered oligonucleotide to introduce precise edits to RNA. Korro Bio iteratively optimizes the editing efficiency of its product candidates using a combination of ADAR biology, chemistry and machine learning expertise. Using this approach, Korro Bio can edit the transcriptome with high efficiency and specificity. The application of such an approach can provide the ability to alter a SNV and affect biology in meaningful ways.

The Solution: Korro Bio’s OPERA Platform

Korro Bio has assembled the preeminent suite of technologies and capabilities to build its RNA editing platform, Oligonucleotide Promoted Editing of RNA, or OPERA.

 

 

LOGO

 

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OPERA relies on the following key components that enable Korro Bio to generate its differentiated RNA editing product candidates:

 

   

Deep understanding of ADAR biology, supported by extensive preclinical research using in vitro assays and proprietary mouse models as well as the fundamental work of our scientific advisors and founders to elucidate key insights and know-how of ADAR biology. This enables an understanding of ADAR activity in different species and disease states, allowing Korro Bio to develop novel product candidates.

 

   

Expertise in oligonucleotide chemistry, enabled by the ability to identify and incorporate chemical modifications to generate a fully modified synthetic oligonucleotide drug candidate. This increases the ability to bring drug-like properties, thereby increasing the editing and translational efficiency of our product candidates.

 

   

Machine learning optimization of oligonucleotides, driven by data science and computational capabilities for rapid design and iteration resulting in optimal RNA editing product candidates for each disease being pursued.

 

   

Fit-for-purpose delivery, made possible by tissue-specific delivery technologies that can enhance biodistribution, specificity, durability and editing efficiency of product candidates for each given disease

The versatility of RNA editing combined with Korro Bio’s OPERA platform broadens the therapeutic target space significantly. While Korro Bio’s approach can be used to repair pathogenic SNVs, it can also engineer de novo SNVs and change amino acids on proteins to endow them with desired properties while preserving their broader functional capabilities. Korro Bio has demonstrated that single RNA changes can disrupt protein-protein interactions, prevent protein aggregation, selectively modulate ion channels and activate kinases. These modification approaches can unlock validated target classes that have historically been difficult to drug, enabling Korro Bio to pursue a broad range of diseases traditionally out-of-scope for other genetic medicine approaches and current traditional drug modalities.

Korro Bio’s Pipeline

Each of Korro Bio’s programs demonstrate the versatility of the oligonucleotide-based ADAR-mediated RNA editing approach to bring additional precision and tunability to address a broad range of rare and highly prevalent diseases.

 

   

Repairing pathogenic variants: An SNV that is a G to A mutation on DNA, leading to an aberrant amino acid on a protein can be repaired using RNA editing. Such an approach is relevant when the patient population has a spectrum of disease manifestations from mild-to-severe.

 

   

Disrupting protein-protein interactions: A single SNV observed in human genetic association studies has the potential to inform how to transiently activate a protein pathway.

 

   

Preventing protein aggregation: In instances where protein aggregation can lead to cellular dysfunction or be harmful to the cell, engineering an SNV using learnings from biochemistry and human genetics to prevent the aggregation while maintaining the protein’s normal function.

 

   

Other target classes: There are multiple other target classes that can be addressed such as selectively modulating ion channels and activating kinases that have been traditionally hard to leverage for developing medicines.

 

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The pipeline chart below demonstrates the breadth of indications and applications enabled by Korro Bio’s

OPERA platform, with an initial focus on six potential programs that are all wholly-owned.

 

 

LOGO

 

1 

Subject to submission of regulatory filing and authorization to proceed

Korro Bio’s most advanced program is a product candidate for Alpha-1 Antitrypsin Deficiency, or AATD, where, using its proprietary RNA editing approach, it is repairing a pathogenic variant on RNA. Korro Bio’s product candidate has the potential to be disease-modifying and establish a new standard of care. AATD is an inherited genetic disorder that can cause severe progressive lung and liver disease due to a lack of normal alpha-1 antitrypsin protein, or A1AT, caused by SNV mutations in the SERPINA1 gene. There are an estimated 3.4 million individuals with deficiency allele combinations worldwide. Despite being minimally effective and not fully addressing the needs of many AATD patients, augmentation therapy currently represents ~$1.4 billion in annual sales worldwide. Korro Bio’s product candidate has the potential to elevate the standard of care and expand the number of patients on treatment and potential to be a leader with a large market opportunity worldwide.

Korro Bio’s AATD product candidate is a proprietary oligonucleotide that utilizes an established lipid nanoparticle, or LNP, based delivery system administered intravenously to transiently restore production of normal A1AT in liver hepatocytes. By correcting the pathogenic G to A SNV in the SERPINA1 gene, Korro Bio aims to bring individuals with the Z mutation to a phenotype where over 50% of RNA has been corrected to produce normal A1AT protein, preserving lung and liver function and preventing further damage.

Korro Bio has generated compelling preclinical data demonstrating proof of concept across multiple RNA editing oligonucleotides that have the potential to become the lead development candidate. These potential development candidates have each achieved targeted durability, high editing efficiency (greater than 50% editing of hepatocytes) and clinically meaningful expression of normal A1AT protein in an in vivo mouse model. Korro Bio has also shown that its product candidates have high translation of RNA editing efficiency from mice to non- human primates, or NHPs, demonstrating the potential applicability of its approach in humans.

Based on the totality of the preclinical data generated to date, Korro Bio intends to nominate its development candidate in the second half of 2023. The development candidate will then be tested in studies to enable a regulatory filing in the second half of 2024.

 

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Each of Korro Bio’s programs demonstrate the versatility of the ADAR-mediated RNA editing approach. Importantly, Korro Bio can not only address classes of diseases caused by deleterious effects of misfolded or misdirected proteins, but it can also potentially utilize genetics to identify highly prevalent diseases where therapeutic benefit can be generated through alteration of protein function or expression. Korro Bio will continue to selectively identify and pursue additional targets and indications based on a range of technical, clinical, and commercial factors, to build a robust and differentiated pipeline.

Korro Bio’s Team & Investors

Korro Bio is led by an experienced team with deep expertise in genetic medicines, development of oligonucleotide-based therapeutics, building novel therapeutic platforms, and bringing multiple therapeutics to market. In addition, Korro Bio’s executive leadership team has a successful track record of company building and leading biotech companies including Ram Aiyar, Ph.D., President and Chief Executive Officer, an experienced executive and company builder with 20 years of diverse industry experience including research, business and strategy; Steve Colletti, Ph.D., Chief Scientific Officer who brings nearly 30 years of drug discovery and development experience covering a broad range of therapeutic areas and modalities; and Vineet Agarwal, Chief Financial Officer, who brings more than 14 years of financial and industry experience as a biotech investment banker with J.P. Morgan Chase & Co. Korro Bio also has an accomplished scientific advisory board comprised of leading experts in the fields of ADAR biology, chemistry, translation medicine, and nucleic acid therapeutics.

Since inception, Korro Bio has raised $223.6 million in capital before this transaction. If this transaction is completed, Korro Bio will raise an additional $117.3 million from premier venture capital funds, healthcare- dedicated funds, major mutual funds and other leading investors that share its vision of creating transformative genetic medicines for diseases with high prevalence.

Korro Bio’s Strategy

Korro Bio’s mission is to discover, develop and commercialize a new class of RNA editing therapies capable of improving the lives of patients with rare and highly prevalent diseases. Korro Bio does this by applying its RNA editing platform, OPERA, which combines its unique expertise in ADAR biology, RNA chemistry, machine learning-driven oligonucleotide optimization and fit-for-purpose tissue-delivery. Korro Bio’s novel RNA editing product candidates harness one of the body’s natural RNA editing processes to make precise single base RNA edits. Korro Bio’s goal is to develop a portfolio of RNA editing product candidates with best-

in-class properties across a range of diseases by executing on the following key pillars of their strategy:

 

   

Develop a novel class of RNA editing therapies using a combination of learnings from genetics and approved medicines to mitigate clinical risk

 

   

Develop and rapidly advance into the clinic a differentiated disease-modifying therapy for patients with AATD

 

   

Deploy Korro Bio’s versatile OPERA platform to develop a portfolio of programs that modify proteins transiently to expand into highly prevalent diseases

 

   

Reinforce Korro Bio’s leadership position in RNA editing by continuing to optimize and enhance its OPERA platform

 

   

Maximize the potential of its OPERA platform through collaborations and strategic partnerships

 

   

Invest in human capital and encourage innovation to maintain its leadership position and advance the frontiers of genetic medicines

 

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The Merger (see page 153)

On July 14, 2023, Frequency entered into the Merger Agreement with Korro Bio and Merger Sub, pursuant to which Merger Sub will merge with and into Korro Bio, with Korro Bio surviving as a direct, wholly owned subsidiary of Frequency. In connection with the Merger, Frequency will change its corporate name to “Korro Bio, Inc.”

Immediately after the Merger, Frequency securityholders as of immediately prior to the Merger are expected to own approximately 8% of the outstanding shares of the combined company on a fully-diluted basis and former Korro Bio securityholders, including the pre-closing financing, or Pre-Closing Financing, investors are expected to own approximately 92% of the outstanding shares of the combined company on a fully-diluted basis, subject to certain assumptions, including, but not limited to, Frequency’s net cash as of closing being equal to $25 million.

At the Effective Time, each share of Korro Bio common stock will be converted into the right to receive a number of shares of Frequency common stock equal to the total number of shares of Frequency common stock to be issued in the Merger multiplied by the applicable Korro Bio stockholder’s percentage interest in Korro Bio as set forth in the Allocation Certificate required under the Merger Agreement. If any Korro Bio common stock outstanding immediately prior to the Effective Time is unvested or is subject to a repurchase option or a risk of forfeiture under any applicable agreement with Korro Bio, then the shares of Frequency common stock issued in exchange for such shares of Korro Bio common stock will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and such shares of Frequency common stock will be marked with appropriate legends.

In connection with the Merger, each option to purchase shares of Korro Bio common stock outstanding as of immediately prior to the Effective Time shall automatically be converted, at the Effective Time, into an option to acquire the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such option as of immediately prior to the Effective Time multiplied by the exchange ratio formula in the Merger Agreement and rounding that result down to the nearest whole number of shares.

Each share of Frequency common stock that is issued and outstanding at the Effective Time will remain issued and outstanding and such shares, subject to the Reverse Stock Split, will be unaffected by the Merger. Each outstanding Frequency Option will remain outstanding and such options, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan or 2014 Stock Incentive Plan, as applicable, to reflect the Reverse Stock Split and the issuance of the CVRs, will be unaffected by the Merger, provided that each Frequency Option that is outstanding and unvested will vest in full immediately prior to the Effective Time. Each restricted stock unit covering shares of Frequency common stock that is outstanding will remain outstanding and such restricted stock units, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan to reflect the Reverse Stock Split and issuance of the CVRs, will be unaffected by the Merger, provided that each restricted stock unit award that vests solely based on the holder’s continued employment or service will vest in full immediately prior to the Effective Time.

The Merger will be completed as promptly as practicable, but in no event later than two (2) business days after all of the conditions precedent set forth in the Merger Agreement have been satisfied or waived (other than those conditions that, by their nature, are to be satisfied at the closing of the Merger) or at such other time, date and place as Frequency and Korro Bio may mutually agree in writing, including the approval by the Frequency stockholders of the issuance of Frequency common stock in the Merger. The Merger is anticipated to close promptly after the Frequency Annual Meeting scheduled to be held on , 2023. However, Frequency and Korro Bio cannot predict the exact timing of the completion of the Merger because it is subject to the satisfaction or waiver of various conditions.

 

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For a more complete description of the Merger, please see the sections titled “The Merger” and “The Merger Agreement” in this proxy statement/prospectus.

Reasons for the Merger (see pages 165 and 169)

Frequency Reasons for the Merger

In the course of evaluating the Merger, the Frequency board of directors held numerous meetings and consulted with Frequency’s senior management, legal counsel and financial advisor, and, in reaching its decision to approve the Merger, the Frequency board of directors considered a wide variety of factors, including, among others, the following material factors (which factors are not necessarily presented in any order of relative importance):

 

   

the review of the business, financial position, and prospects of Frequency on a standalone basis, noting that Frequency’s assets and liabilities are comprised primarily of cash (net of liabilities) and the assets and rights relating to Frequency’s MS Program, and determination that Frequency could not reasonably be expected to fund its MS Program on a standalone basis without substantial additional investment;

 

   

the current financial market conditions and historical market prices, volatility and trading information with respect to Frequency Common Stock and that Frequency is not expected to have any continuing business operations on a standalone basis, assuming divestiture of the MS Program, other than those incidental to Frequency’s status as a publicly traded company;

 

   

the review of the business, strategy, financial position and prospects of Korro Bio and the opportunity for Korro Bio’s RNA editing technology to generate substantial long-term value for the combined company and its stockholders;

 

   

the Merger represents the best transaction alternative reasonably available to Frequency and its stockholders;

 

   

if applicable, the related CVR provides the opportunity for Frequency’s stockholders to receive the value realized from any divestiture of the MS Program in connection with the proposed transaction; and

 

   

the Merger would provide the existing Frequency stockholders an opportunity to participate in the potential growth and value creation of the combined company by virtue of their continued ownership of Frequency Common Stock.

Korro Bio Reasons for the Merger

In the course of reaching its decision to approve the Merger, the Korro Bio board of directors held numerous meetings, consulted with Korro Bio’s senior management, its financial advisors and legal counsel, and considered a wide variety of factors, including, among others, the following material factors (which factors are not necessarily presented in any order of relative importance):

 

   

the Merger will potentially expand the access to capital and the range of investors available as a public company to support the clinical development of Korro Bio’s pipeline, compared to the investors Korro Bio could otherwise gain access to if it continued to operate as a privately-held company;

 

   

the potential benefits from increased public market awareness of Korro and its pipeline;

 

   

the historical and current information concerning Korro Bio’s business, including its financial performance and condition, operations, management and pre-clinical data;

 

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the expected financial position, operations, management structure and operating plans of the combined company (including the ability to support the combined company’s current and planned pre-clinical and clinical trials), including the impact of the CVR agreement; and

 

   

the terms and conditions of the Merger Agreement.

Opinion of Frequency’s Financial Advisor (see page 171)

Frequency has engaged Cowen and Company, LLC, or TD Cowen, as Frequency’s financial advisor in connection with the Merger. In connection with this engagement, TD Cowen delivered a written opinion, dated July 13, 2023, to the Frequency board of directors as to the fairness, from a financial point of view and as of the date of such opinion, to Frequency of the Korro Bio Equity Value provided for pursuant to the Merger Agreement. For purposes of TD Cowen’s financial analyses and opinion, the term “Korro Bio Equity Value” refers to the equity value of $325,639,194.78 ascribed to Korro Bio pursuant to the Merger Agreement. The full text of TD Cowen’s written opinion, dated July 13, 2023, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. The summary of TD Cowen’s written opinion set forth herein is qualified in its entirety by reference to the full text of such opinion. TD Cowen’s analyses and opinion were prepared for and addressed to the Frequency board of directors and were directed only to the fairness, from a financial point of view, to Frequency of the Korro Bio Equity Value. TD Cowen’s opinion did not in any manner address Frequency’s underlying business decision to effect the Merger or related transactions or the relative merits of the Merger or related transactions as compared to other business strategies or transactions that might be available to Frequency. The Korro Bio Equity Value was determined through negotiations between Frequency and Korro Bio and TD Cowen’s opinion does not constitute a recommendation to any securityholder or any other person as to how to vote or act with respect to the Merger, any related transactions or otherwise.

Interests of Certain Directors and Executive Officers of Frequency and Korro Bio (see pages 178 and 183)

Interests of Frequency Directors and Executive Officers in the Merger

In considering the recommendation of the Frequency board of directors with respect to issuing shares of Frequency common stock in the Merger and the other matters to be acted upon by the Frequency stockholders at the Frequency Annual Meeting, Frequency stockholders should be aware that the directors and executive officers of Frequency have interests in the Merger that may be different from, or in addition to, the interests of Frequency stockholders generally.

Frequency is party to a second amended and restated executive employment agreement with David L. Lucchino. Under the employment agreement, in the event Mr. Lucchino is terminated by Frequency without “cause”, or if he resigns for “good reason”, on or within 12 months following a “change in control” (as such terms are defined his employment agreement), he will be entitled to (i) base salary continuation for a period of 18 months, (ii) 100% of his target annual bonus, and (iii) all equity awards held by Mr. Lucchino will accelerate and vest (including performance vesting awards, which will vest at target level of achievement). To the extent Mr. Lucchino is covered under Frequency’s health plan at the time of such termination or resignation, Frequency is required to pay the employer’s portion of Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, premium payments for Mr. Lucchino and his covered dependents through the severance period. The severance payments and benefits provided under the employment agreement are subject to Mr. Lucchino’s execution and non-revocation of a release of claims in favor of Frequency and continued compliance with certain restrictive covenants.

Frequency is party to an amended and restated employment agreement with Dr. Christopher R. Loose. In the event Dr. Loose is terminated by Frequency without “cause”, or if he resigns for “good reason”, within 12 months following a “change in control” (as such terms are defined his employment agreement), he will be

 

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entitled to (i) base salary continuation for a period of 12 months, (ii) an amount equal to 100% of his target annual bonus, and (iii) his unvested equity incentive awards will vest immediately prior to such termination or resignation. To the extent Dr. Loose is covered under Frequency’s health plan at the time of such termination or resignation, Frequency is required to pay the employer’s portion of COBRA premium payments for Dr. Loose and his covered dependents through the severance period. The severance payments and benefits provided under the employment agreement are subject to Dr. Loose’s execution and non-revocation of a release of claims in favor of Frequency and continued compliance with certain restrictive covenants.

Mr. Lucchino is currently a director of Frequency and will continue as a director of the combined company after the Effective Time. Following the Effective Time, it is expected that the combined company will provide compensation to non-employee directors pursuant to a new non-employee director compensation policy that is expected to be adopted post-closing.

As of June 30, 2023, Frequency’s non-employee directors and executive officers beneficially owned, in the aggregate, approximately 2.21% of the shares of Frequency common stock, excluding any shares of Frequency common stock issuable upon exercise or settlement of stock options, restricted stock units or performance stock units held by such individuals.

The Frequency board of directors was aware of and considered these potential conflicts of interest, among other matters, in reaching its decision to approve the Merger Agreement and the Merger, and to recommend that the Frequency stockholders approve the proposals to be presented to the stockholders for consideration at the Frequency Annual Meeting as contemplated in this proxy statement/prospectus. For more information, please see the section titled “The Merger—Interests of Frequency Directors and Executive Officers in the Merger” beginning on page 178 of this proxy statement/prospectus.

Interests of Korro Bio Directors and Executive Officers in the Merger

In considering the recommendation of the Korro Bio board of directors with respect to approving the Merger, Korro Bio stockholders should be aware that certain members of Korro Bio’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of Korro Bio stockholders generally.

Dr. Aiyar,                 ,                 and                 are currently directors of Korro Bio and are expected to become directors of the combined company, and all of Korro Bio’s executive officers are expected to become the executive officers of the combined company, upon the closing of the merger, in connection with which the executive officers may enter into new employment agreements to reflect their status as executive officers of a publicly-traded company. Following completion of the Merger, it is expected that the combined company will provide compensation to non-employee directors pursuant to a new non-employee director compensation policy that is expected to be adopted post-closing.

As of July 24, 2023, Korro Bio’s then-current non-employee directors and executive officers beneficially owned, in the aggregate, approximately 3.85% of the shares of Korro Bio capital stock, excluding any Korro Bio shares issuable upon exercise of Korro Bio stock options held by such individuals. Such shares of Korro Bio capital stock will be converted into shares of Frequency common stock at the Effective Time.

The Korro Bio board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Merger Agreement and the Merger, and to recommend that the Korro Bio stockholders approve the Merger as contemplated by this proxy statement/prospectus. For more information, please see the section titled “The Merger—Interests of Korro Bio Directors and Executive Officers in the Merger” beginning on page 183 of this proxy statement/prospectus.

 

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Overview of the Merger Agreement and Agreements Related to the Merger Agreement

Merger Consideration (see page 190)

At the Effective Time (after giving effect to the conversion of Korro Bio preferred stock as described below), upon the terms and subject to the conditions set forth in the Merger Agreement, each share of Korro Bio common stock outstanding immediately prior to the Effective Time (excluding Korro Bio common stock issued in the pre-closing financing) will be converted solely into the right to receive a number of shares of Frequency common stock equal to the amount of Korro Merger Shares described in the section titled “The Merger Agreement—Korro Merger Shares” beginning on page 192 in this proxy statement/prospectus multiplied by the applicable stockholder’s percentage interest in Korro Bio. If any Korro Bio common stock outstanding immediately prior to the Effective Time is unvested or is subject to a repurchase option or a risk of forfeiture under any applicable agreement with Korro Bio, then the shares of Frequency common stock issued in exchange for such shares of Korro Bio common stock will to the same extent be unvested and subject to the same repurchase option or risk of forfeiture, and such shares of Frequency common stock will be marked with appropriate legends.

At the Effective Time, by virtue of the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement, the Korro Bio common stock issued in the Pre-Closing Financing will be converted solely into the right to receive a number of shares of Frequency common stock equal to the amount of Pre-Closing Financing Merger Shares described in the section titled “The Merger Agreement—Pre-Closing Financing Merger Shares” beginning on page 192 in this proxy statement/prospectus multiplied by the percentage of the proceeds of the Pre-Closing Financing represented by the applicable stockholder’s investment in the Pre-Closing Financing.

At the Effective Time, by virtue of the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement, each share of common stock, $0.01 par value per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, $0.001 par value per share, of the combined company.

All Korro Bio preferred stock will be converted into Korro Bio common stock as of immediately prior to the Effective Time in accordance with, and pursuant to the terms and conditions of, the organizational documents of Korro Bio.

Treatment of Korro Bio Options (see page 194)

Each option to purchase shares of Korro Bio common stock outstanding as of immediately prior to the Effective Time, or Korro Bio Options, shall automatically be converted, at the Effective Time, into an option to acquire, on the same terms and conditions (including the same vesting and exercisability terms and conditions), the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such option as of immediately prior to the Effective Time multiplied by the exchange ratio formula in the Merger Agreement and rounding that result down to the nearest whole number of shares.

Treatment of Korro Bio Warrants (see page 194)

Each warrant issued by Korro Bio outstanding immediately prior to the Effective Time will automatically be converted, at the Effective Time, into a warrant to acquire, on the same terms and conditions (including, without limitation, the exercisability terms and conditions) as were applicable under the warrant issued by Korro Bio to SVB as described in Note 8 of Korro Bio’s audited consolidated financial statements included elsewhere in this proxy statement/prospectus, the number of shares of Frequency common stock equal to the number of shares of Korro Bio common stock subject to such warrant as of immediately prior to the Effective Time determined by the Warrant Exchange Ratio in the Merger Agreement and rounding that result down to the nearest whole number of shares.

 

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Treatment of Frequency Common Stock, Frequency Options, Frequency Restricted Stock Units and Frequency Performance Stock Units (see pages 195)

Each outstanding Frequency Option will remain outstanding and such options, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan or 2014 Stock Incentive Plan, as applicable, to reflect the Reverse Stock Split and the issuance of the CVRs, will be unaffected by the Merger, provided that each such Frequency Option that is unvested will vest in full immediately prior to the Effective Time. Each restricted stock unit award covering shares of Frequency common stock that is outstanding will remain outstanding and such restricted stock unit awards, subject to proportionate adjustment in accordance with the terms of Frequency’s 2019 Incentive Award Plan to reflect the Reverse Stock Split and issuance of the CVRs, will be unaffected by the Merger, provided that each restricted stock unit award that vests solely based on the holder’s continued employment or service will vest in full immediately prior to the Effective Time.

Conditions to the Completion of the Merger (see page 207)

To complete the Merger, Frequency stockholders must approve Proposal No. 1 and Korro Bio must adopt the Merger Agreement and approve the Merger and the additional transactions contemplated thereby. Additionally, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.

Non-Solicitation (see page 201)

Under the Merger Agreement, each of Frequency and Korro Bio have agreed that neither it nor any of its subsidiaries, directors, officers, employees, agents, attorneys, accountants, investment bankers, advisors or representatives, will directly or indirectly:

 

   

solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry (as each term is defined in the section of this proxy statement/prospectus entitled “The Merger Agreement—Non-Solicitation”) or take any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry;

 

   

furnish any non-public information regarding such party to any person (other than Korro Bio or Frequency) in connection with or in response to an Acquisition Proposal or Acquisition Inquiry;

 

   

engage in discussions or negotiations with any person with respect to any Acquisition Proposal or Acquisition Inquiry;

 

   

approve, endorse or recommend any Acquisition Proposal;

 

   

execute or enter into any letter of intent or any contract contemplating or otherwise relating to any Acquisition Transaction (as defined in the section of this proxy statement/prospectus entitled “The Merger Agreement—Non-Solicitation”) or

 

   

publicly propose to do any of the foregoing.

The Merger Agreement affords Frequency certain fiduciary exceptions to the non-solicitation provision to allow the Frequency Board to consider a Superior Offer (as defined in the section of this proxy statement/prospectus entitled “The Merger Agreement—Non-Solicitation”) under certain circumstances.

Board Recommendation Change (see page 203)

Frequency and Korro Bio agreed (and, with respect to Frequency, subject to specified exceptions described in the Merger Agreement and in the section of this proxy statement/prospectus entitled “The Merger Agreement—Board Recommendation Change”beginning on page 203) that their boards of directors may not take any of the following actions:

 

   

withhold, amend, withdraw or modify (or publicly propose to withhold, amend, withdraw or modify) the recommendation of their boards of directors in a manner adverse to the other party;

 

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resolve, or have any committee of their boards of directors resolve, to withdraw or modify their recommendation in a manner adverse to the other party; or

 

   

adopt, approve or recommend (or publicly propose to adopt, approve or recommend) any Acquisition Proposal.

Termination of the Merger Agreement (see page 209)

Either Frequency or Korro Bio may terminate the Merger Agreement under certain circumstances, which would prevent the Merger from being consummated.

Termination Fee (see page 209)

If the Merger Agreement is terminated under certain circumstances, either Frequency could be required to pay Korro Bio a termination fee of $1.5 million, or Korro Bio could be required to pay Frequency a termination fee of $4 million.

Support Agreements (see page 212)

Certain Korro Bio stockholders are party to a support agreement with Frequency pursuant to which, among other things, each such stockholder has agreed, solely in his, her or its capacity as a Korro Bio stockholder, to vote all of his, her or its shares of Korro Bio capital stock in favor of (i) the adoption of the Merger Agreement and approval of the Merger, (ii) the approval of the related transactions contemplated by the Merger Agreement, (iii) the conversion of each share of Korro Bio preferred stock into shares of Korro Bio common stock immediately prior to and contingent upon the closing and (iv) the approval of certain additional proposals in connection with the Merger that the Korro Bio board of directors may recommend. These Korro Bio stockholders also agreed to vote against (i) any competing Acquisition Proposal (as defined in the section of this proxy statement/prospectus entitled “The Merger Agreement—Non-Solicitation” beginning on page 201) and (ii) any action, proposal, agreement, transaction or proposed transaction that would reasonably be expected to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement, subject to certain specified exceptions.

As of July 14, 2023, the Korro Bio stockholders that are party to a support agreement with Frequency owned an aggregate of 4,691,654 shares of Korro Bio common stock and 97,637,593 shares of Korro Bio preferred stock, representing approximately 98.0% of the outstanding shares of Korro Bio capital stock on an as converted to common stock basis. These stockholders include executive officers and directors of Korro Bio, as well as certain other stockholders owning a significant portion of the outstanding shares of Korro Bio capital stock. Following the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus is a part and pursuant to the Merger Agreement, Korro Bio stockholders holding a sufficient number of shares of Korro Bio capital stock to adopt the Merger Agreement and approve the Merger and related transactions will execute written consents providing for such adoption and approval.

Certain Frequency stockholders have entered into support agreements with Korro Bio pursuant to which, among other things, each such stockholder has agreed, solely in his, her or its capacity as a Frequency stockholder, to vote all of his, her or its shares of Frequency common stock in favor of (i) the approval of the Merger Agreement, (ii) the transactions contemplated thereby, including the issuance of Frequency common stock to Korro Bio stockholders, (iii) an amendment to the amended and restated certificate of incorporation of Frequency to effect the Reverse Stock Split, (iv) any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the approval of the Merger Agreement and the transactions contemplated therein and (v) the approval of certain additional proposals in connection with the Merger that the Frequency board of directors

 

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may recommend. These Frequency stockholders also agreed to vote against (i) any competing Acquisition Proposal with respect to Frequency (as defined in the section of this proxy statement/prospectus entitled “The Merger Agreement—Non-Solicitation” beginning on page 201) and (ii) any action, proposal, agreement, transaction or proposed transaction that would reasonably be expected to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement, subject to certain specified exceptions.

As of July 14, 2023, the Frequency stockholders that are party to a support agreement owned approximately 3.5% of the outstanding shares of Frequency common stock. These stockholders include certain executive officers and directors of Frequency.

Lock-Up Agreements (see page 213)

Certain of Korro Bio’s executive officers, directors and stockholders have entered into lock-up agreements, pursuant to which such parties have agreed not to, except in limited circumstances, offer, pledge, sell, contract to sell, sell any option to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any shares of Frequency’s common stock, including, as applicable, shares received in the Merger and shares issuable upon exercise of options, warrants or convertible securities, until 180 days after the Effective Time.

The Korro Bio stockholders who have executed lock-up agreements as of July 14, 2023, owned in the aggregate, approximately 98% of the shares of Korro Bio’s outstanding capital stock.

Certain of Frequency’s executive officers, directors and stockholders have entered into lock-up agreements, pursuant to which such stockholders have agreed not to, except in limited circumstances, offer, pledge, sell, contract to sell, sell any option to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any Frequency securities or shares of Frequency common stock, including, as applicable, shares issuable upon exercise of certain options, warrants or convertible securities, until 180 days after the Effective Time.

Frequency stockholders who have executed lock-up agreements as of July 14, 2023 owned, in the aggregate, approximately 3.5% of the outstanding shares of Frequency common stock.

Contingent Value Rights Agreement (see page 214)

At or prior to the Effective Time, Frequency and Computershare Trust Company, N.A. and Computershare Inc., collectively as Rights Agent, will enter into the CVR Agreement. As provided in the Merger Agreement, unless (i) the MS Asset Disposition has been consummated prior to or on the closing date of the Merger and (ii) all proceeds from the MS Asset Disposition are taken into account in the final Frequency Net Cash and there are no contingent payments, licenses, fees or royalties, equity securities or other non-cash assets or rights that may be payable by any acquiror of any MS Assets or otherwise as a result of the MS Asset Disposition after the closing of the Merger, Frequency shall declare a distribution to its common stockholders of record the right to receive one CVR for each outstanding share of Frequency common stock held by such stockholder as of the record date, each representing the non-transferable contractual right to receive certain contingent payments from Frequency upon the occurrence of certain events within agreed time periods. The record date for such distribution will be the close of business on the last business day prior to the day on which the Effective Time occurs and the payment date for which shall be three business days after the Effective Time; provided that the payment of such distribution may be conditioned upon the occurrence of the Effective Time.

Pursuant to the CVR Agreement, each CVR holder is entitled to certain contingent cash payments, which are payable by Frequency to the Rights Agent for subsequent distribution to the CVR holders (such payments, the

 

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CVR Payments), of the CVR Proceeds, which will equal the net amount (calculated in accordance with GAAP consistently applied) of the following proceeds actually received by Frequency or its subsidiaries, collectively, the Gross Proceeds, after the end of each fiscal quarter of Frequency following the first anniversary of the closing: cash consideration that is paid to or received by Frequency or any of its subsidiaries during the period beginning immediately following the Effective Time and ending on the tenth anniversary of the closing date in respect of any MS Asset Disposition, or resulting from the ownership of equity securities in any subsidiary established by Frequency during the period beginning on the execution date of the Merger Agreement and ending on the one-year anniversary of the closing date, or the Disposition Period, or the subsequent disposition of any such equity securities (regardless of whether such disposition occurs during the Disposition Period). Such proceeds are subject to certain permitted deductions, including for certain income taxes required to be paid in cash, certain reasonable and documented out-of-pocket costs and expenses incurred by Frequency or its subsidiaries, losses incurred or reasonably expected to be incurred by Frequency or its subsidiaries due to a third party proceeding in connection with a disposition and certain wind-down costs.

If any Gross Proceeds result from the MS Assets or from the ownership of equity securities in any subsidiary established by Frequency during the Disposition Period or the subsequent disposition of any such equity securities, then CVR holders will receive 100% of such CVR Proceeds, as a CVR Payment, regardless of when such disposition is consummated.

The CVRs may not be transferred, pledged, hypothecated, encumbered, assigned or otherwise disposed of (whether by sale, merger, consolidation, liquidation, dissolution, dividend, distribution or otherwise), in whole or in part, subject to certain limited exceptions specified in the CVR Agreement.

The CVRs will not be evidenced by a certificate or any other instrument. The CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable in respect of the CVRs. The CVRs will not represent any equity or ownership interest in Frequency, any constituent company to the Merger, or any of its subsidiaries.

Management Following the Merger (see page 357)

Effective as of the closing of the Merger, the combined company’s executive officers are expected to be members of the Korro Bio executive management team prior to the Merger, including:

 

Name

 

Title

Ram Aiyar, Ph.D.

  President and Chief Executive Officer

Vineet Agarwal

  Chief Financial Officer

Steve Colletti

  Chief Scientific Officer

Todd Chappell

  Senior Vice President, Strategy and Portfolio Planning

Shelby Walker

  General Counsel

Material U.S. Federal Income Tax Consequences of the Merger (see page 223)

Frequency and Korro Bio intend the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, subject to the limitations and qualifications described in the section titled “Material U.S. Federal Income Tax Consequences of the Merger,” holders of Korro Bio common stock that exchange their Korro Bio common stock for Frequency common stock in the Merger generally should not recognize gain or loss for U.S. federal income tax purposes on such exchange. However, if the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the Merger would be a taxable transaction to U.S. Holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences of the Merger”),

 

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but Non-U.S. Holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences of the Merger”) generally would not be subject to U.S. federal income tax on any gain realized in connection with the Merger. The closing of the Merger is not conditioned upon the receipt of an opinion of counsel or a ruling from the IRS regarding the U.S. federal income tax treatment of the Merger, and no opinion of counsel or ruling from the IRS will be requested regarding such treatment. Accordingly, there can be no assurance that the IRS will not challenge the qualification of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code or that a court will not sustain such a challenge by the IRS.

The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your tax advisor as to the tax consequences of the Merger in your particular circumstances, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws. For a more detailed discussion of the material U.S. federal income tax consequences of the Merger, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 223.

Nasdaq Stock Market Listing (see page 186)

Frequency intends to file an initial listing application for the combined company common stock with the Nasdaq Stock Market LLC. If such application is accepted, Frequency anticipates that the common stock of the combined company will be listed on Nasdaq following the closing of the Merger under the trading symbol “KRRO.”

Anticipated Accounting Treatment (see page 186)

The Merger is expected to be treated by Frequency as a reverse merger and will be accounted for as a reverse recapitalization in accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP. For accounting purposes, Korro Bio is considered to be acquiring the assets and liabilities of Frequency in this transaction based on the terms of the Merger Agreement and other factors, including: (i) Korro Bio’s stockholders will own a substantial majority of the voting rights of the combined company; (ii) Korro Bio will designate a majority (4 of 7) of the initial members of the board of directors of the combined company; (iii) Korro Bio’s executive management team will become the management of the combined company; and (iv) the combined company will be named Korro Bio, Inc. and be headquartered in Cambridge, MA. See “Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere in this proxy statement/prospectus for additional information.

Appraisal Rights and Dissenters’ Rights (see page 186)

Stockholders of Frequency common stock are not entitled to appraisal rights in connection with the Merger under Delaware law. Stockholders of Korro Bio common stock are entitled to appraisal rights in connection with the Merger under Delaware law.

Comparison of Stockholder Rights (see page 408)

Both Frequency and Korro Bio are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. If the Merger is completed, Korro Bio stockholders will become Frequency stockholders, and their rights will be governed by the DGCL, the Amended and Restated Bylaws of Frequency and the Restated Certificate of Incorporation of Frequency, as may be amended by Proposal No. 2 if approved by the Frequency stockholders at the Frequency Annual Meeting. The rights of Frequency stockholders contained in the Restated Certificate of Incorporation, as amended, and Amended and Restated Bylaws of Frequency differ from the rights of Korro Bio stockholders under the Amended and Restated Certificate of Incorporation and Bylaws of Korro Bio, as more fully described under the section titled “Comparison of Rights of Holders of Frequency Capital Stock and Korro Bio Capital Stock” beginning on page 408 of this proxy statement/prospectus.

 

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Risk Factors (see page 32)

Both Frequency and Korro Bio are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective securityholders, including the following risks:

Risks Related to Merger

 

   

The exchange ratio will not be adjusted based on the market price of Frequency common stock so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

 

   

Failure to complete the Merger may result in Frequency or Korro Bio paying a termination fee to the other party, which could harm the Frequency common stock price and the future business and operations of each company.

 

   

Some Frequency and Korro Bio executive officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.

 

   

Frequency stockholders and Korro Bio stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

 

   

If the conditions to the Merger are not satisfied or waived, the Merger may not occur.

 

   

If the Merger is not completed, Frequency’s stock price may decline significantly.

Risks Related to Frequency

 

   

Failure to complete, or delays in completing, the proposed merger with Korro Bio could expose Frequency to other operational and financial risks.

 

   

Frequency stockholders may not receive any payment on the CVRs, and the CVRs may expire valueless.

 

   

Frequency’s stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

 

   

Frequency has a limited operating history, no history of commercializing products, has incurred significant losses since inception and anticipates continuing to incur net losses for the foreseeable future.

 

   

If the Merger is not consummated and should Frequency resume development of product candidates, it will require additional capital to fund its operations.

 

   

If Frequency fails to obtain necessary financing, it will not be able to complete the development and commercialization of such product candidates.

 

   

Frequency’s failure to meet Nasdaq’s continued listing requirements could result in a delisting of its

   

common stock.

Risks Related to Korro Bio

 

   

Korro Bio has incurred significant losses since inception. Korro Bio expects to incur losses for the foreseeable future and may never achieve or maintain profitability.

 

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There is substantial doubt about Korro Bio’s ability to continue as a going concern.

 

   

Korro Bio has never generated revenue from product sales and may never become profitable.

 

   

Korro Bio will need substantial additional funding. If Korro Bio is unable to raise capital when needed, it will be forced to delay, reduce, eliminate or prioritize among its research and development programs or future commercialization efforts.

 

   

The gene editing field and RNA editing in particular is relatively new and is evolving rapidly. Korro Bio is very early in its development efforts and may not be successful in identifying and developing product candidates. It will be many years before Korro Bio or its collaborators commercialize a product candidate or generate any revenues, if ever. Additionally, other gene editing technologies may be discovered that provide significant advantages over RNA editing, which could materially harm its business.

 

   

RNA editing is a novel technology that is not yet clinically validated for human therapeutic use. The approaches Korro Bio takes to discover and develop novel therapeutics are unproven and may never lead to marketable products.

 

   

Korro Bio is very early in its development efforts, and its preclinical studies and clinical trials may not be successful. If Korro Bio is unable to commercialize its product candidates or experiences significant delays in doing so, its business will be materially harmed.

 

   

Any product candidates Korro Bio develops may fail in preclinical or clinical development or be delayed to a point where they do not become commercially viable.

 

   

If Korro Bio is not able to obtain or protect intellectual property rights related to any of its product candidates, development and commercialization of its product candidates may be adversely affected.

Risks Related to the Combined Company

 

   

The Merger may be completed even though material adverse effects may result from the announcement of the Merger, industry-wide changes and other causes.

 

   

Expectations regarding the combined company’s cash runway and ability to reach data inflection points are based on numerous assumptions that may prove to be untrue.

 

   

The combined company may be required to raise capital sooner than anticipated and its exposure to certain contingent liabilities and contractual obligations may be greater than anticipated.

 

   

The market price of the combined company’s common stock following the Merger may decline as a result of the Merger.

 

   

The market price of the combined company’s common stock is expected to be volatile, the market price of the common stock may drop following the merger and an active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all;

 

   

The combined company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all; If the assets subject to the CVR Agreement are not disposed of in a timely manner, the combined company may have to incur time and resources to wind down or dispose of such assets;

 

   

Provisions in the combined company’s charter documents and under Delaware law could make an acquisition of the combined company more difficult and may discourage any takeover attempts which stockholders may consider favorable, and may lead to entrenchment of management;

 

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After completion of the merger, the combined company’s executive officers, directors and principal stockholders will have the ability to control or significantly influence all matters submitted to the combined company’s stockholders for approval; and

 

   

The combined company will have broad discretion in the use of the cash and cash equivalents of the combined company and the proceeds from the Dianthus pre-closing financing and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

These risks and other risks are discussed in greater detail under the section titled “Risk Factors” beginning on page 32 of this proxy statement/prospectus. Frequency and Korro Bio both encourage you to read and consider all of these risks carefully.

 

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MARKET PRICE AND DIVIDEND INFORMATION

The closing price of Frequency common stock on July 13, 2023, the last trading day prior to the public announcement of the Merger, was $0.40 per share, as reported on Nasdaq. The closing price of the Frequency common stock on July 26, 2023, the last practicable date before the date of this proxy statement/prospectus, as reported on Nasdaq, was $0.54 per share.

Because the market price of Frequency common stock is subject to fluctuation, the market value of the shares of Frequency common stock that Korro Bio stockholders will be entitled to receive in the Merger may increase or decrease.

Korro Bio is a private company, and its shares of common stock and preferred stock are not publicly traded.

Assuming approval of Proposal Nos. 1 and 2 and successful application for initial listing with Nasdaq, following the consummation of the Merger, the Frequency common stock will trade on Nasdaq under Frequency’s new name, “Korro Bio, Inc.,” and new trading symbol “KRRO.”

As of             , 2023, the Record Date for the Annual meeting, there were approximately                      registered holders of record of the Frequency common stock. As of             , 2023, Korro Bio had                      holders of record of Korro Bio common stock and                      holders of record of Korro Bio preferred stock. For detailed information regarding the beneficial ownership of certain Frequency and Korro Bio stockholders, see the sections of this proxy statement/prospectus titled “Principal Stockholders of Frequency” and “Principal Stockholders of Korro Bio” beginning on pages 418 and 420, respectively.

Dividends

Frequency has never declared or paid cash dividends on its capital stock. Korro Bio has never paid or declared any cash dividends on its capital stock. Korro Bio intends to retain all available funds and any future earnings for use in the operation of its business and does not anticipate paying any cash dividends on its capital stock in the foreseeable future. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the Merger will be at the discretion of the combined company’s board of directors and will depend upon a number of factors, including the combined company’s results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the combined company’s board of directors deems relevant.

 

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RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Frequency common stock. You should also read and consider the other information in this proxy statement/prospectus.

Risks Related to the Merger

The exchange ratio will not be adjusted based on the market price of Frequency common stock so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

At the Effective Time, outstanding shares of Korro Bio common stock will be converted into shares of Frequency common stock. The former Korro Bio securityholders, including purchasers in the Pre-Closing Financing, immediately before the Merger are expected to own approximately 92% of the aggregate number of shares of Frequency common stock following the Merger on a fully-diluted basis, and Frequency securityholders immediately before the Merger are expected to own approximately 8% of the aggregate number of shares of Frequency common stock following the Merger on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) a valuation of Frequency equal to its net cash as of the business day immediately prior to the closing date of the Merger, plus $15.0 million, (b) a valuation for Korro Bio equal to $325.6 million and (c) Korro Bio issuing approximately $117.3 million of Korro Bio common stock in the Pre-Closing Financing described elsewhere in this proxy statement/prospectus.

Any changes in the market price of Frequency common stock before the completion of the Merger will not affect the number of shares Korro Bio stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Frequency common stock increases from the market price on the date of the Merger Agreement, then Korro Bio stockholders could receive merger consideration with substantially more value for their shares of Korro Bio common stock than the parties had negotiated when they established the exchange ratio. Similarly, if before the completion of the Merger the market price of Frequency common stock declines from the market price on the date of the Merger Agreement, then Korro Bio stockholders could receive merger consideration with substantially lower value. The Merger Agreement does not include a price-based termination right.

Failure to complete the Merger may result in Frequency paying a termination fee to Korro Bio, which could harm the Frequency common stock price and future business and operations of Frequency.

If the Merger is not completed, Frequency is subject to the following risks:

 

   

if the Merger Agreement is terminated under specified circumstances, Frequency will be required to pay Korro Bio a termination fee of $1.5 million;

 

   

the price of Frequency common stock may decline and could fluctuate significantly; and

 

   

costs related to the Merger, such as financial advisor, legal and accounting fees, which Frequency estimates will total approximately $            , which must be paid even if the Merger is not completed.

If the Merger Agreement is terminated and the board of directors of Frequency determines to seek another business combination, there can be no assurance that Frequency will be able to find a partner with whom a business combination would yield greater benefits than the benefits to be provided under the Merger Agreement.

If the conditions to the Merger are not satisfied or waived, the Merger may not occur.

Even if the Merger is approved by the stockholders of Korro Bio and the Merger Proposal is approved by the Frequency stockholders, specified conditions must be satisfied or waived to complete the Merger. These

 

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conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 207 of this proxy statement/prospectus. Among other things, the Merger Agreement requires the existing shares of Frequency common stock to be continually listed with the Nasdaq Stock Market LLC through the Effective Time. The listing of Frequency common stock with the Nasdaq Stock Market LLC will depend on many factors, including those discussed in the risk factor entitled Frequency’s failure to meet the continued listing requirements of the Nasdaq Stock Market LLC could result in a delisting of its common stock.” Frequency and Korro Bio cannot assure you that all of the conditions to the consummation of the Merger will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or the closing may be delayed, and Frequency and Korro Bio each may lose some or all of the intended benefits of the Merger.

The Merger may be completed even though a material adverse effect may result from the announcement of the Merger, industry-wide changes or other causes.

In general, neither Frequency nor Korro Bio is obligated to complete the Merger if there is a material adverse effect affecting the other party between July 14, 2023, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes are excluded from the concept of a “material adverse effect.” Such exclusions include but are not limited to changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the Merger, natural disasters, pandemics, other public health events and changes in GAAP. Therefore, if any of these events were to occur impacting Frequency or Korro Bio, the other party would still be obliged to consummate the closing of the Merger. If any such adverse changes occur and Frequency and Korro Bio consummate the closing of the Merger, the stock price of the combined company may suffer. This in turn may reduce the value of the Merger to the stockholders of Frequency, Korro Bio or both. For a more complete discussion of what constitutes a material adverse effect on Frequency or Korro Bio, see the section titled “The Merger Agreement—Representations and Warranties” beginning on page 197 of this proxy statement/prospectus.

If Frequency and Korro Bio complete the Merger, the combined company will need to raise additional capital by issuing equity securities or additional debt or through licensing arrangements, which may cause significant dilution to the combined company’s stockholders or restrict the combined company’s operations.

Additional financing may not be available to the combined company when it is needed or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such financing will cause additional dilution to all securityholders of the combined company, including Frequency’s pre-Merger stockholders and Korro Bio’s former securityholders. It is also possible that the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.

Some Frequency and Korro Bio directors and executive officers have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.

Directors and executive officers of Frequency and Korro Bio may have interests in the Merger that are different from, or in addition to, the interests of other Frequency stockholders generally. These interests with respect to Frequency’s directors and executive officers may include, among others, acceleration of Frequency Options, Frequency restricted stock units, retention bonus payments, severance payments and benefits if employment is terminated in a qualifying termination in connection with the Merger and rights to continued indemnification, expense advancement and insurance coverage. David L. Lucchino, a current member of the Frequency board of directors will continue as a director of the combined company after the Effective Time.

 

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Following the Effective Time, it is expected that the combined company will provide compensation to non-employee directors pursuant to a new non-employee director compensation policy that is expected to be adopted post-closing. These interests with respect to Korro Bio’s directors and executive officers may include, among others, certain of Korro Bio’s directors and executive officers have options, subject to vesting, to purchase shares of Korro Bio common stock which, after the Effective Time, will be converted into and become options to purchase shares of the common stock of the combined company; Korro Bio’s executive officers are expected to continue as executive officers of the combined company after the Effective Time; and all of Korro Bio’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. Further, certain current members of Korro Bio’s board of directors will continue as directors of the combined company after the Effective Time, and, following the Effective Time, it is expected that the combined company will provide compensation to non-employee directors pursuant to a new non-employee director compensation policy that is expected to be adopted post-closing.

The board of directors of both Frequency and Korro Bio were aware of and considered these interests, among other matters, in reaching their decisions to approve and adopt the Merger Agreement, approve the Merger, approve the issuance of Frequency common stock in the Merger, and recommend the approval of the Merger Agreement to Korro Bio stockholders and the issuance of the Frequency common stock to Korro Bio stockholders in the Merger to the Frequency stockholders. These interests, among other factors, may have influenced the directors and executive officers of Frequency and Korro Bio to support or approve the Merger.

For more information regarding the interests of Frequency and Korro Bio directors and executive officers in the Merger, please see the sections titled “The Merger—Interests of Frequency Directors and Executive Officers in the Merger” beginning on page 178 and “The Merger—Interests of Korro Bio Directors and Executive Officers in the Merger” beginning on page 183 of this proxy statement/prospectus.

Frequency stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Frequency stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

If the Merger is not completed, Frequency’s stock price may decline significantly.

The market price of Frequency common stock is subject to significant fluctuations. During the 12-month period ended June 30, 2023, the closing sales price of Frequency common stock on Nasdaq ranged from a high of $5.4750 on January 24, 2023 to a low of $0.3318 on June 21, 2023. Market prices for securities of pharmaceutical, biotechnology and other life science companies have historically been particularly volatile. In addition, the market price of Frequency common stock will likely be volatile based on whether stockholders and other investors believe that Frequency can complete the Merger or otherwise raise additional capital to support Frequency’s operations if the Merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of Frequency common stock is exacerbated by low trading volume. Additional factors that may cause the market price of Frequency common stock to fluctuate include:

 

   

adverse publicity relating to the combined company’s business and product candidates;

 

   

the loss of key employees;

 

   

future sales of common stock;

 

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general and industry-specific economic conditions;

 

   

the failure to meet industry analyst expectations; and

 

   

period-to-period fluctuations in financial results.

See also “Risks related to Frequency common stock—The market price of Frequency common stock has been volatile and fluctuated and may in future fluctuate substantially, which could result in substantial losses for Frequency’s stockholders”. Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of Frequency common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies.

Frequency and Korro Bio securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the Merger, the current stockholders of Frequency and Korro Bio will own a smaller percentage of the combined company than their ownership of their respective companies prior to the Merger. Immediately after the Merger, Frequency securityholders as of immediately prior to the Merger are expected to own approximately 8% of the outstanding shares of the combined company on a fully-diluted basis and former Korro Bio securityholders, including purchasers in the Pre-Closing Financing, are expected to own approximately 92% of the outstanding shares of the combined company on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) a valuation of Frequency equal to its net cash as of the business day immediately prior to the closing date of the Merger, plus $15.0 million, (b) a valuation for Korro Bio equal to $325.6 million and (c) Korro Bio issuing approximately $117.3 million of Korro Bio common stock in the Pre-Closing Financing described elsewhere in this proxy statement/prospectus.

During the pendency of the Merger, Frequency and Korro Bio may not be able to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.

Covenants in the Merger Agreement impede the ability of Frequency and Korro Bio to make acquisitions during the pendency of the Merger, subject to specified exceptions. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, proposing, seeking or knowingly encouraging, facilitating or supporting any inquiries, indications of interest, proposals or offers that constitute or may reasonably be expected to lead to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified exceptions. Any such transactions could be favorable to such party’s stockholders, but the parties may be unable to pursue them. For more information, see the sections titled “The Merger Agreement—Non-Solicitation” beginning on page 201.

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Frequency and Korro Bio from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances as described in further detail in the section titled “The Merger Agreement—Non-Solicitation” beginning on page 201. In addition, if Frequency terminates the Merger Agreement under specified circumstances, Frequency would be required to pay Korro Bio a termination fee of $1.5 million. This termination fee may discourage third parties from submitting competing proposals to Frequency or its stockholders, and may cause the Frequency board of directors to be less inclined to recommend a competing proposal.

 

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Because the lack of a public market for Korro Bio’s stock makes it difficult to evaluate the fair market value of Korro Bio’s stock, Frequency may pay more than the fair market value of Korro Bio’s stock and/or the stockholders of Korro Bio may receive consideration in the Merger that is less than the fair market value of Korro Bio’s stock.

The outstanding Korro Bio common stock is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Korro Bio’s stock. Because the percentage of Frequency equity to be issued to Korro Bio stockholders was determined based on negotiations between the parties, it is possible that the value of the Frequency common stock to be received by Korro Bio stockholders will be less than the fair market value of Korro Bio’s stock, or Frequency may pay more than the aggregate fair market value for Korro Bio’s stock.

Frequency stockholders may not receive any payment on the CVRs, and the CVRs may expire valueless.

The right of Frequency stockholders to receive any future payment on or derive any value from the CVRs will be contingent solely upon the occurrence of the CVR Milestones within the time periods specified in the CVR Agreement and the consideration received being greater than the amounts permitted to be withheld or deducted by Frequency under the CVR Agreement. There is no guarantee that Frequency will be able to successfully collaborate or sell any of these assets or establish a viable entity to manage the development of these assets. In the event that no CVR Milestones occur within the time periods specified in the CVR Agreement, no payments will be made under the CVR Agreement, and the CVRs will expire valueless.

Furthermore, the CVRs will be unsecured obligations of the combined company and all payments under the CVRs, all other obligations under the CVR Agreement and the CVRs and any rights or claims relating thereto may be subordinated in right of payment to the prior payment in full of all current or future senior obligations of the combined company.

The tax treatment of the CVRs is unclear.

The U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the CVRs.

For example, as discussed in the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs to Holders of Frequency Common Stock” beginning on page 218 of this proxy statement/prospectus, Frequency does not intend to report the issuance of the CVRs as a current distribution of property with respect to its stock, but it is possible that the IRS could assert that Frequency stockholders are treated as having received a distribution of property equal to the fair market value of the CVRs on the date the CVRs are distributed, which could be taxable to Frequency stockholders without the corresponding receipt of cash. In addition, it is possible that the IRS or a court could determine that the issuance of the CVRs (and/or any payments thereon) and the Reverse Stock Split constitute a single “recapitalization” for U.S. federal income tax purposes with the CVRs constituting taxable “boot” received in such recapitalization exchange. In such case, the tax consequences of the CVRs and the Reverse Stock Split would differ from those described in this proxy statement/prospectus, including with respect to the timing and character of income.

Risks Related to the Proposed Reverse Stock Split

The Reverse Stock Split may not increase the combined company’s stock price over the long-term.

The principal purpose of the Reverse Stock Split is to increase the per-share market price of Frequency common stock above the minimum bid price requirement under the Nasdaq rules so that Frequency can maintain

 

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its listing on Nasdaq. It cannot be assured, however, that the Reverse Stock Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Frequency common stock, it cannot be assured that the Reverse Stock Split will increase the market price of its common stock by enough to maintain the listing of Frequency common stock on Nasdaq, or result in any permanent or sustained increase in the market price of Frequency common stock, which is dependent upon many factors, including Frequency’s business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of Frequency might meet the continued listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

The Reverse Stock Split may decrease the liquidity of the combined company’s common stock.

Although the Frequency board of directors believes that the anticipated increase in the market price of the combined company’s common stock resulting from the proposed Reverse Stock Split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Stock Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock. In addition, the Reverse Stock Split may not result in an increase in the combined company’s stock price necessary to satisfy Nasdaq’s initial listing requirements for the combined company.

The Reverse Stock Split may lead to a decrease in the combined company’s overall market capitalization.

Should the market price of the combined company’s common stock decline after the Reverse Stock Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the Reverse Stock Split. A Reverse Stock Split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the Reverse Stock Split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same after the Reverse Stock Split is effected, or that the Reverse Stock Split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the Reverse Stock Split.

Risks Related to the Combined Company

If any of the events described in “Risks Related to Frequency’s Business” or “Risks Related to Korro Bio’s Business” occur, those events could cause potential benefits of the Merger not to be realized.

Following completion of the Merger, the combined company will be susceptible to many of the risks described in the sections herein entitled “Risks Related to Frequency’s Business” and “Risks Related to Korro Bio’s Business” beginning on pages 46 and 96. To the extent any of the events in the risks described in those sections occur, the potential benefits of the Merger may not be realized and the results of operations and financial condition of the combined company could be adversely affected in a material way. This could cause the market price of the combined company’s common stock to decline.

 

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The market price of the combined company’s common stock is expected to be volatile, and the market price of the common stock may drop following the Merger.

The market price of the combined company’s common stock following the Merger could be subject to significant fluctuations. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:

 

   

results of clinical trials and preclinical studies of the combined company’s product candidates, or those of the combined company’s competitors or the combined company’s existing or future collaborators;

 

   

failure to meet or exceed financial and development projections the combined company may provide to the public;

 

   

failure to meet or exceed the financial and development projections of the investment community;

 

   

if the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts;

 

   

announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by the combined company or its competitors;

 

   

actions taken by regulatory agencies with respect to the combined company’s product candidates, clinical studies, manufacturing process or sales and marketing terms;

 

   

disputes or other developments relating to proprietary rights, including patents, litigation matters, and the combined company’s ability to obtain patent protection for its technologies;

 

   

additions or departures of key personnel;

 

   

significant lawsuits, including patent or stockholder litigation;

 

   

if securities or industry analysts do not publish research or reports about the combined company’s business, or if they issue adverse or misleading opinions regarding its business and stock;

 

   

changes in the market valuations of similar companies;

 

   

general market or macroeconomic conditions or market conditions in the pharmaceutical and biotechnology sectors;

 

   

sales of securities by the combined company or its securityholders in the future;

 

   

if the combined company fails to raise an adequate amount of capital to fund its operations or continued development of its product candidates;

 

   

trading volume of the combined company’s common stock;

 

   

announcements by competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;

 

   

adverse publicity relating to precision medicine product candidates, including with respect to other products in such markets;

 

   

the introduction of technological innovations or new therapies that compete with the products and services of the combined company; and

 

   

period-to-period fluctuations in the combined company’s financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock. In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the combined company’s business and the value of its common stock. In the past, following periods of volatility in the market price of a company’s

 

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securities, stockholders have often instituted class action securities litigation against such companies. Furthermore, market volatility may lead to increased shareholder activism if the combined company experiences a market valuation that activists believe is not reflective of its intrinsic value. Activist campaigns that contest or conflict with the combined company’s strategic direction or seek changes in the composition of its board of directors could have an adverse effect on its operating results, financial condition and cash flows.

The combined company may incur losses for the foreseeable future and might never achieve profitability.

The combined company may never become profitable, even if the combined company is able to complete clinical development for one or more product candidates and eventually commercialize such product candidates. The combined company will need to successfully complete significant research, development, testing and regulatory compliance activities that, together with projected general and administrative expenses, is expected to result in substantial increased operating losses for at least the next several years. Even if the combined company does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

Following the Merger, the combined company may be unable to integrate successfully the businesses of Frequency and Korro Bio and realize the anticipated benefits of the Merger.

The Merger involves the combination of two companies that currently operate as independent companies. Following the Merger, the combined company will be required to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the Merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounter in the integration process include the following:

 

   

the inability to successfully combine the businesses of Frequency and Korro Bio in a manner that permits the combined company to achieve the anticipated benefits from the merger, which would result in the anticipated benefits of the Merger not being realized partly or wholly in the time frame currently anticipated or at all;

 

   

creation of uniform standards, controls, procedures, policies and information systems; and

 

   

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger.

In addition, Frequency and Korro Bio have operated and, until the completion of the Merger, will continue to operate, independently. It is possible that the integration process also could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect the combined company’s ability to maintain its business relationships or the ability to achieve the anticipated benefits of the Merger, or could otherwise adversely affect the business and financial results of the combined company.

If the combined company fails to attract and retain management and other key personnel, it may be unable to continue to successfully develop or commercialize its product candidates or otherwise implement its business plan.

The combined company’s ability to compete in the highly competitive pharmaceuticals industry depends on its ability to attract and retain highly qualified managerial, scientific, medical, legal, sales and marketing and other personnel. The combined company will be highly dependent on its management and scientific personnel. The loss of the services of any of these individuals could impede, delay, or prevent the successful development of the combined company’s product pipeline, completion of its planned clinical trials, commercialization of its product candidates or in-licensing or acquisition of new assets and could impact negatively its ability to

 

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implement successfully its business plan. If the combined company loses the services of any of these individuals, it might not be able to find suitable replacements on a timely basis or at all, and its business could be harmed as a result. The combined company might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses.

The combined company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.

The combined company will require substantial additional funds to conduct the costly and time-consuming clinical efficacy trials necessary to pursue regulatory approval of each potential product candidate. The combined company’s future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could, for example, through the sale of common stock or securities convertible or exchangeable into common stock, significantly dilute its stockholders’ ownership interests or inhibit the combined company’s ability to achieve its business objectives. If the combined company raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely the rights of its common stockholders. In addition, any debt financing may subject the combined company to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the combined company raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, the combined company may have to relinquish certain valuable intellectual property or other rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if the combined company were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to the combined company or its stockholders.

The combined company will incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined company will incur significant legal, accounting and other expenses as a public company that Korro Bio did not incur as a private company, including costs associated with public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act. The combined company’s management team will consist of the executive officers of Korro Bio prior to the Merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise related to public company reporting requirements and compliance with applicable laws and regulations to ensure that the combined company complies with all of these requirements. Any changes the combined company makes to comply with these obligations may not be sufficient to allow it to satisfy its obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for the combined company to attract and retain qualified persons to serve on the board of directors or on board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

Upon completion of the Merger, failure by the combined company to comply with the initial listing standards of Nasdaq will prevent its stock from being listed on Nasdaq.

Upon completion of the Merger, Frequency, under the new name “Korro Bio, Inc.,” will be required to meet the initial listing requirements to maintain the listing and continued trading of its shares on Nasdaq. These initial

 

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listing requirements are more difficult to achieve than the continued listing requirements. Pursuant to the Merger Agreement, Frequency agreed to use its commercially reasonable efforts to cause the shares of Frequency common stock being issued in the Merger to be approved for listing on Nasdaq at or prior to the Effective Time. Based on information currently available to Frequency, Frequency anticipates that its stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement at the closing of the Merger unless it effects a reverse stock split. The board of directors of Frequency intends to effect a reverse stock split of the shares of Frequency common stock at a ratio of between 1:                 to 1:                . In addition, often times a reverse stock split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. Following the Merger, if the combined company is unable to satisfy Nasdaq listing requirements, Nasdaq may notify the combined company that its shares of common stock will not be listed on Nasdaq.

Upon a potential delisting from Nasdaq, if the common stock of the combined company is not then eligible for quotation on another market or exchange, trading of the shares could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of the common stock of the combined company; decreases in institutional and other investor demand for the shares, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute trades in the common stock of the combined company. Also, it may be difficult for the combined company to raise additional capital if the combined company’s common stock is not listed on a major exchange. The occurrence of any of these events could result in a further decline in the market price of the common stock of the combined company and could have a material adverse effect on the combined company.

Once the combined company is no longer an emerging growth company, a smaller reporting company or otherwise no longer qualifies for applicable exemptions, the combined company will be subject to additional laws and regulations affecting public companies that will increase the combined company’s costs and the demands on management and could harm the combined company’s operating results and cash flows.

The combined company will be subject to the reporting requirements of the Exchange Act, which requires, among other things, that the combined company file with the SEC, annual, quarterly and current reports with respect to the combined company’s business and financial condition as well as other disclosure and corporate governance requirements. However, as an emerging growth company, the combined company may take advantage of exemptions from various requirements such as an exemption from the requirement to have the combined company’s independent auditors attest to the combined company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 as well as an exemption from the “say on pay” voting requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The combined company will no longer qualify as an emerging growth company after December 31, 2023. After the combined company no longer qualifies as an emerging growth company, Frequency and Korro Bio expect the combined company to still qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, in at least the near term, which will allow the combined company to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this proxy statement/prospectus and in the combined company’s periodic reports and proxy statements. Once the combined company is no longer an emerging growth company or a smaller reporting company or otherwise no longer qualifies for these exemptions, the combined company will be required to comply with these additional legal and regulatory requirements applicable to public companies and will incur significant legal, accounting and other expenses to do so. If the combined company is not able to comply with the requirements in a timely manner or at all, the combined company’s financial condition or the market price of the combined company’s common stock may be harmed. For example, if the combined company or its independent auditor identifies deficiencies in the combined company’s internal control over financial reporting that are deemed to be material weaknesses the combined company could face additional costs to remedy those

 

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deficiencies, the market price of the combined company’s stock could decline or the combined company could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

If the combined company fails to maintain proper and effective internal controls, its ability to produce accurate financial statements on a timely basis could be impaired.

Provided the combined company continues to be listed on Nasdaq, the combined company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that the combined company maintain effective disclosure controls and procedures and internal control over financial reporting. The combined company must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. As a private company, Korro Bio has never been required to test its internal controls within a specified period. This will require that the combined company incur substantial professional fees and internal costs to expand its accounting and finance functions and that it expends significant management efforts. The combined company may experience difficulty in meeting these reporting requirements in a timely manner.

The combined company may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. The combined company’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If the combined company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if it is unable to maintain proper and effective internal controls, the combined company may not be able to produce timely and accurate financial statements. If that were to happen, the market price of its common stock could decline and it could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

The unaudited pro forma condensed combined financial information for Frequency and Korro Bio included in this proxy statement/prospectus are preliminary, and the combined company’s actual financial position and operations after the Merger may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.

The unaudited pro forma financial information for Frequency and Korro Bio included in this proxy statement/prospectus are presented for illustrative purposes only and is not necessarily indicative of the combined company’s actual financial condition or results of operations of future periods, or the financial condition or results of operations that would have been realized had the entities been combined during the period presented. The combined company’s actual results and financial position after the Merger may differ materially and adversely from the unaudited pro forma financial information included in this proxy statement/prospectus. The exchange ratio formula reflected in this proxy statement/prospectus is preliminary. The final exchange ratio will be determined in accordance with the formula in the Merger Agreement and could differ materially from the preliminary exchange ratio used to prepare the pro forma adjustments. For more information see the section titled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 362.

 

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The combined company’s certificate of incorporation and bylaws and provisions under Delaware law could make an acquisition of the combined company more difficult and may prevent attempts by its stockholders to replace or remove its management.

If the Merger is completed, Frequency’s bylaws and Frequency’s charter, as amended by the amendments thereto attached to this proxy statement/prospectus as Annex H and, assuming Proposal No. 2 are approved by Frequency stockholders at the Frequency Annual Meeting, will become the combined company’s bylaws and certificate of incorporation. Provisions that will be included in the combined company’s certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control of the combined company that stockholders may consider favorable, including transactions in which its common stockholders might otherwise receive a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of the combined company’s common stock, thereby depressing the market price of its common stock. In addition, because the combined company’s board of directors will be responsible for appointing the members of the combined company’s management team, these provisions may frustrate or prevent any attempts by the combined company’s stockholders to replace or remove its current management by making it more difficult for stockholders to replace members of the combined company’s board of directors. Among other things, these provisions:

 

   

establish a classified board of directors such that all members of the board are not elected at one time;

 

   

allow the authorized number of its directors to be changed only by resolution of its board of directors;

 

   

limit the manner in which stockholders can remove directors from the board;

 

   

establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at stockholder meetings;

 

   

require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by its stockholders by written consent;

 

   

limit who may call a special meeting of stockholders;

 

   

authorize its board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by its board of directors; and

 

   

require the approval of the holders of at least 66.67% of the votes that all its stockholders would be entitled to cast to amend or repeal certain provisions of its charter or bylaws.

Moreover, because the combined company will be incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding combined company voting stock from merging or combining with the combined company. Although Frequency and Korro Bio believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the combined company’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the combined company’s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

The bylaws of the combined company will provide that, unless the combined company consents in writing to the selection of an alternative forum, certain designated courts will be the sole and exclusive forum for certain legal actions between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers, employees or agents.

The bylaws of the combined company will provide that, unless it consents in writing to an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (i) any

 

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derivative action or proceeding brought on its behalf, (ii) any action asserting a claim of or based on a breach of a fiduciary duty owed by any of its current or former directors, officers, or other employees to the combined company or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, its charter or its bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, which for purposes of this risk factor refers to herein as the “Delaware Forum Provision.” The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act and the Exchange Act. The bylaws of the combined company will further provide that, unless it consents in writing to an alternative forum, federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which for purposes of this risk factor refers to herein as the “Federal Forum Provision.” In addition, the bylaws of the combined company will provide that any person or entity purchasing or otherwise acquiring any interest in shares of its capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived its compliance with the U.S. federal securities laws and the rules and regulations thereunder.

The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders of the combined company in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the forum selection clauses in the bylaws of the combined company may limit its stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with the combined company or its directors, officers or employees, which may discourage such lawsuits against the combined company and its directors, officers and employees even though an action, if successful, might benefit its stockholders.

Frequency and Korro Bio do not anticipate that the combined company will pay any cash dividends in the foreseeable future.

The current expectation is that the combined company will retain its future earnings, if any, to fund the growth of the combined company’s business as opposed to paying dividends. As a result, capital appreciation, if any, of the common stock of the combined company will be your sole source of gain, if any, for the foreseeable future.

An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.

Prior to the Merger, there had been no public market for shares of Korro Bio capital stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active market for the combined company’s common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.

If existing securityholders of Frequency and Korro Bio sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after legal restrictions on resale discussed in this proxy statement/prospectus lapse, the trading price of the common stock of the combined company could decline. Based on shares outstanding as of                , after giving effect to the estimated exchange ratio, which has been adjusted to reflect the proposed Reverse Stock Split, the Pre-Closing Financing and shares expected to be issued upon completion of the Merger, the combined company is expected to have outstanding a total of approximately                shares of common stock immediately following the completion of the Merger. Of the shares of common stock, approximately                 shares will be available for sale in the public market beginning 180 days after the closing of the Merger as a result of the expiration of lock-up agreements between Frequency and Korro Bio on the one hand and certain securityholders of Frequency

 

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and Korro Bio on the other hand. All other outstanding shares of common stock, other than shares held by affiliates of the combined company and shares of Frequency common stock issued in exchange for shares of Korro Bio common stock issued in the Pre-Closing Financing will be freely tradable, without restriction, in the public market. In addition, shares of common stock that are subject to outstanding options or warrants of Korro Bio will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act. If these shares are sold, the trading price of the combined company’s common stock could decline.

After completion of the Merger, the combined company’s executive officers, directors and principal stockholders will have the ability to control or significantly influence all matters submitted to the combined company’s stockholders for approval.

Upon the completion of the Merger, and giving effect to the issuance of the Pre-Closing Financing, it is anticipated that the combined company’s executive officers, directors and principal stockholders will, in the aggregate, beneficially own approximately         % of the combined company’s outstanding shares of common stock, subject to certain assumptions, including, but not limited to, Frequency’s net cash as of closing being not less than $             million or greater than $             million. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined company’s stockholders for approval, as well as the combined company’s management and affairs. For example, these stockholders, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the combined company’s assets. This concentration of voting power could delay or prevent an acquisition of the combined company on terms that other stockholders may desire.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the combined company, its business or its market, its stock price and trading volume could decline.

The trading market for the combined company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect to not provide research coverage of the combined company’s common stock after the completion of the Merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the combined company will not have any control over the analysts or the content and opinions included in their reports. The price of the combined company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the combined company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.

The combined company will have broad discretion in the use of the cash and cash equivalents of the combined company and the proceeds from the Pre-Closing Financing and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

The combined company will have broad discretion over the use of the cash and cash equivalents of the combined company and the proceeds from the Pre-Closing Financing. You may not agree with the combined company’s decisions, and its use of the proceeds may not yield any return on your investment. The combined company’s failure to apply these resources effectively could compromise its ability to pursue its growth strategy and the combined company might not be able to yield a significant return, if any, on its investment of these net proceeds. You will not have the opportunity to influence its decisions on how to use the combined company’s cash resources.

 

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Changes in tax laws or in their implementation or interpretation may adversely affect the combined company’s business and financial condition.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect the combined company’s business and financial condition. In recent years, many such changes have been made and changes are likely to continue to occur in the future. The combined company cannot predict whether, when, in what form or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided or whether they could increase its tax liability or require changes in the manner in which it operates in order to minimize increases in its tax liability.

The combined company’s ability to use net operating loss carryforwards and other tax attributes may be limited, including as a result of the Merger.

The combined company’s ability to utilize net operating loss carryforwards, or NOLs, and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including, as discussed below, in connection with the Merger or other transactions. Similar rules may apply under state tax laws. If the combined company earns taxable income, such limitations could result in increased future income tax liability to the combined company, and the combined company’s future cash flows could be adversely affected.

For a more complete discussion of the risks related to the net operating loss carryforwards and certain other tax attributes of Frequency and Korro Bio, please see the discussions under “Risk Factors—Risks Related to Frequency’s Business—Risks Related to Frequency’s financial position and need for additional capital—Frequency’s ability to use its net operating loss carryforwards to offset future taxable income, or tax credit carryforwards to offset future income tax liabilities, may be subject to certain limitations” and “Risk Factors—Risks Related to Korro Bio’s Financial Position and Need for Capital—Korro Bio’s ability to utilize its net operating loss carryforwards and certain other tax attributes may be limited,” respectively.

Unfavorable global economic conditions could adversely affect the combined company’s business, financial condition, results of operations or cash flows.

The combined company’s results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A severe or prolonged economic downturn could result in a variety of risks to the combined company’s business, including, weakened demand for the combined company’s product candidates and the combined company’s ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain the combined company’s suppliers, possibly resulting in supply disruption, or cause the combined company’s customers to delay making payments for its services. Any of the foregoing could harm the combined company’s business and the combined company cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact its business.

Risks Related to Frequency’s Business

Risks related to Frequency’s financial position and need for additional capital

Frequency has incurred significant losses since inception and anticipates that Frequency will continue to incur losses for the foreseeable future. Frequency is not currently profitable, and Frequency may never achieve or sustain profitability. If Frequency is unable to achieve or sustain profitability, the market value of Frequency common stock will likely decline.

Frequency is a preclinical-stage biotechnology company with a limited operating history. As a result, Frequency is not profitable and has incurred significant losses since the formation. Frequency had net losses of

 

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$19.5 million and $81.6 million for the three months ended March 31, 2023, and the year ended December 31, 2022, respectively. As of March 31, 2023, Frequency had an accumulated deficit of $281.2 million. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to gain regulatory approval and become commercially viable. Frequency has not commercialized any products and has never generated revenue from the commercialization of any product. To date, Frequency has devoted most of its financial resources to licensing technologies and research and development, including its preclinical platform development activities and clinical trials.

Frequency expects to incur significant additional operating losses to advance any product candidate, including a potential therapeutic candidate for MS, through clinical development, clinical trials, regulatory approval and commercialization. The costs of advancing product candidates into each clinical phase tend to increase substantially over the duration of the clinical development process. Therefore, the total costs to advance any product candidate to marketing approval in even a single jurisdiction are substantial. Because of the numerous risks and uncertainties associated with pharmaceutical product development, Frequency is unable to accurately predict the timing or amount of increased expenses or when, or if, Frequency will be able to begin generating revenue from the commercialization of any product candidates or achieve or maintain profitability. Frequency’s expenses will also increase substantially if Frequency:

 

   

develops and commences clinical trials for any product candidate, including for its MS Program;

 

   

expands its development programs based on its PCA approach;

 

   

further develops its PCA approach;

 

   

seeks regulatory approvals for any other product candidates;

 

   

secures a commercial manufacturing source and supply chain capacity sufficient to produce commercial quantities of any product candidate for which Frequency obtains regulatory approval;

 

   

establishes a sales, marketing and distribution infrastructure to commercialize any product candidates, if approved;

 

   

maintains, expands, and protects its intellectual property portfolio; and

 

   

acquires or in-licenses other product candidates or technologies.

Furthermore, Frequency’s ability to successfully develop, commercialize and license any product candidates and generate product revenue is subject to substantial additional risks and uncertainties, as described under “Risks related to development, clinical testing, manufacturing, and regulatory approval” and “Risks related to commercialization.” As a result, Frequency expects to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on Frequency’s stockholders’ equity and working capital. The amount of its future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenues. If Frequency is unable to develop and commercialize one or more product candidates, either alone or through collaborations, or if revenues from any product that receives marketing approval are insufficient, Frequency will not achieve profitability. Even if Frequency successfully commercializes any product candidates, Frequency may continue to incur substantial research and development and other expenses to identify and develop other product candidates. Even if Frequency does achieve profitability, Frequency may not be able to sustain profitability or meet outside expectations for its profitability. If Frequency is unable to achieve or sustain profitability or to meet outside expectations for its profitability, the value of Frequency common stock will be materially adversely affected.

 

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Frequency will require additional capital to fund its operations, and if Frequency fails to obtain necessary financing, Frequency may not be able to complete the development and commercialization of any product candidates or explore additional product candidates.

Frequency will require additional capital to enable Frequency to develop any product candidate, which it may acquire through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. Adequate additional financing may not be available to Frequency on acceptable terms, or at all. Frequency’s failure to raise capital as and when needed would have a negative effect on Frequency’s financial condition and its ability to pursue its business strategy. In addition, attempting to secure additional financing may divert the time and attention of Frequency’s management from day-to-day activities and harm its development efforts.

Changing circumstances, including any unanticipated expenses, could cause Frequency to consume capital significantly faster than Frequency currently anticipates, and Frequency may need to spend more than currently expected because of circumstances beyond its control. Because the length of time and scope of activities associated with successful development of any product candidate Frequency may develop is highly uncertain, Frequency is unable to estimate the actual funds it will require for development and any marketing and commercialization activities. Its future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

 

   

the initiation, progress, timing, costs and results of clinical trials through all phases of development, including any unforeseen costs Frequency may incur as a result of public health emergencies or other causes;

 

   

the outcome, timing and cost of meeting regulatory requirements established by the FDA, and other comparable foreign regulatory authorities, including any clinical trials required by the FDA or other comparable foreign regulatory authorities;

 

   

the willingness of the FDA and other comparable foreign regulatory authorities to accept its clinical trial designs, as well as data from clinical trials and preclinical studies, as the basis for review and approval of any product candidate;

 

   

the cost of filing, prosecuting, defending, and enforcing its patent claims and other intellectual property rights;

 

   

the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against Frequency;

 

   

the effect of competing technological and market developments;

 

   

the cost and timing of completion of commercial-scale manufacturing activities;

 

   

the costs of operating as a public company;

 

   

the extent to which Frequency in-licenses or acquires other product candidates or technologies;

 

   

the cost of establishing sales, marketing and distribution capabilities for its product candidates, if approved; and

 

   

the initiation, progress, and timing of commercialization of any product candidate, if approved.

Depending on its business performance, the economic climate and market conditions, Frequency may be unable to raise additional funds through any sources. Market volatility resulting from the COVID-19 global pandemic, international geopolitical conflict, global supply chain issues, and increased inflation could also adversely impact its ability to access capital as and when needed. If Frequency is unable to raise additional capital in sufficient amounts or on terms acceptable to Frequency, Frequency may have to significantly delay, scale back or discontinue the development or commercialization of any product candidates, or potentially discontinue operations.

 

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Additionally, Frequency maintains the majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and its deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where Frequency maintains its cash and cash equivalents, there can be no assurance that Frequency would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect its business and financial position.

Frequency has a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for its future viability.

Frequency was established and began operations in 2014. Its operations to date have been limited to financing and staffing Frequency, licensing technologies, developing its PCA approach, developing and conducting preclinical and clinical studies for the treatment of SNHL, and developing a pipeline of preclinical and research programs, including its remyelination program in MS. Frequency has not yet demonstrated the ability to successfully complete a large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial-scale product, or arrange for a third party to do so on Frequency’s behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about its future success or viability may not be as accurate as they could be if Frequency had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

In addition, as a business with a limited operating history, Frequency may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. Its FX-322 Phase 2b results (FX-322-208), for example, showed no statistically significant difference at day 90 between those administered FX-322 versus those receiving placebo in the proportion of individuals that demonstrated an improvement in speech perception. Frequency will eventually need to transition from a company with a research focus to a company capable of supporting commercial activities. Frequency may not be successful in such a transition and, as a result, its business may be adversely affected.

Frequency expects its financial condition and operating results may fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond its control. Accordingly, the results of any quarterly or annual period are not necessarily indicative of future operating performance.

Frequency’s ability to use its net operating loss carryforwards to offset future taxable income, or tax credit carryforwards to offset future income tax liabilities, may be subject to certain limitations.

As of December 31, 2022, Frequency had NOLs of $174.1 million for federal income tax purposes and $141.3 million for state income tax purposes, which may be available to offset its future taxable income, if any. Frequency’s NOLs expire in various amounts through 2042, provided that federal NOLs generated in taxable years beginning after December 31, 2017, will not be subject to expiration. However, although federal NOLs generated in taxable years beginning after December 31, 2017, may be carried forward indefinitely, such NOLs may only be used to offset 80% of Frequency’s taxable income in taxable years beginning after December 31, 2020, which may require Frequency to pay federal income taxes in future years despite generating federal NOLs in prior years. As of December 31, 2022, Frequency also had federal and state research and development and other tax credit carryforwards of approximately $8.2 million and $3.6 million, respectively, available to reduce future income tax liabilities. Frequency’s tax credit carryforwards expire at various dates through 2042. These NOLs and tax credit carryforwards could expire unused, to the extent subject to expiration, and be unavailable to offset future taxable income or income tax liabilities, as applicable.

In addition, in general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs and tax credit carryforwards to offset future taxable income. For these purposes, an ownership change generally occurs where one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases their ownership

 

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by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Frequency believes it has experienced ownership changes in 2017 and 2019. As a result of the ownership changes in 2017 and 2019, $0.01 million and $0.04 million of NOL carryforwards are limited under Section 382 of the Code. Frequency may experience ownership changes in the future as a result of future transactions in its stock, some of which may be outside its control. In particular, the Merger and the Pre-Closing Financing, if consummated, are likely to constitute an ownership change within the meaning of Section 382 of the Code, which could eliminate or otherwise substantially limit Frequency’s ability to use its NOLs and tax credit carryforwards. For these reasons, Frequency may not be able to use a material portion of its NOLs or tax credit carryforwards, even if Frequency attains profitability. Frequency has recorded a full valuation allowance related to its NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future tax benefit of such assets.

Changes in tax laws or in their implementation or interpretation may adversely affect Frequency’s business and financial condition.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect Frequency’s business and financial condition. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Frequency cannot predict whether, when, in what form or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided or whether they could increase its tax liability or require changes in the manner in which it operates in order to minimize increases in its tax liability.

Risks related to development, clinical testing, manufacturing, and regulatory approval

Frequency is heavily dependent on the MS Program, and if it is unable to enter into a strategic transaction for its MS Program, or is unable to develop an MS product candidate or such MS product candidate does not receive regulatory approval or is not successfully commercialized, its business could be materially adversely harmed.

To date, Frequency has invested a significant portion of its efforts and financial resources in the development of FX-322 for the treatment of SNHL. Frequency recently discontinued its FX-322 and FX-345 development programs following the results of its FX-322 Phase 2b study which showed no statistically significant difference at day 90 between those administered FX-322 versus those receiving placebo in the proportion of individuals that demonstrated an improvement in speech perception. Frequency’s future success is substantially dependent on its ability to successfully enter into a strategic transaction for its MS Program or complete development for, obtain regulatory approval for, and successfully commercialize an MS product candidate, which may never occur. Frequency currently has no products that are approved for commercial sale and may never be able to develop a marketable product. An MS development program will require a substantial portion of Frequency’s efforts and expenditures and will require clinical development, management of clinical and manufacturing activities, regulatory approval, establishing commercial scale manufacturing, and significant sales, marketing, and distribution efforts before Frequency can generate any revenues from any commercial sales. Frequency cannot be certain that it will be able to successfully complete any of these activities or that, even if it receives regulatory approval, a remyelinating therapeutic will be as effective as anticipated at treating MS.

The research, testing, manufacturing, labeling, approval, sale, packaging, marketing, and distribution of drug products are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries. Frequency is not permitted to market an MS product candidate until Frequency receive regulatory approval from the FDA or comparable regulatory authorities in other countries, and Frequency may never receive such regulatory approval. Furthermore, Frequency cannot be certain that it will be able to enter into any strategic transaction for the MS Program or that it will be able to enter into a strategic transaction on favorable terms. As a result, its financial position could be materially adversely affected, and Frequency may not be able to generate sufficient revenue to continue its business.

 

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Frequency utilizes its PCA approach to develop product candidates that are designed to activate progenitor cells, which is a new approach to therapeutic intervention and, as a result, successful development, approval, and commercialization of any product candidates, including an MS product candidate, is uncertain.

Frequency utilizes its PCA approach to develop product candidates, including in its MS development program. Frequency’s PCA approach is designed to identify pathways to activate progenitor cells already present in the body to treat conditions or diseases through cellular regeneration. Frequency has not, nor to its knowledge has any other company, received regulatory approval utilizing this mechanism of cellular regeneration. Given the novelty of its approach, Frequency could encounter a longer than expected regulatory review process, increased development costs, or unexpected delays in, or even prevention of, the regulatory approval and commercialization of its product candidates, and Frequency cannot be certain that its approach will lead to the development of any approvable or marketable products.

Clinical trials are expensive, time consuming, and difficult to design and implement, and involve an uncertain outcome. The results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate that Frequency advances into clinical trials may not achieve favorable results in later clinical trials, if any, or receive marketing approval.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and completed clinical trials are not necessarily predictive of future results, and any product candidates Frequency develops may not be further developed or may have additional unfavorable results in later studies or trials. Clinical trial failure may result from a multitude of factors, including, but not limited to, flaws in study design, dose selection, placebo effect, subject enrollment criteria, selection of subjects based on subject misrepresentations, and failure to demonstrate favorable safety or efficacy traits. As such, failure in clinical trials can occur at any stage of testing, which may result in setbacks in development or a determination to no longer pursue a particular product candidate or indication. For example, later-stage clinical trials in its hearing program failed to meet their primary end points despite promising results from earlier clinical trials and, as a result, Frequency ended its hearing program. Further, based upon negative or inconclusive results or a need for additional information, Frequency may decide, or regulatory authorities may require Frequency, to conduct additional clinical trials or preclinical studies.

Frequency may experience delays in initiating and completing any clinical trials that Frequency intends to conduct, and Frequency does not know whether its clinical trials will begin on time, need to be redesigned, enroll subjects on time, or be completed on schedule, or at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

 

   

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of its clinical studies;

 

   

obtaining regulatory approval to commence a trial;

 

   

reaching an agreement on acceptable terms with prospective contract research organizations, or CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

obtaining Institutional Review Board, or IRB, approval at each site within the United States, or Independent Ethics Committee, or IEC, approval at sites outside the United States;

 

   

business interruptions resulting from public health emergencies, such as the COVID-19 pandemic;

 

   

recruiting suitable subjects to participate in a trial in a timely manner and in sufficient numbers;

 

   

having subjects complete a trial or return for post-treatment follow-up;

 

   

imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues or side effects or failure of trial sites or investigators to adhere to regulatory requirements or follow trial protocols;

 

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clinical sites deviating from the trial protocol or dropping out of a trial;

 

   

addressing subject safety concerns that arise during a trial;

 

   

adding a sufficient number of clinical trial sites; or

 

   

manufacturing sufficient quantities of a product candidate for use in clinical trials.

Frequency could also encounter delays if a clinical trial is suspended or terminated by Frequency, the IRBs or IECs of the institutions in which such trials are being conducted, the FDA or other regulatory authorities, or recommended for termination by a Data and Safety Monitoring Board, or DSMB, for such trial. Such authorities may impose a suspension or termination or recommend an alteration due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or its clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial.

Furthermore, Frequency relies on CROs and clinical trial sites to ensure the proper and timely conduct of its clinical trials and, while Frequency has agreements governing its committed activities, Frequency has limited influence over its actual performance, as described in the section titled “Risks related to Frequency’s dependence on third parties.”

If Frequency experiences delays in the commencement or completion of any clinical trials, or if Frequency terminates a clinical trial prior to completion, the commercial prospects of any product candidate Frequency develops could be harmed, and its ability to generate revenues may be delayed. In addition, any delays in its clinical trials could increase its costs, slow the development and approval process and jeopardize its ability to commence product sales and generate revenues. Any of these occurrences may materially harm its business, financial condition, and results of operations. In addition, many of the factors that may cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of its product candidates.

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time- consuming, and inherently unpredictable, and if Frequency is ultimately unable to obtain regulatory approval for any product candidates, its business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during a product candidate’s clinical development and may vary among jurisdictions. The approval process may also be delayed by changes in government regulation, future legislation or administrative action. Frequency has not obtained regulatory approval for any product candidate and it is possible that Frequency will never obtain regulatory approval for any product candidate. Frequency is not permitted to market any of its product candidates in the United States until Frequency receives approval of an NDA from the FDA.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, Frequency must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authority, that such product candidates are safe and effective for their intended uses. In addition, data obtained from preclinical trials and clinical trials are susceptible to varying interpretations, and regulatory authorities may not interpret its data as favorably as Frequency does, which may further delay, limit, or prevent development efforts, clinical trials, or marketing approval. Furthermore, as more competing drug candidates within a class of drugs proceed through clinical development to regulatory review and approval,

 

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the amount and type of clinical data that may be required by regulatory authorities may increase or change. Even if Frequency believes the preclinical or clinical data for its product candidates are promising, such data may not be sufficient to support approval by the FDA and other comparable regulatory authorities.

The FDA or any foreign regulatory authority can delay, limit, or deny approval of a product candidate that Frequency develops or requires Frequency to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:

 

   

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of its clinical trials;

 

   

Frequency may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

 

   

serious and unexpected drug-related side effects experienced by participants in its clinical trials or by individuals using drugs similar to its product candidates, or other products containing an active ingredient in its product candidates;

 

   

negative or ambiguous results from its clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

   

Frequency may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

 

   

the FDA or comparable foreign regulatory authorities may disagree with its interpretation of data from preclinical studies or clinical trials;

 

   

the data collected from clinical trials of its product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and Frequency may be required to conduct additional clinical trials;

 

   

the FDA’s or the applicable foreign regulatory authority’s disagreement regarding the formulation, the labeling, and/or the specifications of its product candidates;

 

   

the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which Frequency contracts for clinical and commercial supplies;

 

   

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering its clinical data insufficient for approval; and

 

   

significant regulatory GxP non-compliance or data integrity findings from FDA Bioresearch Monitoring inspections or pre-approval inspections inclusive of clinical investigator sites, contracted partners and their company’s quality management system and execution thereof.

Of the large number of drugs in development, only a small percentage successfully complete the regulatory approval processes and are commercialized. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in Frequency’s failing to obtain regulatory approval to market its product candidates, which would significantly harm its business, results of operations, and prospects.

In addition, the FDA or the applicable foreign regulatory authority also may approve a product candidate for a more limited indication or patient population than Frequency originally requested, and the FDA or applicable foreign regulatory authority may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing circumstances could materially harm the commercial prospects for its product candidates and its business.

 

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Enrollment and retention of individuals in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside Frequency’s control.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on Frequency’s ability to enroll a sufficient number of subjects who remain in the study until its conclusion. Frequency may encounter delays in enrolling, or be unable to enroll, a sufficient number of subjects to complete any of its clinical trials, and even once enrolled, Frequency may be unable to retain a sufficient number of subjects to complete any of its trials.

Subject enrollment and retention in clinical trials depends on many factors, including:

 

   

the subject eligibility criteria defined in the protocol;

 

   

the size of the subject population required for analysis of the trial’s primary endpoints;

 

   

the nature of the trial protocol, trial design, side effects or other results that may arise in development;

 

   

the existing body of safety and efficacy data with respect to the product candidate;

 

   

the proximity of subjects to clinical sites;

 

   

its ability to recruit clinical trial investigators with the appropriate competencies, motivation and experience;

 

   

clinicians’ and subjects’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications Frequency is investigating;

 

   

competing clinical trials being conducted by other companies or institutions;

 

   

its ability to obtain and maintain subject consents;

 

   

the risk that subjects enrolled in clinical trials will drop out of the trials before completion; and

 

   

any ongoing impact of the COVID-19 pandemic, see “The COVID-19 pandemic has caused and could continue to cause disruptions to Frequency’s business, including its preclinical studies, clinical trials and operations and could adversely impact its financial condition and results of operations.”;

In addition, Frequency’s clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as its product candidates, and this competition will reduce the number and types of subjects available to Frequency, because some people who might have opted to enroll in its trials may instead opt to enroll in a trial being conducted by one of its competitors. Furthermore, any negative results Frequency may report in clinical trials of any product candidate may make it difficult or impossible to recruit and retain people in other clinical trials of that same product candidate. Delays or failures in planned subject enrollment or retention may result in increased costs or program delays, which could have a harmful effect on its ability to develop a product candidate or could render further development impossible.

Results of preclinical studies, clinical trials, or analyses may not be indicative of results that may be obtained in later trials or preclinical studies.

The results of preclinical studies, clinical trials, or analyses of the results from such trials may not be predictive of the results of later preclinical studies or clinical trials. Product candidates in later clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and prior clinical trials or having shown promising results based on analyses of data from earlier trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding earlier promising results. Frequency’s FX-322 Phase 2b results (FX-322-208), for example, showed no statistically significant difference at day 90 between those administered FX-322 versus those receiving placebo in the proportion of individuals that demonstrated an improvement in speech perception. In addition, conclusions based on promising data from analyses of clinical results, such as the prospective and post hoc analysis of data from its Phase 1/2 clinical trial of FX-322 for the

 

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treatment of SNHL (FX-322-201), may be shown to be incorrect in subsequent clinical trials that have pre-specified end points or may not be considered adequate by regulatory authorities. Further, Frequency has in the past and may in the future abandon product candidates that Frequency initially advanced for development based on positive preclinical results due to unfavorable results from additional preclinical studies. For example, Frequency recently discontinued its FX-322 and FX-345 development programs after the results of the FX-322-208 clinical trial. Even if Frequency completes later clinical trials as planned, Frequency cannot be certain that its results will support the safety and efficacy requirements sufficient to obtain regulatory approval, and, as a result, its clinical development plans may be materially harmed.

Interim and preliminary “top-line” data from its clinical trials that Frequency announces or publishes from time to time may change as more subject data becomes available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, Frequency may publicly disclose interim, top-line or preliminary data from its clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. Frequency also makes assumptions, estimations, calculations and conclusions as part of its analyses of data, and Frequency may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that Frequency reports may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the top-line or preliminary data Frequency previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

From time to time, Frequency may also disclose interim data from its preclinical studies and clinical trials. Interim data from clinical trials that Frequency may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more subject data become available. Adverse differences between interim data and final data could significantly harm its business prospects. Further, disclosure of interim data by Frequency or by its competitors could result in volatility in the price of Frequency common stock.

Further, others, including regulatory agencies, may not accept or agree with Frequency’s assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and its company in general. In addition, the information Frequency chooses to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what Frequency determines is material or otherwise appropriate information to include in its disclosure.

If the interim, top-line or preliminary data that Frequency reports differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, its ability to obtain approval for, and commercialize, its product candidates may be harmed, which could harm its business, operating results, prospects or financial condition.

Any of Frequency’s product candidates or component of a product candidate that Frequency develops or the administration thereof, may cause serious adverse events or undesirable side effects, which may halt their clinical development, delay or prevent marketing approval, or, if approved, require them to be taken off the market, include safety warnings, or otherwise limit their sales.

Serious adverse events or undesirable side effects caused by its product candidates or component of a product candidate Frequency develops could cause Frequency or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Results of any clinical trial Frequency conducts could reveal a high and unacceptable severity and prevalence of side effects.

 

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If unacceptable side effects arise in the development of any product candidate, Frequency, the FDA, or the IRBs or IECs at the institutions in which its studies are conducted, or the DSMB, if constituted for their clinical trials, could recommend a suspension or termination of their clinical trials, or the FDA or comparable foreign regulatory authorities could order Frequency to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related side effects could affect subject recruitment or the ability of enrolled subjects to complete a trial or result in potential product liability claims. These side effects also may not be appropriately recognized or managed by the treating medical staff. Frequency may have to train medical personnel regarding the proper administration protocol for their product candidates and to understand the side effect profiles for their clinical trials and upon any commercialization of any of their product candidates. Inadequate training in recognizing or managing the potential side effects of their product candidates could result in subject injury or death. Any of these occurrences may harm its business, financial condition, and prospects significantly.

Additionally, if any product candidates Frequency develops receives marketing approval, and Frequency or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may suspend, withdraw, or limit approvals of such product, or seek an injunction against its manufacture or distribution;

 

   

regulatory authorities may require Frequency to recall a product or Frequency may decide to initiate a voluntary recall of a product;

 

   

regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;

 

   

additional restrictions may be imposed on the marketing of the product or the manufacturing processes for the product or any component thereof;

 

   

Frequency may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to subjects;

 

   

Frequency may be required to conduct post-market studies or agree to post marketing commitments;

 

   

Frequency could be sued and held liable for harm caused to subjects;

 

   

the product may become less competitive; and

 

   

Frequency’s reputation may suffer.

Any of these events could prevent Frequency from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm its business, results of operations, and prospects.

Disruptions at the FDA and other government agencies caused by funding shortages, changes in the federal administration or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact Frequency’s business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect Frequency’s business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory

 

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agencies, such as the FDA, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs or the FDA experiences other delays, it could significantly impact the ability of the FDA to timely review and process their regulatory submissions, which could have a material adverse effect on their business.

Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of foreign and domestic manufacturing facilities at various points. Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of their employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic or issue guidance materially affecting the conduct of clinical trials. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process its regulatory submissions, which could have a material adverse effect on its business. Further, in Frequency’s operations as a public company, future government shutdowns or delays could impact its ability to access the public markets and obtain necessary capital in order to properly capitalize and continue its operations.

Frequency may not be successful in its efforts to identify additional product candidates. Due to Frequency’s limited resources and access to capital, Frequency must prioritize development of certain product candidates, the choice of which may prove to be wrong and adversely affect its business.

Frequency may fail to identify viable new product candidates for clinical development for several reasons. If Frequency fails to identify additional potential product candidates, its business could be materially harmed.

Research programs to develop additional product candidates based on its PCA approach require substantial technical, financial, and human resources whether or not they are ultimately successful. Frequency’s research programs may initially show promise in identifying potential indications or product candidates, yet fail to yield results for clinical development for several reasons, including:

 

   

the research methodology used may not be successful in identifying potential indications or product candidates;

 

   

potential product candidates may, after further study, be shown to have harmful or unexpected adverse effects or other characteristics that indicate they are unlikely to be effective drugs; or

 

   

it may take greater human and financial resources than Frequency possesses to identify additional therapeutic opportunities for its product candidates or to develop suitable potential product candidates through internal research programs, thereby limiting its ability to develop, diversify, and expand its product portfolio.

Because Frequency has limited financial and human resources, Frequency focuses on research programs and product candidates for a limited set of indications. As a result, Frequency may forego or delay pursuit of opportunities with other product candidates or for other indications that could have greater commercial potential or a greater likelihood of success. Frequency’s resource allocation decisions may cause Frequency to fail to capitalize on viable commercial products or profitable market opportunities.

Accordingly, there can be no assurance that Frequency will ever be able to identify additional therapeutic opportunities for its product candidates or to develop suitable potential product candidates through internal research programs, which could materially adversely affect its future growth and prospects. Frequency may focus its efforts and resources on potential product candidates or other potential programs that ultimately prove to be unsuccessful.

 

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Frequency has never obtained marketing approval for a product candidate and Frequency may be unable to obtain, or may be delayed in obtaining, marketing approval for any product candidate.

Frequency has never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that Frequency submits for its product candidates or may conclude after review of its data that Frequency’s applications are insufficient to obtain marketing approval of its product candidates. Frequency believes its approach of activating progenitor cells to treat conditions or diseases through cellular regeneration is novel and, as a result, the process for, and the outcome of, FDA approval is especially uncertain. If the FDA does not accept or approve its NDAs for its product candidates, it may require that Frequency conducts additional clinical, preclinical, or manufacturing validation studies and submit that data before it will reconsider its applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA that Frequency submits may be delayed or may require Frequency to expend more resources than Frequency has available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve its NDAs.

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent Frequency from commercializing its product candidates, generating revenues, and achieving and sustaining profitability. If any of these outcomes occur, Frequency may be forced to abandon its development efforts for its product candidates, which could significantly harm Frequency’s business.

Even if Frequency obtains FDA approval for a product candidate in the United States, Frequency may never obtain approval for or commercialize the product candidate in any other jurisdiction, which would limit its ability to realize its full market potential.

In order to market any product in a particular jurisdiction, Frequency or its collaborators must establish and comply with numerous and varying regulatory requirements regarding safety and efficacy on a country-by-country basis. Approval by the FDA in the United States does not ensure approval by comparable regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact Frequency’s or its collaborators’ ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for Frequency and require additional preclinical studies or clinical trials which could be costly and time- consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of its products in those countries. Frequency does not have any product candidates approved for sale in any jurisdiction, including in international markets, and Frequency does not have experience in obtaining regulatory approval in international markets. If Frequency fails to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, its target market will be reduced and Frequency will be unable to realize the full market potential of any product Frequency develops.

Even if Frequency obtains regulatory approval for any product candidate, Frequency will still face extensive and ongoing regulatory requirements and obligations, which may result in significant additional expense, and any product candidates, if approved, may face future development and regulatory difficulties.

Any product candidate for which Frequency obtains marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, and advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports,

 

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establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance, and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and Good Clinical Practice, or GCP, and requirements for any clinical trials that Frequency conducts post-approval.

Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If a product candidate receives marketing approval, the accompanying label may limit the approved indicated use of the product, which could limit sales of the product. The FDA may also require costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use, and if Frequency markets its products for uses beyond their approved indications, Frequency may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs, may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with its products, manufacturers, or manufacturing processes or failure to comply with regulatory requirements, may yield various results, including:

 

   

restrictions on manufacturing such products;

 

   

restrictions on the labeling or marketing of products;

 

   

restrictions on product distribution or use;

 

   

requirements to conduct post-marketing studies or clinical trials;

 

   

warning letters or untitled letters;

 

   

refusal to approve pending applications or supplements to approved applications that Frequency submit;

 

   

recalls or market withdrawals of products;

 

   

fines, restitution, or disgorgement of profits or revenues;

 

   

suspension or withdrawal of marketing approvals;

 

   

refusal to permit the import or export of its products;

 

   

product seizure; or

 

   

injunctions, consent decrees, or the imposition of civil or criminal penalties.

Further, the FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of a product candidate. If Frequency is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Frequency is not able to maintain regulatory compliance, Frequency may lose any marketing approval that it may have obtained, which would adversely affect its business, prospects, and ability to achieve or sustain profitability.

Frequency also cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. The policies of the FDA and of other comparable regulatory authorities may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of a product candidate. If Frequency is slow or

 

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unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Frequency is not able to maintain regulatory compliance, Frequency may be subject to enforcement action, and it may not achieve or sustain profitability, which would adversely affect its business, prospects, financial condition, and results of operations. Furthermore, noncompliance by Frequency or any collaborator with regulatory requirements, including safety monitoring or pharmacovigilance, may also result in significant financial penalties, which would adversely affect its business.

Potential product liability lawsuits against Frequency could cause Frequency to incur substantial liabilities and limit commercialization of any products that it may develop.

The use of any product candidate Frequency may develop in clinical trials and the sale of any products for which Frequency obtains marketing approval exposes Frequency to the risk of product liability claims. Product liability claims might be brought against Frequency by patients, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with its products. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If Frequency cannot successfully defend against product liability claims, it could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

impairment of its business reputation and significant negative media attention;

 

   

withdrawal of participants from its clinical trials;

 

   

significant costs to defend the litigation;

 

   

distraction of management’s attention from its primary business;

 

   

substantial monetary awards to patients or other claimants;

 

   

inability to commercialize a product candidate;

 

   

product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

   

decreased market demand for any product; and

 

   

loss of revenue.

The product liability insurance Frequency currently carries, and any additional product liability insurance coverage Frequency acquires in the future, may not be sufficient to reimburse Frequency for any expenses or losses Frequency may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, Frequency may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect Frequency against losses due to liability. If Frequency obtains marketing approval for any product candidate, Frequency intends to acquire insurance coverage to include the sale of commercial products; however, Frequency may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim, or series of claims, brought against Frequency could cause its share price to decline and, if judgments exceed its insurance coverage, could adversely affect its results of operation and business, including preventing or limiting the commercialization of any product candidates Frequency develops.

The COVID-19 pandemic has caused and could continue to cause disruptions to Frequency’s business, including its preclinical studies, clinical trials and operations and could adversely impact its financial condition and results of operations.

The global outbreak of COVID-19 continues to rapidly evolve and continues to have indeterminable adverse effects on general commercial activity and the world economy. Due to the uncertain nature of the effects of the outbreak, particularly in the United States, enrollment, participation and retention in Frequency’s planned trials may be reduced, and for a number of the clinical sites, halted for an unknown period of time. Any reduction in enrollment, participation and retention and any halts may delay clinical trials and development plans for any product candidates, which could have an adverse impact on Frequency’s business and results of operations.

 

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If COVID-19 or its variants again spread in the United States and worldwide, and measures to mitigate the ongoing effects of the pandemic, such as stay home orders and/or advisories persist or are reintroduced, Frequency may continue to experience disruptions and other effects on its business that could severely impact its business, operations, preclinical studies and clinical trials, including:

 

   

delays, difficulties or postponement in enrolling and retaining subjects in clinical trials;

 

   

delays, difficulties or postponement in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

   

diversion of healthcare resources away from the conduct of clinical trials;

 

   

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

 

   

interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;

 

   

interruption of, or delays in receiving, supplies of its product candidates from its contract manufacturing organizations, or CMOs, due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

 

   

interruptions in planned trials due to restricted or limited operations at its laboratory facility;

 

   

continual changes to operating requirements and related expenses, limitations in employee resources that would otherwise be focused on the conduct of its preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people and resulting losses of productivity and employee work culture;

 

   

risk that participants enrolled in its clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

 

   

refusal of the FDA, or other government agencies, to accept data from clinical trials in these affected geographies;

 

   

interruption or delayed to its sourced discovery and clinical activities, and;

 

   

inability to obtain additional financing or access the financial markets.

The extent to which COVID-19 may continue to impact Frequency’s business, preclinical studies, clinical trials and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence. In addition, if Frequency or any of the third parties with whom Frequency engages were to experience shutdowns or additional business disruptions, Frequency’s ability to conduct its business in the manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on its business and its financial results. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, resulting in an economic downturn that could continue to significantly impact its business, financial condition and results of operations. To the extent the COVID-19 pandemic adversely affects Frequency’s business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

 

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Risks related to commercialization

Frequency faces significant competition from biotechnology and pharmaceutical companies, and its operating results will suffer if Frequency fails to compete effectively.

The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Frequency’s success is highly dependent on its ability to acquire, develop, and obtain marketing approval for new products on a cost-effective basis and to market them successfully. If a product candidate Frequency develops is approved, Frequency will face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies, and early-stage companies, particularly if the early-stage company has a collaborative arrangement with a large and established company. Frequency is aware of several companies developing programs with research and development efforts to treat MS through the regeneration of myelin.

Competition could render any product candidate Frequency develops obsolete, less competitive, or uneconomical. Frequency’s competitors may, among other things:

 

   

have significantly greater name recognition and financial, manufacturing, marketing, product development, technical, and human resources than Frequency does, with mergers and acquisitions in the biotechnology and pharmaceutical industries resulting in even more resources being concentrated in its competitors;

 

   

more effectively recruit and retain qualified scientific and management personnel;

 

   

more effectively establish clinical trial sites and subject registration;

 

   

develop and commercialize products that are safer, more effective, less expensive, more convenient, or easier to administer, or have fewer or less severe side effects;

 

   

obtain quicker regulatory approval;

 

   

better protect their patents and intellectual property or acquire technologies that are complementary to, or necessary for, its programs;

 

   

implement more effective approaches to sales, marketing, pricing, coverage, and reimbursement; or

 

   

form more advantageous strategic alliances or collaborations.

If Frequency is not able to effectively compete for any of the foregoing reasons, its business will be materially harmed.

The successful commercialization of any product candidate Frequency develops will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels, and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for its product candidates, if approved, could limit Frequency’s or its collaborators’ ability to market those products and decrease Frequency’s or its collaborators’ ability to generate revenue.

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers, and other third-party payors are essential for most patients to be able to afford prescription medications. Frequency’s ability to achieve acceptable levels of coverage and reimbursement for products or procedures using its products by governmental authorities, private health insurers and other organizations will influence its ability to successfully commercialize any product candidates Frequency develops. Assuming Frequency obtains coverage for any product candidates or procedures using its products by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Frequency cannot be sure that coverage and reimbursement in the United States or elsewhere will be available for any product Frequency commercializes, and any reimbursement that may become available may be decreased or eliminated in the future.

 

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Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and the current presidential administration and Congress have introduced several proposals related to drug pricing. Many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar, or a less expensive therapy is available. A third-party payor may consider such a drug as substitutable and only offer to reimburse patients for the less expensive product. Even if Frequency shows improved efficacy, pricing of existing drugs may limit the amount Frequency will be able to charge for any product Frequency commercializes. Payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable Frequency to realize a satisfactory return on its investment in its product candidates. If reimbursement is not available or is available only at limited levels, Frequency may not be able to successfully commercialize its product candidates and may not be able to obtain a satisfactory financial return on its product candidates. Additionally, Frequency’s ability to obtain a satisfactory financial return depends on what, if any, proposals related to drug pricing may be implemented and, if implemented, when they might take effect.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for its product candidates.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor, and one third-party payor’s decision to cover a product does not ensure that other payors will also provide similar coverage. Additionally, the process for determining whether a third-party payor will provide coverage for a product is typically separate from the process for setting the price of such product or establishing the reimbursement rate that the payor will pay for the product once coverage is approved. As a result, the determination of coverage and reimbursement is often a time-consuming and costly process that will require Frequency to provide scientific and clinical support for the use of Frequency’s product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and Frequency believes that changes in these rules and regulations are likely.

Moreover, increasing efforts by governmental and third-party payors in the United States to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for any product Frequency commercializes. Frequency expects to experience pricing pressures in connection with the sale of any product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations, and additional legislative, administrative, or regulatory changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.

Frequency may also be subject to extensive governmental price controls and other market regulations outside of the United States, and Frequency believes the increasing emphasis on cost-containment initiatives in other countries have and will continue to put pressure on the pricing and usage of medical products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national

 

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health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that Frequency is able to charge for products Frequency commercializes. Accordingly, in markets outside the United States, the reimbursement for products Frequency or commercialize may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Even if a product candidate Frequency develops receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors, or others in the medical community necessary for commercial success.

If a product candidate Frequency develops receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. In addition, physicians, patients, and third-party payors may prefer other novel products to Frequency’s. If a product candidate does not achieve an adequate level of acceptance, Frequency may not generate significant product revenues or become profitable. The degree of market acceptance of its product candidates, if approved, will depend on several factors, including, but not limited to:

 

   

the efficacy and potential advantages compared to alternative treatments;

 

   

effectiveness of sales and marketing efforts;

 

   

the cost of treatment in relation to alternative treatments, including any similar generic treatments;

 

   

Frequency’s ability to offer its products for sale at competitive prices;

 

   

the convenience and ease of administration compared to alternative treatments;

 

   

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

the strength of marketing and distribution support;

 

   

the availability of third-party coverage and adequate reimbursement;

 

   

the prevalence and severity of any side effects; and

 

   

any restrictions on the use of its product together with other medications.

Because Frequency expects sales of its product candidates, if approved, to generate substantially all its revenues for the foreseeable future, the failure of its product candidates to find market acceptance would harm its business and could require Frequency to seek additional financing.

If Frequency is unable to establish sales and marketing capabilities either on its own or in collaboration with third parties, Frequency may not be successful in commercializing any product candidate Frequency develops, if approved.

In order to market and successfully commercialize any product candidate Frequency develops, if approved, Frequency must build its sales and marketing capabilities or enter into collaborations with third parties for these services. Frequency currently has no sales, marketing or distribution capabilities and as a company have no experience in marketing products. To the extent that Frequency depends on collaborators for sales and marketing activities, any revenues Frequency receives will depend upon the success of those collaborators’ sales and marketing teams and the collaborators’ prioritization of its product and compliance with applicable regulatory requirements, and there can be no assurance that the collaborators’ efforts will be successful.

If Frequency is unable to enter into a collaboration for the commercialization of product candidates Frequency develops, if approved, Frequency may be forced to delay the commercialization of its product candidates or reduce the scope of its sales or marketing activities, which would have an adverse effect on its business, operating results and prospects.

 

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A variety of risks associated with operating internationally could materially adversely affect Frequency’s business.

Frequency’s business strategy includes potentially expanding internationally if any of its product candidates receive regulatory approval. Doing business internationally involves several risks, including, but not limited to:

 

   

multiple, conflicting, and changing laws and regulations, such as data privacy and security laws and regulations, tax laws, export and import restrictions, economic sanctions laws and regulations, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses;

 

   

failure by Frequency to obtain and maintain regulatory approvals for the use of its products in various countries;

 

   

additional potentially relevant third-party patent rights;

 

   

complexities and difficulties in obtaining protection and enforcing its intellectual property;

 

   

difficulties in staffing and managing foreign operations;

 

   

complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems;

 

   

limits in its ability to penetrate international markets;

 

   

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for its products, and exposure to foreign currency exchange rate fluctuations;

 

   

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions;

 

   

certain expenses, including, among others, expenses for travel, translation, and insurance; and

 

   

regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, its books and records provisions, or its anti-bribery provisions, as well as other applicable laws and regulations prohibiting bribery and corruption.

Any of these factors could significantly harm any future international expansion and operations and, consequently, Frequency’s results of operations.

Risks related to Frequency’s dependence on third parties

Frequency may not succeed in establishing and maintaining collaborations, which may significantly limit its ability to successfully develop and commercialize any product candidates.

Frequency may seek collaborations for the development and commercialization of any product candidates. The process of establishing and maintaining collaborative relationships is difficult, time-consuming, and involves significant uncertainty, such as:

 

   

a collaborator may shift its priorities and resources away from its product candidates due to a change in business strategies, or a merger, acquisition, sale, or downsizing;

 

   

a collaborator may seek to renegotiate or terminate its relationships with Frequency due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons;

 

   

a collaborator may cease development in therapeutic areas which are the subject of its collaboration;

 

   

a collaborator may not devote sufficient capital or resources towards its product candidates, or may fail to comply with applicable regulatory requirements;

 

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a collaborator may change the success criteria for a product candidate, thereby delaying or ceasing development of such candidate;

 

   

a significant delay in initiation of certain development activities by a collaborator will also delay payment of milestones tied to such activities, thereby impacting its ability to fund its own activities;

 

   

a collaborator could develop a product that competes, either directly or indirectly, with its product candidate;

 

   

a collaborator with commercialization obligations may not commit sufficient financial resources or personnel to the marketing, distribution, or sale of a product;

 

   

a collaborator with manufacturing responsibilities may encounter regulatory, resource, or quality issues and be unable to meet demand requirements;

 

   

a collaborator may terminate a strategic alliance;

 

   

a dispute may arise between Frequency and a collaborator concerning the research, development, or commercialization of a product candidate resulting in a delay in milestones or royalty payments or termination of the relationship and possibly resulting in costly litigation or arbitration, which may divert management’s attention and resources; and

 

   

a collaborator may use its products or technology in such a way as to invite litigation from a third party.

If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, Frequency’s research, clinical development, manufacturing, or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for Frequency to assume responsibility for expenses or activities that would otherwise have been the responsibility of its collaborator. If Frequency is unable to establish and maintain collaborations on acceptable terms or to successfully transition away from terminated collaborations, Frequency may have to delay or discontinue further development of one or more of its product candidates, undertake development and commercialization activities at its own expense, or find alternative sources of capital, which would have a material adverse impact on Frequency’s clinical development plans and business.

Frequency’s employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties Frequency may engage in connection with development and commercialization may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on its business.

Frequency’s employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties Frequency may engage in connection with development and commercialization of its product candidates, could engage in misconduct, including intentional, reckless, or negligent conduct or unauthorized activities that violate applicable laws, rules, and regulations including: the laws and regulations of the FDA or other similar regulatory requirements of other authorities, including those laws that require the reporting of true, complete, and accurate information to such authorities; manufacturing standards; data privacy, security, fraud and abuse, and other healthcare laws and regulations; or laws that require the reporting of true, complete, and accurate financial information and data. Specifically, 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 may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Activities subject to these or other laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to Frequency’s reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions Frequency takes to detect and prevent this activity may not be effective in controlling

 

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unknown or unmanaged risks or losses or in protecting Frequency from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, Frequency is subject to the risk that a person or government agency could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against Frequency or them and Frequency is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business and results of operations, including the imposition of significant civil, criminal, and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of its operations.

Frequency currently intends to rely on third-party CMOs for the production of clinical supply and the production of commercial supply of any product candidates, as well as to supply raw materials necessary to produce its product candidates. Frequency’s dependence on CMOs may impair the development of its product candidates and may impair their commercialization, which would adversely impact its business and financial position.

Frequency does not own facilities for manufacturing any product candidate. Instead, Frequency relies on and expects to continue to rely on CMOs for the supply of cGMP grade clinical trial materials of any product candidates Frequency develops and, in future, for commercial quantities. Reliance on CMOs may expose Frequency to more risk than if Frequency was to manufacture its product candidates itself. If any CMO Frequency engages is unable to provide sufficient supply of any product candidate Frequency develops, Frequency may be unable to arrange for an alternative supply or to do so on commercially reasonable terms or in a timely manner, which could delay any clinical trials, the commercial launch of its product candidates, if approved, or, regarding any commercial supply, result in a shortage in supply that could negatively impact its revenues.

The facilities used to manufacture any product candidates Frequency develops must be inspected by the FDA and comparable foreign regulatory authorities. While Frequency provides oversight of manufacturing activities, Frequency does not and will not control the execution of manufacturing activities by, and are or will be dependent on, its CMOs for compliance with cGMP requirements for the manufacture of any product candidates. As a result, Frequency is subject to the risk that any product candidates may have manufacturing defects that Frequency has limited ability to prevent. If a CMO cannot successfully manufacture material that conforms to its specifications and the regulatory requirements, Frequency will not be able to secure or maintain regulatory approval for the use of its product candidates in clinical trials, or for commercial distribution of any product candidates, if approved. Frequency has limited control over the ability of its CMOs to maintain adequate quality control, quality assurance, and qualified personnel, and Frequency was not involved in developing its CMOs’ policies and procedures.

If the FDA or comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of Frequency’s product candidates or if it withdraws any such approval or finds deficiencies in the future, Frequency may need to find alternative manufacturing facilities, which would delay its development program and significantly impact its ability to develop, obtain regulatory approval for, or commercialize its product candidates, if approved. In addition, any failure to achieve and maintain compliance with laws, regulations, and standards related to manufacturing could subject Frequency to risks, including the risk that Frequency may have to suspend the manufacture of its product candidates, that obtained approvals could be revoked, and that the FDA or another governmental regulatory authority may take enforcement actions, including untitled letters, warning letters, seizures, injunctions, or product recalls. Furthermore, CMOs may breach existing agreements they have with Frequency because of factors beyond its control. They may also terminate or refuse to renew their agreement at a time that is costly or otherwise inconvenient for Frequency. If Frequency was unable to find an adequate CMO or another acceptable solution in time, its clinical trials could be delayed, or its commercial activities could be harmed.

 

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Frequency contracts for the supply of the active pharmaceutical ingredient, or API, and other raw material necessary to produce any product candidates Frequency develops. Supplies of API or other raw material could be interrupted from time to time and Frequency cannot be certain that alternative supplies could be obtained within a reasonable time frame, at an acceptable cost, or at all. The extent to which the COVID-19 pandemic impacts Frequency’s ability to procure sufficient supplies for the development of its products and product candidates will depend on the severity and duration of the spread of the virus, and the actions undertaken to mitigate the spread of COVID-19 or treat its effects and may cause delays. In addition, a disruption in the supply of API or other raw material could delay the commercial launch of its product candidates, if approved, or result in a shortage in supply, which would impair its ability to generate revenues. Growth in the costs and expenses of API or other raw material may also impair its ability to cost-effectively manufacture its product candidates. In addition, there may be a limited number of suppliers for API or other raw material that Frequency may use to manufacture its product candidates, and Frequency cannot be certain that Frequency will be able to engage such suppliers in a timely manner or at all. If Frequency is unable to do so, clinical development of its product candidates, commercialization for any approved product, or its business could be adversely affected.

Finding new CMOs or third-party suppliers involves additional cost and requires its management’s time and focus. In addition, there is typically a transition period when a new CMO commences work. Although Frequency has not, and does not intend to, begin a clinical trial unless Frequency believes it has on hand, or will be able to obtain, a sufficient supply of its product candidates to complete the clinical trial, any significant delay in the supply of its product candidates or the raw materials needed to produce its product candidates, could considerably delay conducting its clinical trials and potential regulatory approval of its product candidates.

As part of their manufacture of Frequency’s product candidates, its CMOs and third-party suppliers are expected to comply with and respect the proprietary rights of others. If a CMO or third-party supplier fails to acquire the proper licenses or otherwise infringes the proprietary rights of others in the course of providing services to Frequency, Frequency may have to find alternative CMOs or third-party suppliers or defend against claims of infringement, either of which would significantly impact its ability to develop, obtain regulatory approval for, or commercialize its product candidates, if approved.

Frequency intends to rely on third parties to conduct, supervise, and monitor its clinical trials. If those third parties do not successfully carry out their contractual duties, or if they perform in an unsatisfactory manner, it may harm its business.

Frequency has relied, and will continue to rely, on CROs, CRO-contracted vendors, and clinical trial sites to ensure the proper and timely conduct of its clinical trials and any future clinical trials of other product candidates. Frequency’s reliance on CROs and clinical trial sites for clinical development activities limits its control over these activities and Frequency was not involved in developing their policies and procedures, but Frequency remains responsible for ensuring that each of its trials is conducted in accordance with the applicable protocol and legal, regulatory, and scientific standards.

Frequency and its CROs will be required to comply with the Good Laboratory Practice requirements for its preclinical studies and GCP requirements for its clinical trials, which are regulations and guidelines enforced by the FDA and are also required by comparable foreign regulatory authorities. Regulatory authorities enforce GCP requirements through periodic inspections of trial sponsors, principal investigators, and clinical trial sites. If Frequency or its CROs fail to comply with GCP requirements, the clinical data generated in its clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require Frequency to perform additional clinical trials before approving its marketing applications. Frequency cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of its clinical trials comply with GCP requirements. In addition, its clinical trials must be conducted with product produced under cGMP requirements. Accordingly, if its CROs fail to comply with these requirements, Frequency may be required to repeat clinical trials, which would delay the regulatory approval process.

 

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Frequency’s CROs are not its employees, and Frequency does not control whether they devote sufficient time and resources to its clinical trials. Frequency’s CROs may also have relationships with other commercial entities, including its competitors, for whom they may also be conducting clinical trials, or other drug development activities, which could harm its competitive position. Frequency faces the risk of potential unauthorized disclosure or misappropriation of its intellectual property by CROs, which may reduce its trade secret protection and allow Frequency’s potential competitors to access and exploit its proprietary technology. If its CROs do not successfully carry out their contractual duties or obligations, or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to its clinical protocols or regulatory requirements or for any other reason, its clinical trials may be extended, delayed or terminated, and Frequency may not be able to obtain regulatory approval for, or successfully commercialize, any product candidate that Frequency develops. As a result, its financial results and the commercial prospects for any product candidate that Frequency develops would be harmed, its costs could increase, and its ability to generate revenue could be delayed.

If its relationship with any CROs terminates, Frequency may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management’s time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact its ability to meet its desired clinical development timelines. While the COVID-19 pandemic and government measures taken in response have had a significant impact on its CROs and their ability to conduct clinical trials, there is potential they will face disruption in the future, which may affect its ability to initiate and complete its clinical trials. Though Frequency intends to carefully manage its relationships with its CROs, there can be no assurance that Frequency will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on its business, financial condition, and prospects.

Risks related to healthcare laws and other legal compliance matters

Enacted and future healthcare legislation may increase the difficulty and cost for Frequency to obtain marketing approval of and commercialize its product candidates, if approved, and may affect the prices Frequency may set.

In the United States and other jurisdictions, there have been, and Frequency expects there will continue to be, a number of legislative and regulatory changes, and additional proposed changes, to the healthcare system that could affect its future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of health care. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the biotechnology and pharmaceutical industries include the following: an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents;

 

   

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

 

   

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and biologics that are inhaled, infused, instilled, implanted, or injected;

 

   

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

 

   

establishment of a Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

 

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Since its enactment, there have been judicial challenges to certain aspects of the ACA. 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 Supreme Court’s decision, President Biden issued an executive order initiating a special enrollment period from February 15, 2021 through August 15, 2021 for purposes 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. It is unclear how healthcare reform measures, if any, will impact its business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In March 2021, the American Rescue Plan Act of 2021 was signed into law, which, among other things, eliminated the statutory cap on drug manufacturers’ Medicaid Drug Rebate Program rebate liability, effective January 1, 2024. Under current law enacted as part of the ACA, drug manufacturers’ Medicaid Drug Rebate Program rebate liability is capped at 100% of the average manufacturer price for a covered outpatient drug. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices Frequency may obtain.

Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been administration efforts, Congressional inquiries and proposed federal and state legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient assistance programs and reform government program reimbursement methodologies for drugs. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. Most recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. For that and other reasons, it is currently unclear how the IRA will be effectuated. Frequency expects that additional U.S. federal healthcare reform measures will be implemented in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for its product candidates or additional pricing pressures.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological 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, measures designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm its business, results of operations, financial condition, and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices. These reforms could reduce the ultimate demand for its product candidates or put pressure on its product pricing.

In markets outside of the United States, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. Frequency cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction. If Frequency or any third parties Frequency may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Frequency or such third parties are not able to maintain regulatory compliance, its product candidates may lose any regulatory approval that may have been obtained and Frequency may not achieve or sustain profitability.

 

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Frequency’s business operations and current and future relationships with contractors, investigators, healthcare professionals, consultants, third-party payors, patient organizations, customers, and others will be subject to applicable healthcare regulatory laws, which could expose Frequency to penalties.

Frequency’s business operations and current and future arrangements with contractors, investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers may expose Frequency to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which Frequency conducts its operations, including how Frequency researches, markets, sells, and distributes its product candidates, if approved. Such laws include:

 

   

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The U.S. federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand;

 

   

the U.S. federal false claims, including the civil False Claims Act, or FCA, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. A claim includes “any request or demand” for money or property presented to the federal government. In addition, pharmaceutical manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;

 

   

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and 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. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation:

 

   

the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices;

 

   

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

 

   

federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products;

 

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the U.S. federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse midwives) and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members;

 

   

analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to its business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities;

 

   

similar healthcare laws and regulations in the European Union, or EU, and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers; and

 

   

laws and regulations prohibiting bribery and corruption such as the FCPA, which, among other things, prohibits U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations or foreign government-owned or affiliated entities, candidates for foreign public office, and foreign political parties or officials thereof.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of Frequency’s business activities, including its consulting agreements and other relationships with healthcare providers, some of whom receive stock or stock options as compensation for their services, could be subject to challenge under one or more of such laws. Ensuring that its current and future internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that its business practices do not comply with current or future statutes, regulations, agency guidance, or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If Frequency’s operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to Frequency, Frequency may be subject to actions including the imposition of civil, criminal, and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements, or oversight if Frequency becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, and curtailment or restructuring of its operations, any of which could adversely affect its ability to operate its business and its results of operations. If any of the physicians or other providers or entities with whom Frequency expects to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs and imprisonment, which could affect its ability to operate its business. Further, defending against any such actions can be costly, time consuming, and may require significant personnel resources. Therefore, even if Frequency is successful in defending against any such actions that may be brought against Frequency, its business may be impaired.

 

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Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect Frequency’s business, results of operations, and financial condition.

The global data protection landscape is rapidly evolving, and Frequency is or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal data, such as information that Frequency may collect in connection with clinical trials in the U.S. and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and Frequency cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on its business. This evolution may create uncertainty in its business, affect its ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in its contracts, result in liability or impose additional costs on Frequency. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by Frequency to comply with federal, state or foreign laws or regulation, its internal policies and procedures or its contracts governing its processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to its reputation, any of which could have a material adverse effect on its operations, financial performance and business.

As Frequency’s operations and business grow, Frequency may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the U.S., HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. Frequency may obtain health information from third parties (including research institutions from which Frequency obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. While Frequency does not believe that Frequency is currently acting as a covered entity or business associate under HIPAA and thus are not directly regulated under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, Frequency could be subject to significant penalties if Frequency violates HIPAA. Certain states have also adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for Frequency and its future customers and strategic partners.

Further, Frequency may also be or become subject to other state laws governing the privacy, processing and protection of personal information. For example, the California Consumer Privacy Act, or CCPA, went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase Frequency’s compliance costs and potential liability, and many similar laws have been proposed at the federal level and in other states. Further, the California Privacy Rights Act, or CPRA, passed in California and it significantly amends the CCPA. It will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have passed in Virginia, Connecticut, Utah, Colorado, and Iowa and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that Frequency is subject to or affected by HIPAA, the CCPA, the CPRA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect its financial condition.

 

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Frequency’s operations abroad may also be subject to increased scrutiny or attention from data protection authorities. For example, in Europe, the EU General Data Protection Regulation, or GDPR, went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States; in July 2020, the Court of Justice of the EU, or CJEU, limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses, or SCCs. In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations; however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities. European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, Frequency could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if Frequency is otherwise unable to transfer personal data between and among countries and regions in which Frequency operates, it could affect the manner in which Frequency provides its services, the geographical location or segregation of its relevant systems and operations, and could adversely affect its financial results.

Further, from January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom GDPR, or the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the United Kingdom will be regulated in the long term. As Frequency continues to expand into other foreign countries and jurisdictions, Frequency may be subject to additional laws and regulations that may affect how Frequency conducts business.

Although Frequency works to comply with applicable laws, regulations and standards, its contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which Frequency must comply. Any failure or perceived failure by Frequency or its employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to Frequency, damage its reputation, and adversely affect its business and results of operations.

Frequency is subject to environmental, health and safety laws and regulations, and Frequency may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.

Frequency’s operations, including its development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release, and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds, and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If Frequency fails to comply with such laws and regulations, Frequency could be subject to fines or other sanctions.

 

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As with other companies engaged in activities similar to Frequency, it faces a risk of environmental liability inherent in its current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. Frequency may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of its third-party manufacturers or its development efforts may be interrupted or delayed.

Risks related to Frequency’s intellectual property

If Frequency is unable to obtain, maintain, enforce and protect patent protection for its technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, its competitors could develop and commercialize technology and products similar or identical to Frequency, and its ability to successfully develop and commercialize its technology and product candidates may be adversely affected.

Frequency’s success depends in large part on its ability to obtain and maintain protection of the intellectual property Frequency may own solely and jointly with others, or may license from others, particularly patents, in the United States and other countries with respect to any proprietary technology and product candidates Frequency develops. Frequency seeks to protect its proprietary position by filing patent applications in the United States and abroad related to its technologies and product candidates that are important to its business and by in-licensing intellectual property related to such technologies and product candidates. If Frequency is unable to obtain or maintain patent protection with respect to any proprietary technology or product candidate, its business, financial condition, results of operations and prospects could be materially harmed.

The patent prosecution process is expensive, time-consuming, and complex, and Frequency may not be able to file, prosecute, maintain, defend, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that Frequency will fail to identify patentable aspects of its research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, Frequency does not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain, enforce, and defend the patents, covering technology that Frequency licenses from third parties. Therefore, these in-licensed patents, and applications may not be prepared, filed, prosecuted, maintained, defended, and enforced in a manner consistent with the best interests of its business.

The patent position of pharmaceutical and biotechnology companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the scope of patent protection outside of the United States is uncertain and laws of foreign countries may not protect its rights to the same extent as the laws of the United States or vice versa. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. With respect to both owned and in-licensed patent rights, Frequency cannot predict whether the patent applications Frequency and its licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors. Further, Frequency may not be aware of all third-party intellectual property rights potentially relating to its product candidates. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not published at all. Therefore, neither Frequency nor its licensors can know with certainty whether either Frequency or its licensors were the first to make the inventions claimed in the patents and patent applications Frequency owns or in-licenses now or in the future, or that either Frequency or its licensors were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability, and commercial value of Frequency’s owned and in-licensed patent rights are uncertain. Moreover, its owned and in-licensed pending and future patent applications may not result in patents being issued that protect its technology and product candidates, in whole or in part, or that effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of its patents and its ability to obtain, protect, maintain, defend, and enforce its patent rights, narrow the scope of its patent protection and, more generally, could affect the value or narrow the scope of its patent rights.

 

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Moreover, Frequency or its licensors may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, revocation, reexamination, inter partes review, post-grant review, or interference proceedings challenging its patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, its patent rights, allow third parties to commercialize its technology or product candidates and compete directly with Frequency, without payment to Frequency, or result in its inability to manufacture or commercialize drugs without infringing third-party patent rights. If the breadth or strength of protection provided by its patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with Frequency to license, develop or commercialize current or future product candidates.

Additionally, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if Frequency’s owned and in-licensed patent applications issue as patents, they may not issue in a form that will provide Frequency with any meaningful protection, prevent competitors from competing with Frequency, or otherwise provide Frequency with any competitive advantage. The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and its owned and in-licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit its ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of its technology and product candidates. Such proceedings also may result in substantial cost and require significant time from its management and employees, even if the eventual outcome is favorable to Frequency. 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. Furthermore, its competitors may be able to circumvent its owned or in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner. As a result, its owned and in-licensed patent portfolio may not provide Frequency with sufficient rights to exclude others from commercializing technology and products similar or identical to any of its technology and product candidates.

Patent terms may be inadequate to protect Frequency’s competitive position on its product candidates for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest United States non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering its product candidates are obtained, once the patent life has expired, Frequency may be open to competition from competitive products, including generics or biosimilars. 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. As a result, its owned and licensed patent portfolio may not provide Frequency with sufficient rights to exclude others from commercializing products similar or identical to Frequency.

If Frequency is unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with its obligations under such agreements, its business could be harmed.

It may be necessary for Frequency to use the patented or proprietary technology of third parties to commercialize its products, in which case Frequency would be required to obtain a license from these third parties. If Frequency is unable to license such technology, or if Frequency is forced to license such technology on unfavorable terms, its business could be materially harmed. If Frequency is unable to obtain a necessary license, Frequency may be unable to develop or commercialize the affected product candidates, which could materially harm its business and the third parties owning such intellectual property rights could seek either an injunction prohibiting its sales or an obligation on its part to pay royalties and/or other forms of compensation. Even if Frequency is able to obtain a license, it may be non-exclusive, thereby giving its competitors access to the same technologies licensed to Frequency.

 

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If Frequency is unable to obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights Frequency has, Frequency may be required to expend significant time and resources to redesign its technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If Frequency is unable to do so, Frequency may be unable to develop or commercialize the affected technology and product candidates, which could significantly harm its business, financial condition, results of operations, and prospects.

Additionally, if Frequency fails to comply with its obligations under license agreements, its counterparties may have the right to terminate these agreements, in which event Frequency might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of Frequency’s rights under these agreements, or restrictions on its ability to freely assign or sublicense its rights under such agreements when it is in the interest of its business to do so, may result in its having to negotiate new or reinstated agreements with less favorable terms, cause Frequency to lose its rights under these agreements, including its rights to important intellectual property or technology, or impede, or delay or prohibit the further development or commercialization of, one or more product candidates that rely on such agreements.

If Frequency does not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of its marketing exclusivity for any product candidates Frequency may develop, its business may be materially harmed.

In the United States, the patent term of a patent that covers an FDA-approved drug may be eligible for limited patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. In addition, only one patent applicable to an approved drug 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. Similar provisions may be available in Europe and certain other non-United States jurisdictions to extend the term of a patent that covers an approved drug. While, in the future, if and when Frequency’s product candidates receive FDA approval, Frequency expects to apply for patent term extensions on patents covering those product candidates, there is no guarantee that the applicable authorities will agree with its assessment of whether such extensions should be granted, and even if granted, the length of such extensions. Frequency may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than Frequency requests. If Frequency is unable to obtain any patent term extension or the term of any such extension is less than Frequency requests, its competitors may obtain approval of competing products following the expiration of its patent rights, and its business, financial condition, results of operations, and prospects could be materially harmed.

It is possible that Frequency will not obtain patent term extension under the Hatch-Waxman Act for a United States patent covering any of its product candidates that Frequency may identify even where that patent is eligible for patent term extension, or if Frequency obtains such an extension, it may be for a shorter period than Frequency had sought. Further, for its licensed patents, Frequency may not have the right to control prosecution, including filing with the USPTO, of a petition for patent term extension under the Hatch-Waxman Act. Thus, if one of its licensed patents is eligible for patent term extension under the Hatch-Waxman Act, Frequency may not be able to control whether a petition to obtain a patent term extension is filed, or obtained, from the USPTO.

 

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Also, there are detailed rules and requirements regarding the patents that may be submitted to the FDA for listing in the Approved Drug Products with Therapeutic Equivalence Evaluations, or the Orange Book. Frequency may be unable to obtain patents covering its product candidates that contain one or more claims that satisfy the requirements for listing in the Orange Book. Even if Frequency submits a patent for listing in the Orange Book, the FDA may decline to list the patent, or a manufacturer of generic drugs may challenge the listing. If one of its product candidates is approved and a patent covering that product candidate is not listed in the Orange Book, a manufacturer of generic drugs would not have to provide advance notice to Frequency of any abbreviated new drug application filed with the FDA to obtain permission to sell a generic version of such product candidate.

Although Frequency is not currently involved in any litigation related to its intellectual property, Frequency may become involved in lawsuits to protect or enforce its patent or other intellectual property rights, which could be expensive, time-consuming and unsuccessful.

Competitors and other third parties may infringe, misappropriate or otherwise violate Frequency’s issued patents or other intellectual property. As a result, Frequency may need to file infringement, misappropriation or other intellectual property related claims, which can be expensive and time-consuming. Any claims Frequency asserts against perceived infringers could provoke such parties to assert counterclaims against Frequency alleging that it infringes, misappropriates, or otherwise violates their intellectual property. In addition, in a patent infringement proceeding, such parties could counterclaim that the patents Frequency have asserted are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement.

Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may institute such claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). The outcome following legal assertions of invalidity and unenforceability is unpredictable.

An adverse result in any such proceeding could put one or more of Frequency’s patents at risk of being invalidated or interpreted narrowly and could put any of its patent applications at risk of not yielding an issued patent. A court may also refuse to stop the third party from using the technology at issue in a proceeding on the grounds that its patents do not cover such technology. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of its confidential information or trade secrets could be compromised by disclosure during this type of litigation. Any of the foregoing could allow such third parties to develop and commercialize competing technologies and products and have a material adverse impact on its business, financial condition, results of operations, and prospects.

Interference or derivation proceedings provoked by third parties or brought by Frequency or declared by the USPTO may be necessary to determine the priority of inventions with respect to its patents or patent applications. An unfavorable outcome could require Frequency to cease using the related technology or to attempt to license rights to it from the prevailing party. Its business could be harmed if the prevailing party does not offer Frequency a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and its competitors gain access to the same technology. Its defense of litigation or interference or derivation proceedings may fail and, even if successful, may result in substantial costs, and distract its management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on its ability to raise the funds necessary to continue its clinical trials, continue its research programs, license necessary technology from third parties, or enter into development partnerships that would help Frequency bring its product candidates to market.

 

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Frequency’s 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 its common stock.

Third parties may initiate legal proceedings alleging that Frequency is infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of its business.

Frequency’s commercial success depends upon its ability to develop, manufacture, market and sell its product candidates and use its proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties. There is considerable patent and other intellectual property litigation in the pharmaceutical and biotechnology industries. Frequency may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to its technology and product candidates, including interference proceedings, post grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions such as oppositions before the European Patent Office. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which Frequency is pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that its technologies or product candidates that Frequency may identify may be subject to claims of infringement of the patent rights of third parties.

The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend. Litigation and contested proceedings can also be expensive and time-consuming, and its adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than Frequency can. The risks of being involved in such litigation and proceedings may increase if and as Frequency’s product candidates near commercialization and as Frequency gains the greater visibility associated with being a public company. Third parties may assert infringement claims against Frequency based on existing patents or patents that may be granted in the future, regardless of merit. Frequency may not be aware of all such intellectual property rights potentially relating to its technology and product candidates and their uses, or Frequency may incorrectly conclude that third party intellectual property is invalid or that its activities and product candidates do not infringe such intellectual property. Thus, Frequency does not know with certainty that its technology and product candidates, or its development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third party’s intellectual property.

Third parties may assert that Frequency is employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the discovery, use or manufacture of the product candidates that Frequency may identify or related to its technologies. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that the product candidates that Frequency may develop may be found to infringe. In addition, third parties may obtain patents in the future and claim that use of its technologies infringes upon these patents. Moreover, as noted above, there may be existing patents that Frequency is not aware of or that Frequency has incorrectly concluded are invalid or not infringed by its activities. If any third-party patents were held by a court of competent jurisdiction to cover, for example, the manufacturing process of the product candidates that Frequency may develop, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block its ability to commercialize such product candidate unless Frequency obtained a license under the applicable patents, or until such patents expire.

Parties making claims against Frequency may obtain injunctive or other equitable relief, which could effectively block its ability to further develop and commercialize the product candidates that Frequency may

 

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identify. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from its business. In the event of a successful claim of infringement against us, Frequency may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign its infringing products, or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Frequency may choose to take a license or, if Frequency is found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, Frequency could also be required to obtain a license from such third party to continue developing, manufacturing and marketing its technology and product candidates. However, Frequency may not be able to obtain any required license on commercially reasonable terms or at all. Even if Frequency was able to obtain a license, it could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies licensed to Frequency and could require Frequency to make substantial licensing and royalty payments. Frequency could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product. In addition, Frequency could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if Frequency is found to have willfully infringed a patent or other intellectual property right and could be forced to indemnify its customers or collaborators. A finding of infringement could prevent Frequency from commercializing its product candidates or force Frequency to cease some of its business operations, which could materially harm the business. In addition, Frequency may be forced to redesign its product candidates, seek new regulatory approvals, and indemnify third parties pursuant to contractual agreements. Claims that Frequency has misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on its business, financial condition, results of operations, and prospects.

Intellectual property litigation or other legal proceedings relating to intellectual property could cause Frequency to spend substantial resources and distract Frequency’s personnel from their normal responsibilities.

Even if resolved in Frequency’s favor, litigation or other legal proceedings relating to intellectual property claims may cause Frequency to incur significant expenses and could distract its technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of Frequency common stock. Such litigation or proceedings could substantially increase its operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. Frequency may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of its competitors may be able to sustain the costs of such litigation or proceedings more effectively than Frequency can because of their greater financial resources and may also have an advantage in such proceedings due to their more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could compromise its ability to compete in the marketplace.

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

Periodic maintenance, renewal and annuity fees and various other government fees on any issued patent and pending patent application must be paid to the USPTO and foreign patent agencies in several stages or annually over the lifetime of its owned and in-licensed patents and patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In certain circumstances, Frequency relies on its licensing partners to pay these fees to, or comply with the procedural and documentary rules of, the relevant patent agency. With respect to its patents, Frequency relies on an annuity service, outside firms, and outside

 

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counsel to remind Frequency of the due dates and to make payment after Frequency instructs them to do so. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Under certain circumstances, Frequency may be unable to comply with requirements. For example, due to the sanctions imposed by the United States on Russia as a result of the conflict in Ukraine, it is not possible to pay fees on Russian patents and the future of such patents is uncertain. In such an event, potential competitors might be able to enter the market with similar or identical products or technology. If Frequency or its licensors fail to maintain the patents and patent applications covering its product candidates, it would have a material adverse effect on its business, financial condition, results of operations, and prospects.

Changes to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Frequency’s ability to protect its products.

Changes in either the patent laws or interpretation of patent laws in the United States, including patent reform legislation such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase the uncertainties and costs surrounding the prosecution of Frequency’s owned and in-licensed patent applications and the maintenance, enforcement, or defense of its owned and in-licensed issued patents. The Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution, and additional procedures to attack the validity of a patent at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of Frequency’s patent applications and the enforcement or defense of its issued patents, all of which could have a material adverse effect on its business, financial condition, results of operations, and prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on its patent rights and its ability to protect, defend and enforce its patent rights in the future.

Frequency may not be able to protect its intellectual property and proprietary rights throughout the world.

Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States, and even where such protection is nominally available, judicial and governmental enforcement of such intellectual property rights may be lacking. Consequently, Frequency may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions. Competitors may use its technologies in jurisdictions where Frequency has not

 

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obtained patent protection to develop its own products and, further, may export otherwise infringing products to territories where Frequency has patent protection or licenses, but enforcement is not as strong as that in the United States. These products may compete with its products, and its 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, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for Frequency to stop the infringement of its patents or marketing of competing products in violation of its intellectual property and proprietary rights generally. In addition, certain jurisdictions do not protect, to the same extent or at all, inventions that constitute new methods of treatment.

In addition, geo-political actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of its patent applications or those of any current or future licensors and the maintenance, enforcement or defense of its issued patents or those of any current or future licensors. For example, the United States and foreign government actions related to Russia’s conflict in Ukraine may limit or prevent filing, prosecution, and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of its patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on its business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees from the United States without consent or compensation. Consequently, Frequency would not be able to prevent third parties from practicing its inventions in Russia or from selling or importing products made using its inventions in and into Russia. Accordingly, Frequency’s competitive position may be impaired, and its business, financial condition, results of operations and prospects may be adversely affected.

Proceedings to enforce Frequency’s intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put Frequency’s patents at risk of being invalidated or interpreted narrowly, could put its patent applications at risk of not issuing, and could provoke third parties to assert claims against Frequency. Frequency may not prevail in any lawsuits that Frequency initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, its efforts to enforce its intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that Frequency develops or licenses.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If Frequency or any of its licensors are forced to grant a license to third parties with respect to any patents relevant to its business, Frequency’s competitive position may be impaired, and its business, financial condition, results of operations, and prospects may be adversely affected.

Finally, Europe is implementing a Unified Patent Court that may present uncertainties for its ability to protect and enforce Frequency’s patent rights in Europe and the ability of third parties to do the same. In 2012, regulations were passed with the goal of providing a pan-European Unitary Patent and a new European Unified Patent Court, or UPC, for litigation involving European patents. Implementation is currently scheduled for June 1, 2023. Under the UPC, all European patents granted in countries that have ratified the UPC Agreement, including those patents issued prior to the UPC, will automatically fall under the jurisdiction of the UPC. The UPC will provide Frequency’s competitors with a new forum to centrally revoke European patents, and allow for the possibility of a competitor to obtain injunctions in multiple European countries in a single UPC action. It will

 

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be several years before Frequency will understand the scope of patent rights that will be recognized and the strength of patent remedies that will be provided by the UPC. Note that Frequency will have the option to opt its patents out of the UPC over the first seven years of the court’s existence, but doing so may preclude Frequency from realizing the benefits of the new unified court.

If Frequency fails to comply with any obligations in its intellectual property licenses and funding arrangements with third parties, or otherwise experience disruptions to its business relationships with its licensors, Frequency could lose intellectual property rights that are important to its business.

Frequency may enter into licensing and funding arrangements with third parties that may impose, diligence, development, and commercialization timelines, milestone payment, royalty, insurance and other obligations on Frequency. If Frequency fails to comply with such obligations under future license and funding agreements, its counterparties may have the right to terminate these agreements or require Frequency to grant them certain rights. Such an occurrence could materially adversely affect the value of any product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of its rights under these agreements may result in Frequency’s having to negotiate new or reinstated agreements with less favorable terms, or cause Frequency to lose its rights under these agreements, including its rights to important intellectual property or technology, which would have a material adverse effect on its business, financial condition, results of operations, and prospects.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

 

   

the scope of rights granted under the license agreement and other interpretation related issues;

 

   

the extent to which its technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

   

the sublicensing of patent and other rights under its collaborative development relationships;

 

   

its diligence obligations under the license agreement and what activities satisfy those diligence obligations;

 

   

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by its licensors and Frequency and its partners; and

 

   

the priority of invention of patented technology.

In addition, the agreements under which Frequency currently licenses intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what Frequency believes to be the scope of its rights to the relevant intellectual property or technology, or increase what Frequency believes to be its financial or other obligations under the relevant agreement, either of which could have a material adverse effect on its business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that Frequency has licensed prevent or impair its ability to maintain its current licensing arrangements on commercially acceptable terms, Frequency may be unable to successfully develop and commercialize the affected technology and product candidates, which could have a material adverse effect on its business, financial conditions, results of operations, and prospects.

Frequency’s current or future licensors may have relied on third-party consultants or collaborators or on funds from third parties such that its licensors are not the sole and exclusive owners of the patents and patent applications Frequency in-licenses. If other third parties have ownership rights to patents and/or patent applications Frequency in-licenses, they may be able to license such patents to its competitors, and its competitors could market competing products and technology. This could have a material adverse effect on its competitive position, business, financial conditions, results of operations, and prospects.

 

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In spite of Frequency’s best efforts, its licensors might conclude that Frequency has materially breached its license agreements and might therefore terminate the license agreements, thereby removing its ability to develop and commercialize product candidates and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technologies identical to Frequency’s. This could have a material adverse effect on Frequency’s competitive position, business, financial conditions, results of operations, and prospects.

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

Frequency or its licensors may be subject to claims that former employees, collaborators or other third parties have an interest in its owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, Frequency or its licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing its product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or Frequency’s or its licensors’ ownership of its owned or in-licensed patents, trade secrets, or other intellectual property. If Frequency or its licensors fail in defending any such claims, in addition to paying monetary damages, Frequency may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to its product candidates. Even if Frequency is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on its business, financial condition, results of operations and prospects.

If Frequency is unable to protect the confidentiality of its trade secrets, its business and competitive position would be harmed.

In addition to seeking patents for some of its technology and product candidates, Frequency also relies on trade secrets and confidentiality agreements to protect its unpatented know-how, technology, and other proprietary information, to maintain its competitive position. Frequency seeks to protect its trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as its employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. Frequency also enters into confidentiality and invention or patent assignment agreements with its employees and consultants. Frequency cannot guarantee that Frequency has entered into such agreements with each party that may have or has had access to its trade secrets or proprietary technology. Despite these efforts, any of these parties may breach the agreements and disclose its proprietary information, including its trade secrets, and Frequency may not be able to obtain adequate remedies for such breaches. Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside of the United States are less willing or unwilling to protect trade secrets. If any of its trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, Frequency would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with Frequency. If any of its trade secrets were to be disclosed to or independently developed by a competitor or other third party, Frequency’s competitive position would be materially and adversely harmed.

If Frequency’s trademarks and trade names are not adequately protected, then Frequency may not be able to build name recognition in its markets of interest and Frequency’s business may be adversely affected.

Frequency’s registered and unregistered trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. Frequency may not be able to protect its rights to these trademarks and trade names, which Frequency needs to build name recognition among

 

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potential collaborators or customers in its markets of interest. At times, competitors may adopt trade names or trademarks similar to Frequency, thereby impeding its ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trade names or trademarks that incorporate variations of its unregistered trade names or trademarks. Over the long term, if Frequency is unable to successfully register its trade names and trademarks and establish name recognition based on its trade names and trademarks, then Frequency may not be able to compete effectively, and its business may be adversely affected. Frequency’s efforts to enforce or protect its proprietary rights related to trade names and trademarks may be ineffective and could result in substantial costs and diversion of resources and could adversely impact its financial condition or results of operations.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by Frequency’s intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect Frequency’s business or permit Frequency to maintain its competitive advantage. For example:

 

   

Frequency, or its license partners or current or future collaborators, might not have been the first to file patent applications covering certain of Frequency’s or their inventions;

 

   

others may independently develop similar or alternative technologies or duplicate any of its technologies without infringing its owned or in-licensed intellectual property rights;

 

   

it is possible that its owned and in-licensed pending patent applications or those Frequency may own or in-license in the future will not lead to issued patents;

 

   

issued patents that Frequency holds rights to may be held invalid or unenforceable, including as a result of legal challenges by its competitors;

 

   

its competitors might conduct research and development activities in countries where Frequency does not have patent rights and then use the information learned from such activities to develop competitive products for sale in its major commercial markets;

 

   

Frequency cannot ensure that any of its pending patent applications, if issued, or those of its licensors, will include claims having a scope sufficient to protect its product candidates;

 

   

Frequency cannot ensure that any patents issued to Frequency or its licensors will provide a basis for an exclusive market for its commercially viable product candidates or will provide Frequency with any competitive advantages;

 

   

Frequency cannot ensure that its commercial activities or product candidates will not infringe upon the patents of others;

 

   

Frequency cannot ensure that Frequency will be able to successfully commercialize its product candidates on a substantial scale, if approved, before the relevant patents that Frequency owns, or license expires;

 

   

Frequency may not develop additional proprietary technologies that are patentable;

 

   

the patents of others may harm its business; and

 

   

Frequency may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on its business, financial condition, results of operations, and prospects.

 

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Risks related to Frequency’s employees, managing its growth and its operations

Frequency’s business depends on its ability to retain its key personnel and to attract, retain and motivate qualified personnel.

Frequency is highly dependent on the expertise of the principal members of its management and scientific teams. Although Frequency has employment agreements, offer letters or consulting agreements with its executive officers, these agreements do not prevent them from terminating their services at any time.

If Frequency loses one or more of its executive officers or key employees, its ability to implement Frequency’s business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period because of the limited number of individuals in its industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize product candidates successfully. Competition to hire from this limited pool is intense, and Frequency may be unable to hire, train, retain or motivate these additional key personnel on acceptable terms given the competition among numerous biotechnology and pharmaceutical companies for similar personnel. Frequency also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions. Frequency may also decide not to replace an executive officer, which may have an adverse effect on its operations.

In addition, Frequency relies on consultants and advisors, including scientific and clinical advisors, to assist Frequency in formulating its research and development and commercialization strategy. Frequency’s consultants and advisors may be engaged by other companies or organizations and may have commitments that limit their availability. If Frequency is unable to continue to attract and retain highly qualified personnel, its ability to develop and commercialize its product candidates will be limited.

Frequency’s recent reduction in force undertaken to better align its workforce with the needs of Frequency’s business.

In February 2023, Frequency implemented a reduction in force affecting approximately 55% of the workforce to better align its workforce with the needs of Frequency’s business and focus more of its capital resources on its MS Program. In May 2023, Frequency implemented another reduction in force affecting approximately 55% of the workforce to better align its workforce with its business needs.

The reduction in force may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees, decreased morale among its remaining employees, and the risk that Frequency may not achieve the anticipated benefits of the reduction in force. In addition, while positions have been eliminated certain functions necessary to its operations remain, and Frequency may be unsuccessful in distributing the duties and obligations of departed employees among its remaining employees. The reduction in workforce could also make it difficult for Frequency to pursue, or prevent Frequency from pursuing, new opportunities and initiatives due to insufficient personnel, or require Frequency to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If Frequency is unable to realize the anticipated benefits from the reduction in force, or if Frequency experiences significant adverse consequences from the reduction in force, its business, financial condition, and results of operations may be materially adversely affected.

Frequency may engage in transactions that could disrupt its business, cause dilution to its stockholders or reduce its financial resources.

Other than the Merger Agreement, Frequency may enter into transactions to acquire or in-license rights to product candidates, products or technologies, or to acquire other businesses. If Frequency does identify suitable candidates, Frequency may not be able to enter into such transactions on favorable terms, or at all. Any such acquisitions or in-licenses may not strengthen its competitive position, and these transactions may be viewed

 

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negatively by analysts, investors, customers, or other third parties with whom Frequency has relationships. Frequency may decide to incur debt in connection with an acquisition, or in-license or issue its common stock or other equity securities as consideration for the acquisition, which would reduce the percentage ownership of its existing stockholders. Frequency could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification Frequency may obtain from the sellers of the acquired business. In addition, Frequency may not be able to successfully integrate the acquired personnel, technologies, and operations into its existing business in an effective, timely, and nondisruptive manner. Such transactions may also divert management attention from day-to-day responsibilities, increase its expenses, and reduce its cash available for operations and other uses. Frequency cannot predict the number, timing or size of future acquisitions or in-licenses or the effect that any such transactions might have on its operating results.

Frequency’s business and operations would suffer in the event of security breaches or information technology system failures.

In the ordinary course of its business, Frequency and third parties with which Frequency has relationships will continue to collect and store sensitive data, including clinical trial data, proprietary business information, personal data and personally identifiable information of its clinical trial subjects and employees, in data centers and on networks. The secure processing, maintenance and transmission of this information is critical to its operations. Despite the implementation of security measures, its computer systems, as well as those of its CROs and other contractors and consultants, are vulnerable to attack, damage and interruption from computer viruses and malware (e.g. ransomware), malicious code, unauthorized access, malfeasance, natural and manmade disasters (including hurricanes), terrorism, war, and telecommunication, electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft of misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside its organization, or persons with access to systems inside its organization.

Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. For instance, companies have experienced an increase in phishing and social engineering attacks from third parties in connection with COVID-19 global pandemic, and the recent hostilities between Russia and Ukraine may result in increased attacks that could either directly or indirectly impact Frequency. Frequency may also face increased cybersecurity risks due to its reliance on internet technology and the number of its employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, Frequency may be unable to anticipate these techniques or implement adequate preventative measures. Frequency may also experience security breaches that may remain undetected for an extended period. Even if identified, Frequency may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Frequency and certain of its service providers are from time to time subject to cyberattacks and security incidents. While Frequency does not believe that its network has experienced any significant system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in its operations, it could result in delays and/or material disruptions of its research and development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing, or planned trials could result in delays in its regulatory approval efforts and significantly increase its costs to recover or reproduce the data. Likewise, Frequency currently relies and intends to rely in the future on third parties for the manufacture of its product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on its business. If a security breach or other incident were to result in the unauthorized access to or unauthorized use, disclosure, release or other processing of personal information, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties

 

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pursuant to privacy and security laws. Any such access, disclosure, notifications, follow-up actions related to such a security breach or other loss of information could result in legal claims or proceedings, liability under data protection laws, and significant costs, including regulatory penalties, fines, and legal expenses, and such an event could disrupt its operations, cause Frequency to incur remediation costs, damage its reputation, and cause a loss of confidence in Frequency and its or such third parties’ ability to conduct clinical trials, which could adversely affect its reputation and delay the clinical development of Frequency’s product candidates.

Frequency’s employees work remotely and in a shared office with its sublessor, and Frequency may be subject to heightened operational, confidentiality and cybersecurity risks.

Many of Frequency’s employees work remotely from home at times. In addition, when in the office, its employees share an open, undivided office space with its sublessor. This subjects Frequency to heightened operational risks. For example, technologies in its employees’ homes may not be as robust and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable, and Frequency may be subject to increased cybersecurity risk which could expose Frequency to risks of data or financial loss. In Frequency’s office, there are risks that individuals accessing its shared office space who are not associated with Frequency may have access to confidential data, including from its clinical trials. There is no guarantee that the security and privacy safeguards Frequency will put in place both for remote work and for its shared office space will be completely effective or that Frequency will not encounter risks associated with unauthorized access to its data and information. If any of these risks were to occur, its business and operations could be materially adversely affected.

Risks related to Frequency common stock

The market price of Frequency common stock has been volatile and fluctuated and may in future fluctuate substantially, which could result in substantial losses for Frequency’s stockholders.

The market price of Frequency common stock has been highly volatile and subject to wide fluctuations in response to various factors, some of which are beyond its control. In addition to the factors discussed in this section titled “Risks related to Frequency’s business”, these factors include:

 

   

the announcement of the Merger and other public communications related to the Merger;

 

   

any delay in the enrollment or ultimate completion of any clinical trials;

 

   

the results of any clinical trials or clinical trials of competitors for the same or similar indication. For example, the price of Frequency common stock decreased significantly following the announcement of its FX-322 Phase 2a (FX-322-202) interim results and its FX-322 Phase 2b (FX-322-208) results;

 

   

its ability to develop product candidates based on its PCA approach;

 

   

any delay in submitting a regulatory filing and any adverse development or perceived adverse development with respect to the regulatory review of such filing;

 

   

failure to successfully develop any product candidates;

 

   

inability to obtain additional funding;

 

   

regulatory or legal developments in the United States and other countries applicable to its PCA approach or any product candidate:

 

   

adverse regulatory decisions;

 

   

changes in the structure of healthcare payment systems;

 

   

adverse developments concerning its CMOs or CROs;

 

   

inability to obtain adequate product supply for its other product candidates, or the inability to do so at acceptable prices;

 

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introduction of new products, services or technologies by its competitors;

 

   

its ability to effectively manage its growth;

 

   

failure to meet or exceed financial projections Frequency provides to the public;

 

   

failure to meet or exceed the estimates and projections of the investment community;

 

   

changes in the market valuations of companies similar to Frequency;

 

   

market conditions in the biotechnology and pharmaceutical sectors, and the issuance of new or changed securities analysts’ reports or recommendations;

 

   

announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by Frequency or its competitors;

 

   

the termination of a collaboration agreement, licensing agreement or other strategic arrangement, or the inability to establish additional collaboration arrangements that Frequency needs on favorable terms, or at all;

 

   

significant lawsuits and their outcomes, including patent or stockholder litigation, and disputes or other developments relating to its proprietary rights, including patents, litigation matters, and its ability to obtain patent protection for its product candidates and PCA approach;

 

   

additions or departures of key scientific or management personnel;

 

   

sales of Frequency common stock by Frequency or its stockholders in the future;

 

   

trading volume of its common stock; and

 

   

general economic, industry and market conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, inflation rates, labor shortages, supply chain difficulties, fuel prices, international currency fluctuations, corruption, political instability, acts of war, international geopolitical conflict, acts of terrorism, and the COVID-19 pandemic or other public health crises.

In addition, the trading prices for common stock of biopharmaceutical companies continue to be highly volatile as a result of the COVID-19 pandemic and general market conditions, among other reasons. The COVID-19 pandemic and fluctuations in the global economy continue to evolve and remain unpredictable. The extent to which a public health emergency, such as the COVID-19 pandemic, may impact its business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

Frequency’s failure to meet the continued listing requirements of the Nasdaq Stock Market LLC, or Nasdaq, could result in a delisting of its common stock.

Frequency common stock is currently listed on the Nasdaq Stock Market LLC. Nasdaq requires listed companies to meet certain listing criteria including total number of stockholders, corporate governance requirements, minimum closing bid price, total value of public float, and in some cases total stockholders’ equity and market capitalization requirements. If Frequency fails to satisfy the continued listing standards, including with respect to the maintenance of a minimum share price, or if Nasdaq, in its discretion, determines that a condition exists that makes further dealings of its company on the exchange unwarranted, Nasdaq may issue a non-compliance letter or initiate delisting proceedings.

For example, on March 28, 2023, Frequency received a notification letter from the Listing Qualifications Department of Nasdaq notifying Frequency that, for the last 30 consecutive business days, the bid price for its common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1), or the Bid Price Requirement. In

 

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accordance with Nasdaq Listing Rule 5810(c)(3)(A), Frequency has been provided an initial compliance period of 180 calendar days from receipt of the notification letter, or until September 25, 2023, to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price for Frequency common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to September 25, 2023, unless Nasdaq exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). If Frequency does not regain compliance with the Bid Price Requirement by September 25, 2023, Frequency may be eligible for an additional 180 calendar day compliance period. There can be no assurance Frequency will be able to regain compliance or that Nasdaq will extend the compliance period.

If for any reason Frequency common stock does not maintain eligibility for listing on Nasdaq, Frequency may list its common stock elsewhere, such as one of the OTC markets, which are generally considered less liquid and more volatile than a national securities exchange, and could mean that certain institutional investors could no longer hold or purchase its stock, and as a result, a purchaser of its common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the price of their shares. This could materially and adversely affect the liquidity of its common stock.

Because Frequency does not anticipate paying any cash dividends on its common stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for its stockholders.

Frequency has never declared or paid any cash dividends on its common stock. Frequency currently anticipates that Frequency will retain future earnings for the development, operation and expansion of its business and does not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of its common stock will be the sole source of gain on an investment in its common stock for the foreseeable future.

Frequency will continue to incur increased costs as a result of operating as a public company, and its management will continue to devote substantial time to compliance initiatives and corporate governance practices.

As a public company, and particularly after Frequency no longer qualifies as an emerging growth company, Frequency will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, or SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Frequency’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase its legal and financial compliance costs and will make some activities more time consuming and costly. For example, these rules and regulations may make it more expensive for Frequency to obtain director and officer liability insurance, which in turn could make it more difficult for Frequency to attract and retain qualified senior management personnel or members for its board of directors. In addition, these rules and regulations are often subject to varying interpretations, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of SOX, or Section 404, Frequency is required to furnish a report by its senior management on its internal control over financial reporting, and its independent registered public accounting firm is required to provide an attestation report on its internal control over financial reporting. However, while Frequency remains an emerging growth company, its independent registered public accounting firm will not be required to provide the attestation report. To ensure compliance with Section 404, Frequency continues to engage in a process to document and evaluate its internal control over financial reporting, which is both costly and challenging. In this regard, Frequency will need to continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal control over

 

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financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite its efforts, there is a risk that Frequency will not be able to conclude, within the prescribed timeframe or at all, that its internal control over financial reporting is effective as required by Section 404. If Frequency identifies one or more material weaknesses, it could result in an adverse reaction on the price of its common stock in the market due to a loss of confidence in the reliability of its financial statements. Furthermore