ITEM 1. BUSINESS
Merger
of Galena Biopharma, Inc. and SELLAS Life Sciences Group Ltd.
On December 29, 2017, we completed the business combination with the privately held
Bermuda exempted company, Sellas Life Sciences Group Ltd., or Private SELLAS, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of August 7, 2017 and amended November 5, 2017, or the Merger
Agreement, by and among our company, Sellas Intermediate Holdings I, Inc., Sellas Intermediate Holdings II, Inc., Galena Bermuda Merger Sub, Ltd., and Private SELLAS. We refer to this business combination throughout this annual report on Form
10-K
as the Merger. As a result of the Merger, our business is now substantially comprised of the business of Private Sellas, and although we are considered the legal acquiror of Private SELLAS, for accounting
purposes, Private SELLAS is considered to have acquired our company in the Merger. Consequently, the Merger is accounted for as a reverse acquisition.
Immediately prior to the Merger, we effected a
1-for-30
reverse stock split of
our outstanding common stock. Under the terms of the Merger Agreement, we issued shares of our common stock to Private SELLAS securityholders at an exchange ratio of 43.9972 shares of our common stock in exchange for each common share of
Private SELLAS outstanding immediately prior to the Merger. We also assumed all of the restricted stock units, or RSUs issued and outstanding under the Private SELLAS Stock Incentive Plan #1, and all of the issued and outstanding warrants of Private
SELLAS. Accordingly, such RSUs will now be settled in, and such warrants now are exercisable for, shares of our common stock. Accordingly, immediately after the Merger, there were approximately 5,766,891 shares of our common stock outstanding, with
the former Private SELLAS securityholders owning approximately 67.5% of our fully diluted common stock, and our
pre-Merger
securityholders owning the remaining approximately 32.5%.
Upon completion of the Merger, we changed our name from Galena Biopharma, Inc. to SELLAS Life Sciences Group, Inc., our common stock
began trading on The Nasdaq Capital Market under a new ticker symbol SLS on January 2, 2018 and our financial statements became those of Private SELLAS.
As used in this annual report on Form
10-K,
the words we, us, our, the
Company, and SELLAS refer to SELLAS Life Sciences Group, Inc. and its consolidated subsidiaries following completion of the Merger.
Overview
We are a clinical-stage biopharmaceutical
company focused on novel cancer immunotherapeutics for a broad range of cancer indications. Our lead product candidate, galinpepimut-S, or GPS, is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center, or MSK, that
targets the Wilms tumor 1, or WT1, protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has the potential as a monotherapy or in combination with other immunotherapeutic agents to
address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. Phase 2 clinical trials for GPS have been completed and we have planned Phase 3 clinical trials (pending funding availability) for two indications, acute myeloid
leukemia, or AML, and malignant pleural mesothelioma, or MPM. GPS is also in development as a potential treatment for multiple myeloma, or MM, and ovarian cancer. We plan to study GPS in up to four additional indications: as a combination therapy in
small cell lung cancer, colorectal cancer, triple-negative breast cancer; and, as a monotherapy in chronic myelogenous leukemia, or CML. We received Orphan Drug Product Designations from the U.S. Food and Drug Administration, or FDA as well as
Orphan Medicinal Product Designations from the European Medicines Agency, or EMA, for GPS in AML and MPM, as well as Fast Track Designation for AML and MPM from the FDA.
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Our pipeline also includes the legacy development programs of our
pre-Merger
company, including novel cancer immunotherapy programs for NeuVax (nelipepimut-S; a vaccine against the E75 peptide derived from the human epidermal growth factor 2
-or
HER2- protein),
GALE-301
(a vaccine against the E39 peptide derived from the folate binding protein, or FBP) and
GALE-302
(a
vaccine against the J65 peptide derived from FBP) and
GALE-401
(a controlled release version of the approved drug anagrelide). NeuVax is currently in multiple investigator-sponsored Phase 2 clinical trials in
breast cancer, including a prospective, randomized, single-blinded, controlled Phase 2b independent investigator-sponsored clinical trial of trastuzumab (Herceptin
®
) +/- NeuVax in HER2 1+/2+
breast cancer patients in the adjuvant setting to prevent recurrences. On April 2, 2018, we announced that a pre-specified interim analysis, conducted by an independent Data Safety Monitoring Board, or DSMB, of the efficacy and safety data for the
study demonstrated a clinically meaningful difference in median disease-free survival, or DFS, in favor of the active arm (NeuVax + Herceptin), a primary endpoint of the study. Based on these results, and the DSMBs recommendation, we plan to
expeditiously seek regulatory guidance by the FDA for further development of the combination of NeuVax + Herceptin in Triple Negative Breast Cancer, or TNBC, considering the statistically significant benefit of the combination therapy seen in this
population with large unmet medical need.
GALE-301
and
GALE-302
have
completed early stage trials in ovarian, endometrial and breast cancers.
GALE-401
is being developed for the treatment of elevated platelets in patients with myeloproliferative neoplasms, or MPNs, and a
completed Phase 2 clinical trial in patients with essential thrombocythemia, or ET for this clinical candidate. Since the closing of the Merger, management has been evaluating
GALE-301,
GALE-302,
and
GALE-401
for potential internal development, strategic partnership, or other types of product rationalizations.
Our Strategy
We seek to use our expertise and
understanding of cancer immunotherapy and general cancer therapeutic product development to develop novel products that have the potential to transform the treatment of cancer patients. The key components of our strategy are as follows:
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Continue to rapidly advance our
first-in-class
cancer immunotherapy product candidates and other new products through clinical
development.
We intend to continue to execute a focused clinical development plan that takes our product candidates through approval by regulatory authorities. This includes developing GPS as both a monotherapy or in combination, in addition
to exploring opportunities for the other product candidates in our pipeline. The entire GPS clinical program currently targets up to eight tumor types, namely AML, MPM, MM, ovarian cancer, small cell lung cancer, colorectal cancer, triple negative
breast cancer, and CML. We may pursue additional development of GPS for other indications, both as a monotherapy or in combination with other therapeutic agents.
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GPS monotherapy
: GPS has completed Phase 2 clinical trials and has Phase 3 clinical trials planned (pending funding availability) for
AML and MPM. There is also an ongoing Phase 2 clinical trial of GPS for MM as monotherapy. We also have plans to pursue additional clinical development programs for GPS as a monotherapy, including in chronic myelogenous leukemia, or CML, and AML
treated with hypomethylators.
GPS combination therapy
: GPS has an ongoing Phase 1/2 clinical trial for ovarian cancer, in
combination with nivolumab (Opdivo
®
) (the clinical trial is independently sponsored by MSK). We plan to test GPS in combination with other therapeutic agents for various solid and hematologic
cancers. Our leading combination clinical program will be in collaboration with a Merck & Co., Inc., Kenilworth, N.J., USA subsidiary (known as MSD outside the United States and Canada), or Merck subsidiary. The purpose of the trials is to
determine if the administration of GPS in combination with the PD1 blocker pembrolizumab (Keytruda
®
) has the potential to demonstrate clinical activity in the presence of macroscopic disease,
where monotherapy with either agent would have a more limited effect.
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Utilize rare disease development pathways at the FDA and comparable foreign regulatory agencies to accelerate progression to late-stage development and early approval.
A component of our strategy is to
focus on rare types of cancers where our cancer immunotherapy product candidates may produce clinical benefit and where we can take advantage of regulatory programs intended to expedite drug development in these types of rare cancers. We received
Orphan Drug Product Designation from the FDA as well as Orphan Medicinal Product Designation from the EMA for GPS in AML and MPM, as well as Fast Track Designation from the FDA for AML, MPM, and NeuVax. We plan to apply for Orphan Drug Designation,
Fast Track Designation, Breakthrough Therapy Designation and Priority Review from the FDA as well as Orphan Medicinal Product Designation, Priority Medicines Designations, and Conditional Authorizations from the EMA for any given indication, if
applicable when pertinent data becomes available, to potentially reduce clinical trial expense and increase speed to commercialization.
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Enter into collaboration and license agreements with other biotechnology and pharmaceutical companies to develop our current product candidates and other future product candidates.
WE seek out
collaborations for additional opportunities and development of programs in our pipeline that require larger clinical trials or extensive commercial infrastructure. Specifically, we plan to advance the development of NeuVax through a partnership or
other strategic collaboration. We are also evaluating licensing and other strategic options for GALE-301, GALE-302 and GALE-401.
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Selectively build focused commercial capabilities and establish commercial collaborations to maximize the value of our clinical development pipeline.
We have not yet defined our sales, marketing or product
distribution strategy for GPS or any future product candidates. Our future commercial strategy may include the use of strategic alliances, distributors, a contract sales force, or the establishment of our own commercial and specialty sales force to
maximize the value of our pipeline.
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The chart below summarizes the current status of our clinical development pipeline:
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The Cancer Immunotherapy Industry
Overview
The principle behind cancer immunotherapy
involves stimulating a persons own immune system to selectively attack cancer cells while keeping normal cells unaffected or delivering certain immune system components in order to inhibit the spread of cancer. Cancer immunotherapy drugs now
constitute a new mode of cancer treatment, alongside more established options such as surgery, chemotherapy, targeted therapy and radiation therapy. A July 2016 report by Kelly Scientific Publications estimates that immunotherapies may
eventually be used in as many as 60% of cases of advanced cancer; further, based on a recent Allied Market Research report on the estimated entire market value of oncology drugs in 2020, cancer immunotherapies could represent up to 71% of that total
value. Either in mono or in combination therapies, immunotherapies may produce long-term remissions or even operational cures for cancers that have been uniformly fatal until recently. Thus, cancer immunotherapy is an important and
rapidly emerging field, which has led to exciting new clinical research studies and garnered the attention of investors, biotechnology and pharmaceutical companies, regulatory agencies, payors and hospital systems, cancer patients and their families
and the general public at large.
Market
The
global market for cancer drugs (including immunotherapy drugs) is expected to reach $161.3 billion by end of 2021, growing at a compound annual growth rate, or CAGR of around 7.4% between 2016 and 2021 (according to a December 2016 report by
Zion Market Research). According to a September 2016 report by MarketsandMarkets, the global cancer immunotherapy market is expected to reach $119.4 billion by 2021 from $61.97 billion in 2016 at an estimated CAGR of 14.0%. We estimate
that by 2021, 74% of the oncology market worldwide will be supported by usage of cancer immunotherapies.
The first category of immunotherapies, immune
synapse modulators (which includes checkpoint inhibitors and immune synapse
co-stimulators),
is likely to reach and exceed 90% of the immunotherapy market in the coming years, which leaves approximately 10%
for the other three major categories, which include peptide cancer active immunizers such as our product candidate, GPS.
GPS targets malignancies and
tumors characterized by an overexpression of the WT1 protein. The WT1 protein is one of the most widely expressed cancer proteins in multiple malignancies. A 2009 pilot project regarding the prioritization of cancer antigens conducted by the
National Cancer Institute, or NCI, a division of the National Institutes of Health, or NIH, ranked the WT1 protein as a top priority for immunotherapy. WT1 is a protein that resides in the cells nucleus and participates in the process of
cancer formation and progression. As such, it is classified as an oncogene. WT1 plays a key role in the development of the kidneys in fetal life, but then almost disappears from normal organs and tissues. In a wide variety of cancers (20
or more cancer types), WT1 becomes detectable again in the cells of these cancers. WT1 appears in large amounts (
i.e.
, becomes overexpressed) in numerous hematological malignancies, including AML, MM and chronic myeloid leukemia,
as well as in many solid malignancies such as MPM, gastrointestinal cancers (such as colorectal cancer), glioblastoma multiforme, triple-negative breast cancer, ovarian cancer and small-cell lung cancer. Overall, WT1 is expressed in at least 50% of
tumor pathology specimens in 20 or more cancer types. The following figure shows the ratio of samples testing positive for WT1 to those testing negative for WT1 in a number of different malignancies.
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WT1 EXPRESSION FREQUENCY ACROSS VARIOUS CANCERS
(Positive samples / Total samples)
Data sampling overview from multiple studies in human tumor samples or cancer cell lines
Our other cancer immunotherapy product, NeuVax (nelipepimut-S), utilizes a targeted approach based upon two key areas: preventing secondary recurrence of
human epidermal growth factor receptor, or HER2, positive breast cancer because the number of breast cancer survivors continues to grow; and, primary prevention intended to prevent ductal carcinoma
in situ
, or DCIS, from becoming invasive
breast cancer. Once a patients tumor becomes metastatic, the outcome is often fatal, making the prevention of recurrence a potentially critical component of overall patient care. Our secondary recurrence programs for NeuVax primarily target
patients in the adjuvant, or after-surgery setting who have relatively healthy immune systems but may still have residual disease. Minimal residual disease, or micrometastasis, that are undetectable by current radiographic scanning technologies, can
result in breast cancer recurrence.
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While GPS and NeuVax are both anti-cancer vaccines, they have some distinguishing features. GPS is tetravalent
and Neuvax is monovalent. GPS is a direct immunogen emulsified into the clinically safe adjuvant Montanide, and administered subcutaneously after priming the immune system with recombinant human granulocyte macrophage-colony stimulating factor, or
GM-CSF, Sargramostim. NeuVax, on the other hand, uses an immunodominant HER2 peptide combined with GM-CSF as the immune adjuvant, and is administered intradermally. Both GPS and NeuVax, however, work by harnessing the patients own immune
system to seek out and attack any residual cancer cells. We believe using peptide immunogens has many potential clinical advantages, including a favorable safety profile, because these therapies may lack the toxicities typical of most cancer
therapies. Peptide immunogens also have the potential to induce immunologic memory and provide long-lasting protection with convenient modes of delivery.
Galinpepimut-S
Overview
GPS is a
WT1-targeting
peptide-based cancer immunotherapeutic being developed as a monotherapy and in combination with
other therapeutic agents to treat different types of cancers that result from uninhibited tumor cell growth.
Cancer immunotherapy is an approach to
cancer treatment that harnesses the bodys natural immune system response to fight and/or prevent such tumor growth. An essential feature of the immune system is its ability to recognize foreign, or
non-self,
threats, including cancerous growths, as distinct from normal, or self, cells. Despite originating from normal cells, tumor cells can be recognized as
non-self
because of their capacity to elicit the production of tumor antigens. These antigens may be released in the interstitial tissues and, eventually, the bloodstream or remain on the surface of cognate cancer cells. Such tumor-associated antigens, or
TAAs, have been identified in most human cancers. The WT1 protein is one of the most widely expressed TAAs in multiple malignances.
The immune system is
a network of tissues, cells, and signaling molecules that work to protect the body by recognizing and attacking foreign cells, including cancer cells. Several different types of cells are important for the development and maintenance of an immune
response against cancer. The most crucial types of cells are antigen-presenting cells, or APCs, and lymphocytes. APCs include various subtypes, such as dendritic cells, monocytes and macrophages. Once a patient is exposed to a TAA (either by the
presence of cancer itself or through active immunization through a vaccine type immunotherapeutic), this antigen gets recognized by the APC and becomes processed through digestion into smaller fragments within the APC. Subsequently, the
APC communicates with a specific type of lymphocytes called
T-cells.
Inactive
T-cells
search for TAAs by transiently binding to antigens presented by major
histocompatibility complexes, or MHCs, on the APCs. Notably, there is great variability in the expression of different subtypes of MHCs in the human population. The MHC system expresses the
so-called
human
leukocyte antigens, or HLAs, and there are dozens of subclasses that determine the vigor and duration of any given
T-cell
response to a cancer among different patients. Consequently, active immunizers that
work across many HLA types, such as GPS, are predicted to be more efficacious across larger segments of patient populations as compared to agents that act in the context of only one or few HLA types.
T-cells
themselves also come in many variants. CD8 cells recognize the processed TAA fragment as foreign and respond.
The CD8 cells also develop properties that can directly kill the
TAA-expressing
cancer cell by becoming cytotoxic CD8 cells. The CD8 cells, as well as the APCs, also activate CD4 cells, which are
very important for the development of immunologic memory. Immunologic memory is developed when a host keeps a long-term trace of the TAA associated with the cancer and is a desirable result, as it allows the host to continue attacking the TAA
associated with the cancer. Therefore, activation of CD4 cells helps avoid or mitigate immune tolerance. Immune tolerance is an undesirable result, as it dampens the hosts immune response against the cancer. This cascade of events
is collectively called cellular immunity and is very important for anti-cancer activity of immunotherapeutic compounds such as GPS. Of note, once
T-cells
are activated, another class of
lymphocytes, called
B-cells,
are also secondarily activated.
B-cells
are responsible for making antibodies against TAAs. These antibodies become expressed on the surface
of the
B-cells
and are eventually secreted as soluble proteins in tissue fluids and blood. Such anti-cancer antibodies can be detected and have variable degree of activity against the cancer itself. This type
of immunity is called humoral immunity and complements the actions and effects of the cellular immunity.
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Key Features
GPS is a multi-peptide product that we have exclusively licensed from MSK, which has been modified to enhance the degree and duration of the immune response
against the WT1 protein. The modification is based on the fact that two of the four peptides in the peptide mixture comprising GPS are deliberately mutated in a single amino acid residue. These mutated peptides are recognized by the immune system as
non-self entities and are therefore less likely to induce immune tolerance. After administration of these mutated peptides, the patients become immunized against the corresponding native versions of these peptides (which are expressed by the tumor
cells), and thus, are able to cross-react against them, which concept is called the heteroclitic principle. The enhanced immunity and duration are largely independent of a patients HLA type. GPS also elicits both CD4 and CD8 immune responses.
As described above, CD8 cells are extremely important, as their activation by GPS would lead to direct cancer cell killing, or cytotoxicity, and eventual establishment of immunologic memory against a
WT1-expressing
cancer. This occurs by two mechanisms, conversion of some of the activated CD8 cells to CD8 memory cells, and activation of CD4 cells and eventual creation of CD4 terminal effective memory
cells.
We are currently developing GPS for up to eight indications.
GPS monotherapy.
GPS has completed Phase 2 clinical trials and has Phase 3 clinical trials planned (pending funding availability) for AML and
MPM is also in various development phases as a potential treatment for MM and ovarian cancer. There is also an ongoing Phase 2 clinical trial of GPS for MM as monotherapy. We also have plans to pursue additional clinical development programs for GPS
as a monotherapy, including in CML and AML treated with hypomethylators.
GPS combination therapy.
In October 2017, we announced a clinical
trial collaboration and supply agreement through a Merck subsidiary to conduct a combination clinical trial (using GPS along with the PD1 blocker pembrolizumab (Keytruda)) targeting up to five cancer types, namely colorectal cancer, small cell
lung cancer, triple negative breast cancer, ovarian cancer and AML treated with hypomethylators. We are preparing to start this clinical trial pending funding availability. Separately, a clinical trial in ovarian cancer of GPS in combination with
nivolumab (Opdivo) is being conducted as an independently-sponsored trial by MSK. Finally, we also have GPS delivery technology in preclinical development using licensed technology from Advaxis using a bacterial vector, Lm (which if successful,
could lead to a second-generation product called
WT1-Lm).
The following table summarizes the key features of GPS:
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Key features of an Optimal Cancer Active
Immunizer Therapeutic
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GPS Properties and Clinical Strategy
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Selecting the right target antigen and
epitopes within that antigen
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Four peptides and 25 epitopes selected optimally to ensure:
optimal MHC complex presentation;
specificity across different
HLA types;
production of
both CD4 and CD8 activated cells; and
the ability to apply the heteroclitic principle, as described above, to overcome
tolerance.
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Key features of an Optimal Cancer Active
Immunizer Therapeutic
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GPS Properties and Clinical Strategy
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Optimal
T-cell
engagement leading to
cancer cell destruction
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Immune response data from the multiple myeloma clinical study of GPS in 12 evaluable patients that was presented at the Society of Hematologic Oncology Fifth Annual Meeting (Dr. Kohne et al.), showed 83.3% frequency of
either CD8+ or CD4+ responses to an
all-pool
mixture of
WT1-derived
antigens after completion of the 12 vaccinations per the study protocol. This evidence of
multi-epitope, broad cross-reactivity along the full-length of the WT1 protein, is suggestive of epitope spreading, as it emerged across epitopes against which the patients were not specifically immunized. These data strongly suggest stimulation of
T-cells
towards intracellular antigen fragments from
GPS-induced
destruction of tumor cells, which effect is a hallmark of an effective vaccine, e.g., that it is targeting the
right (e.g., chosen by design) epitopes.
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Overcoming the barriers of an
adverse/immunosuppressive tumor
micro-environment, or
TME
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The GPS monotherapy clinical studies are in the setting of complete remission, or CRem, and minimal residual disease, whereby no bulky or measurable tumor deposits exist. This is typically seen after successful frontline therapy in
select cancer types for which such debulking standard therapies exist (
e.g.
, AML or MPM). In these settings, the TME is substantially absent. We are also pursuing combination therapy with checkpoint inhibitors in tumor settings whereby
measurable disease exists, as contemporaneous checkpoint inhibition would abrogate the immunosuppressive effects of the TME.
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Overcoming or mitigating immune
tolerance
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Heteroclitic peptides are those in which mutations have been deliberately introduced in the amino acid sequence. The use of heteroclitic peptide in an active immunizer, such as GPS, increases immunogenicity without changes in the
antigenicity profile, as well as strengthens MHC binding of the peptide to produce cytotoxic CD8 cells that continue to recognize the corresponding native peptide sequence. This is a key factor differentiating GPS from essentially all previously
developed peptide vaccines, and applies a highly innovative technology platform, peptide heteroclicity, in a clinical late-stage cancer immunotherapeutic candidate product.
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Addressing the broadest possible
candidate patient population
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GPS has activity across multiple HLA types that could allow treatment of a vast majority of global patient populations harboring
WT1-positive
malignancies.
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Potential Key Differentiators
GPS potential key differentiators as compared to other active immunization or vaccine-type approaches, as well as compared to immunotherapy approaches
more generally, are as follows:
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heteroclitic peptides may offer increased immune response and less potential for tolerance;
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multivalent oligopeptide mixture potentially drives differentiated immunotherapeutic efficacy, targeting 25 key epitopes of WT1;
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potentially applicable to 20 or more cancer types worldwide and the vast majority of HLA types;
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CRem or minimal residual disease status (after initial tumor debulking with preceding standard therapy) is the preferred setting for GPS monotherapy;
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does not directly compete with current clinical standard of care therapies, but rather complements them in the maintenance setting;
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potential for combination approaches with other cancer immunotherapies, due to tolerable adverse event profile;
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anticipated cost-effective manufacturing; allogeneic,
off-the-shelf,
vialed subcutaneously administered drug that is not
patient-specific; and
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positive Phase 2 clinical data on effectiveness (based on overall survival, or OS, in AML and progression-free survival, or PFS, in MM) with good tolerability and an innocuous safety profile.
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Mechanism of Action
GPS has a mechanism of action
that involves direct activation of the patients immune system specifically and solely against the WT1 protein. Typically, patients harboring
WT1-positive
malignancies have very few or no
T-lymphocytes
specifically reactive or responsive to, and therefore activated by, WT1. WT1 is a self antigen, against which the immune system is
non-reactive,
or
said to be in a state of immune tolerance. Even if some patients have some innate
T-cell
responses naturally, these responses are weak and not adequate for any anti-cancer effect.
GPS is a WT1 peptide mixture. It cannot be administered to patients in a water-soluble form, and so it is given under the skin, or subcutaneously. If
administered on its own, GPS would rapidly degrade and would not have the opportunity and the necessary time interval to activate the immune system. Therefore, GPS is mixed with Montanide, creating a dense emulsion. Additionally, prior to the
administration of GPS, patients receive an adjuvant, GM-CSF to
non-specifically
stimulate and activate APCs in the vicinity of the subcutaneous injection of GPS.
After subcutaneous injection, the WT1 peptides within GPS disperse locally underneath the injection site and at local lymph nodes, and are ingested by APCs.
Digested peptide fragments are then presented on the surface of APCs to CD8 and CD4 lymphocytes while simultaneously associated on the cell membrane with MHC/HLA molecules. This process activates the CD4 and CD8 cells and sensitizes them to the key
25 epitopes of WT1, thus initiating the process of short- and long-term
T-cell-mediated
immunity against WT1. CD8 cells then circulate around the lymphatic system and blood stream throughout the patients
body targeting
WT1-positive
cancer cells. The stimulated CD8 cells transform into cytotoxic
T-lymphocytes,
or CTLs, which are able to attack and destroy specifically
WT1-positive
cancer cells. Each CTL typically destroys one
WT1-positive
cancer cell, but they have been shown to be able to kill up to 10 to 20
WT1-positive
cancer cells. Further, CD4 cells are stimulated to produce
WT1-specific,
helper
T-cells,
which are able to in turn
activate CTLs and
B-cells.
The
B-cells
helped by the helper
T-cells
produce antibodies to specific WT1 epitopes. The
anti-cancer effect is considered to be a result of a combination of all of the above actions, as well as possible additional, less clear mechanisms involving other immune cell types (
e.g.
, natural killer cells). The principles behind the
above described mechanism of action of GPS are well established for the class of peptide-based active immunizing therapies of the vaccine type.
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The following diagram illustrate GPS mechanism of action:
Targeted Indications
GPS Monotherapy for Acute Myeloid Leukemia
AML is an
aggressive and highly lethal blood cancer characterized by the rapid growth of abnormal white blood cells that build up in the bone marrow and interfere with the production of normal blood cells. Its symptoms include fatigue, shortness of breath,
bruising and bleeding, and increased risk of infection. The cause of AML is unknown, and the disease is typically fatal within weeks or months if untreated. AML most commonly affects adults, and its incidence increases with age. Current treatments
include chemotherapy, and some patients may receive a hematopoietic, or blood-forming, stem cell transplant, or HSCT. The goal of upfront therapy for AML is to achieve a state of CRem. CRem is defined per consensus criteria by the European Leukemia
Net, whereby the hematologic and clinical features of the disease are no longer detected. In principle, an allogeneic HSCT is an immunotherapy used clinically and specifically in AML, which works in four stages:
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achievement of CRem with standard upfront therapy followed by additional very high-dose chemotherapy that completely destroys any remnant of the patients blood forming cells, including any residual AML malignant
cells;
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selection of a sufficiently genetically similar donor (usually one of the patients close relatives), called a histocompatible donor;
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removal of blood-forming cells from the bloodstream of that donor; and
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infusion of these donor cells into the patient for eventual engraftment onto the patients bone marrow and eventual creation of a completely
re-instituted
blood-forming
system to sustain life and long-term leukemia-free status for the patient.
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Barring the successful completion of an allogeneic HSCT in AML, no therapies have been proven to accord any
meaningful long-term benefit after patients achieve a CRem status. Without allogeneic HSCT, once the disease relapses, second-line therapies can be given, but these have very limited positive clinical impact to date and their benefit is transitory;
this means that eventually essentially all AML patients who do not undergo an allogeneic HSCT succumb to AML or complications associated with it.
The
overall treatment landscape for AML has remained static for decades, as numerous (at the time, novel) targeted and antiproliferative agents failed to yield meaningful long-term clinical benefits, including increments in survival.
The AML indication was chosen for
first-in-human
clinical studies of GPS for
the following reasons:
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AML presents a clinical setting in which CRem status can be achieved with standard upfront therapy;
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the almost universal expression of WT1 in leukemic blasts, which are AMLs malignant cells, as well as leukemic stem cells, or LSCs, cells that are or become extremely resistant to standard chemotherapy or targeted
agent approaches and which can be realistically eradicated only with immunotherapy methods (including allogeneic HSCT). LSCs have been shown to be susceptible to targeting by cytotoxic
T-cells
(CD8 and CD4
cells) stimulated against leukemia-associated antigens and we predicted this would be the case for GPS;
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the fact that WT1 has been associated with the actual development of leukemia;
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the positive correlation between the level of expression of WT1 and the prognosis in AML;
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the fact that the level of expression of WT1 can be followed over time in patients during and after therapy, including immunotherapy, as a method of monitoring for minimal residual disease, or MRD;
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early evidence from mouse models that vaccination with peptides against select WT1 antigenic epitopes leads to detection of immune response;
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early evidence that human immunocytes sensitized
ex-vivo
to peptides contained in GPS were able to recognize naturally presented WT1 peptides on the surface of several leukemia
cell lines;
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early anecdotal (at the time) clinical data showing antileukemic activity of WT1 monovalent vaccines in the Japanese population (albeit restricted to
HLA-A*2401
type), as well as
a dendritic cell vaccine in the Netherlands (independent of HLA haplotype);
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the high degree of unmet medical need in AML and the absence of an effective maintenance therapy over the decades after initial upfront induction until and immediately after achievement of CRem status, particularly in
patients older than 60 years of age;
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a predictive assumption of very low to negligible degree of clinical toxicity with a
WT1-targeted
immunotherapy such as GPS, due to the fact that WT1 in normal,
non-cancerous,
tissues is both expressed at extremely low levels and limited in number of organs and tissues, but also due to the fact that WT1 fragments, or peptide epitopes, in normal cells are presented to host
APCs in a different manner than are WT1 fragments produced in cancer cells; of note, WT1 expression in normal tissues of adults is limited to the podocyte layer of the glomerulus (kidney), Sertoli cells (testis), granulosa cells (ovary), decidual
cells (uterus), mesothelial cells (peritoneum, pleura), mammary duct and lobule (breast), and blood-forming (hematopoietic) progenitor cells (CD34+ cells in the bone marrow); and
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the advent of modern immunotherapeutics in cancer and the promise of an innovative,
off-the-shelf
immunotherapy for AML, a disease that was
associated with dearth of deep and sustained responses to checkpoint inhibitors.
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11
Clinical DataAML
In an initial pilot clinical trial in AML, a total of nine adult patients of all ages with de novo AML were treated with upfront standard chemotherapy and were
able to achieve their first complete remission, or CRem1. Administration of GPS resulted in a median OS that was at least 35 months from the time of GPS administration. In this study, specifically for patients who were 60 yrs and older (n=5), median
OS was at least 33 months from the time of GPS administration or approximately 43 months from the time of initial AML diagnosis. The mean time of
follow-up
was 30 months from the time of diagnosis at the
time of this analysis for all patients. Of the eight patients tested for immunologic response, seven, or 87.5%, demonstrated a
WT1-specific
immune response.
In a subsequent Phase 2 clinical trial in AML, a total of 22 adult patients of all ages with de novo AML were treated with upfront standard chemotherapy and
were able to achieve CRem1. Most patients also received one to four cycles of consolidation chemotherapy per standard AML treatment guidelines. GPS was then administered within three months from the completion of the consolidation
chemotherapy regimen in up to 12 total doses: Six initial doses (priming immunization) followed by six additional booster immunizations over a total period of up to 15 months to qualifying patients (
i.e.
, patients who were
clinically stable and did not show disease recurrence after the first six injections). This Phase 2 clinical trial met its primary endpoint of an actual OS rate of at least 34%, measured three years into the clinical trial (
i.e.
, percentage
of patients alive after three years of
follow-up).
An actual OS rate of 47.4% was demonstrated at 3 years
post-GPS
treatment, exceeding historical published data of OS
of 20% to 25% by
2.4-
to
1.9-fold
(or 240% to 190%), respectively.
GPS
administration was also shown to improve OS in comparison to historical data in patients in CRem1. Administration of GPS resulted in a median OS that was poised to exceed 67.6 months from the time of initial AML diagnosis in patients of all ages,
which represents a substantial improvement compared to best standard therapy. Only five of the 22 patients underwent allogeneic HSCT and an ad hoc statistical analysis failed to show a significant effect of the transplant upon OS (either in median
survival times or survival rates at specific landmark time-points). GPS was well tolerated in this patient population, whose median age was 64 years old. Moreover, GPS elicited
WT1-specific
immune responses in
88% of patients, including CD4 and CD8
T-cell
responses. Further, the heteroclitic principle was confirmed, in that immune responses were seen against the native version of the two mutated WT1 peptides within
the GPS mixture. The results showed a trend in improved clinical outcomes in patients who mounted an immune response with GPS compared to those patients who did not. Importantly, a preplanned subgroup analysis for the cohort of 13 patients within
the clinical trial who were 60 years of age or older demonstrated a median OS of 35.3 months from time of initial diagnosis. This is also a remarkably prolonged value, considering that comparable historical populations have a median OS ranging from
9.5 to 15.8 months from initial diagnosis, which represents a 2.25 to
3.75-fold
improvement in OS as compared to these historical cohorts of broadly comparable patients.
An additional Phase 2 clinical trial of GPS was performed at the H. Lee Moffitt Cancer Center & Research Institute, or Moffitt. This Phase 2 trial
included ten AML patients who had received first-line therapy for their disease, who then experienced relapse and were subsequently treated with second-line chemotherapy and achieved a second complete remission, or CRem2. This group of patients had
a more advanced disease in comparison to those treated in the other Phase 2 clinical trials discussed above, and typically demonstrated a historical OS of less than ~8 months, even with post-CRem2 allogeneic HSCT. In the Moffitt trial, the efficacy
of GPS (measured as median OS from the time of administration of a maintenance therapy to immediately after achievement of CRem2) was compared with that of watchful waiting in a cohort of 15 contemporaneously treated (but not matched by
randomization) broadly comparable patients treated by the same clinical team at Moffitt. GPS administration resulted in a median OS of 16.3 months (495 days) compared to 5.4 months (165 days) from the time of achievement of CRem2. This was a
statistically significant difference (P=0.0175). Two of 14 AML patients demonstrated relapse-free survival of more than one year. Both such patients were in CRem2 at time of GPS administration, with duration of their remission exceeding duration of
their CRem1, strongly suggesting a potential benefit based on immune response mechanisms. GPS was well-tolerated in this clinical trial.
12
Planned Phase 3 Clinical TrialAML
We are planning a Phase 3 clinical trial for GPS in AML patients 60 years of age or older who have achieved CRem1 following upfront chemotherapy and up to two
cycles of post-remission consolidation chemotherapy, but who will not undergo allogeneic HSCT. This clinical trial has been planned, a principal investigator and the majority of site investigators have been identified and our operational partners
for the execution of the trial are in the process of being identified. After several meetings and correspondence exchanges, the FDA has indicated that the agency has no further comments on the clinical trial design, protocol or statistical analysis
plan. In addition, well-qualified members of an independent data monitoring committee have agreed to join the independent data monitoring committee for this clinical trial upon its establishment.
We currently plan to initiate this clinical trial, pending funding availability, in 2018.
The clinical trial is planned to include up to 180 centers in the United States, Canada, European Union, Eurasian Union, and other countries and an estimated
total sample size of up to 390 patients. Randomization will be 2:1 (GPS:placebo) and
on-trial
treatment duration will be up to approximately 82 weeks (1.58 years). The primary endpoint of the clinical trial is
OS, measured from the time of randomization (not initial diagnosis). No companion diagnostic will be used as AML universally expresses WT1. Randomization will be stratified by region (U.S. compared to
non-U.S.),
cytogenetic risk at diagnosis (favorable compared to not favorable compared to unknown), and type of AML (de novo compared to secondary). Patients will provide historical cytogenetic analysis
results from initial diagnosis, before the start of their original chemotherapy treatment, to assess National Comprehensive Cancer Network genetic risk category. The clinical trial is currently powered to declare a positive result if GPS provides a
4-month
OS advantage compared to placebo, namely increasing median OS from ~9 months in the control arm to ~13 months in the active,
GPS-treated
arm with an
1-sided
α of 2.5%. Three interim analyses (IA1, IA2 and IA3) are planned in addition to a final analysis.
The
following figure illustrates the AML Phase 3 GPS clinical trial schema described in the above paragraph.
*
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maximum for final analysis, unless futility or efficacy thresholds are met in Interim Analyses prior to FA
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^
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All agents are administered subcutaneously
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13
GPS Monotherapy for Malignant Pleural Mesothelioma
MPM is an asbestos-related cancer that forms on the protective tissues that cover many of the internal organs. The most common area affected is the lining of
the lungs and abdomen, though it can also form around the lining of the heart. Most cases are traced to
job-related
exposures to asbestos and it can take approximately 40 years between exposure and cancer
formation. Symptoms may include shortness of breath, a swollen abdomen, chest wall pain, cough, feeling tired, and weight loss. MPM is generally resistant to radiation and chemotherapy, and long-term survival is rare, even in cases where aggressive
upfront debulking multimodality therapy (
i.e.
, extirpative surgery, chemotherapy and in some cases radiotherapy, often described as trimodality therapy when used to treat MPM) are used.
Assuming absence of distant, systemic metastatic disease, MPM patients can initially present with a very
difficult-to-treat
malignancy. The location, geometry, and origin of the tumor in the pleura (the external lining of the lungs and inner lining of the chest cage) present significant challenges for local and
regional disease control. Extensive and complex surgery is initially considered and attempted to be planned. Patients without distant disease are broadly divided in two subgroups: (a) those who are in an inoperable status and (b) those who
are operable. Patients in the former subgroup may be inoperable for two reasons: first, because they may be medically unfit for an extensive definitive surgery, most commonly due to
co-morbidities
(contemporaneously active diseases unrelated to their cancer) or, secondly, for technical reasons (location and/or bulk of tumor); the latter group of patients is defined as harboring unresectable disease. In general, approximately 35%
to 40% of patients with
a priori
unresectable disease can be converted to technically resectable/marginally resectable, particularly if surgical expertise is high, after several cycles of upfront chemotherapy. This preoperative chemotherapy
is termed neoadjuvant therapy. After the patients tumor becomes technically resectable, they receive extirpative surgery, often followed by more chemotherapy and sometimes radiotherapy. On the other hand, patients who are
a
priori
operable proceed immediately with definitive surgery, resulting in either R0 or R1 resections, the degree between the two being assessed by surgical pathology review, with R0 corresponding to resection for curative intent, and
R1 corresponding to microscopic residual tumor despite complete eradication by visual inspection at the time of surgery. After surgery, this subgroup of patients receives several cycles of chemotherapy and sometimes radiotherapy. This is
postoperative chemotherapy termed adjuvant therapy.
In essence, all MPM patients who receive successful upfront trimodality therapy (schema
A: Upfront neoadjuvant chemotherapy, followed by definitive surgery, followed possible further additional chemotherapy and schema B: upfront definitive surgery followed by adjuvant chemotherapy) become free of residual detectable, macroscopic
malignant deposits. Like AML patients who achieve CRem after upfront chemotherapy (in the absence of allogeneic HSCT), virtually all MPM patients will eventually relapse. Recurrent disease is unfortunately minimally responsive to second-line
chemotherapy in MPM and typically these patients succumb to their disease or related complications within a few weeks to months after the emergence of clinically evident recurrent MPM. To date, there is no effective maintenance type of therapy to
delay or prevent MPM relapse after initially successful upfront trimodality therapy. Typical median OS, even when following a fairly aggressive regimen when surgery is feasible, is between 12 and 16 months following diagnosis. Nonetheless, highly
select patients who both undergo R0/R1 extensive surgery and complete a full course (6 cycles) of indicated chemotherapy (specifically those receiving the combination of pemetrexed with cisplatin, either in the neoadjuvant or adjuvant setting) can
survive up to 21.0 to 24.8 months following initial diagnosis. These patients are typically younger, in excellent functional status, without
co-morbidities
and possibly having tumor-related factors related to
better prognosis, such as intrinsically higher sensitivity of MPM cancer cells to chemotherapy-induced destruction.
Like AML, MPM represents a
model type of solid tumor for testing the effects of GPS in clinical studies for the following reasons:
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MPM presents a clinical setting whereby minimal residual disease status can be achieved with standard upfront therapy;
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the universal expression of WT1 in MPM malignant cells; in fact, WT1 expression is an established pathognomonic criterion for the actual diagnosis of MPM and its differentiation of other chest malignancies, for example,
pulmonary adenocarcinoma;
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the positive correlation between the level of expression of WT1 and prognosis in MPM;
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preliminary evidence that WT1 expression could be involved in the MPM tumorigenesis and malignant growth promotion;
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14
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early evidence that human APCs sensitized
ex-vivo
to peptides contained in the GPS mixture were able to recognize naturally presented WT1 peptides from MPM cell lysates;
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evidence that CD8 tumor-infiltrating lymphocytes predict favorable prognosis in MPM after resection (with the assumption that these CD8 cells are highly sensitized to tumor-associated antigens, including WT1);
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the high degree of unmet medical need in MPM and the absence of an effective maintenance therapy; indeed, despite extensive research efforts and recent promising, yet preliminary, results with checkpoint inhibitors in
second or third line therapy of MPM patients, few options are available for the treatment of MPM in the maintenance setting after successful debulking with upfront trimodality therapy (with the vast majority being managed with watchful
waiting until the diseases inexorable relapse) and its prognosis remains very poor;
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a predictive assumption of very low to negligible degree of clinical toxicity with a
WT1-targeted
immunotherapy such as GPS, due to the fact that WT1 in normal,
non-cancerous,
tissues is both expressed at extremely low levels and limited in number of organs and tissues, but also due to the fact that WT1 fragments, or peptide epitopes, in normal cells are presented to host
APCs in a different manner than are WT1 fragments produced in cancer cells; and
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an initial preliminary clinical efficacy signal from the Phase 2 clinical trial of GPS at MSK in patients with MPM.
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Clinical DataMPM
A randomized, double-blind,
placebo-controlled Phase 2 clinical trial in MPM patients enrolled a total of 41 patients at MSK and M.D. Anderson Cancer Center. According to the Phase 2 MPM clinical trial data of GPS presented at the 2016 International Mesothelioma Interest
Group and the 2016 Annual Meeting of the American Society of Clinical Oncology, as of May 2016, based on an initial analysis of 40 patients who were eligible at the time with a median
follow-up
of 16.3 months,
a median OS of 24.8 months was recorded for
GPS-treated
MPM patients, compared to a median OS of 16.6 months for patients in the control arm, with a hazard ratio, or HR, of 0.51 in favor of GPS based on an
initial analysis of 40 patients who were eligible at the time. Patients with an R0 tumor resection and subsequent treatment with GPS showed a significant survival benefit compared to those who received a placebo, with a median OS of 39.3 months
compared to 24.8 months (HR: 0.415) in favor of GPS; this was a statistically significant difference (P<0.05). In a subsequent analysis of these endpoints for the entire cohort (n=41) in August 2016, with a median
follow-up
of 17.2 months, a median OS of 22.8 months was observed for
GPS-treated
MPM patients, compared to a median OS of 18.3 months for patients in the control arm,
with an HR of 0.54 in favor of GPS. Furthermore, in the datasets from both of these analyses, GPS was shown to induce
WT1-specific
CD8 and CD4
T-cell
activation. GPS
administration in the 19 MPM patients in the active arm of the aforementioned study was commonly associated with mild (grade 1 and 2) and self-limited injection site reactions. Clinically significant severe adverse events did not occur.
15
Planned Phase 3 Clinical TrialMPM
We have planned a Phase 3 clinical trial in MPM, pending funding availability. The FDA has reviewed the clinical trial design in previous meetings and,
following a formal
end-of-phase
2 meeting, has indicated that the agency has no further comments on the clinical trial design, protocol or statistical analysis plan. We
are currently evaluating the best strategy to develop GPS in this indication.
The planned Phase 3 clinical trial may include up to 120 centers in the
United States, European Union, and other countries and an estimated total sample size ranging from 120 to 500 patients. The sample size is variable due to the Bayesian statistical design of the clinical trial. Randomization will be 1:1 (GPS:placebo)
and
on-trial
treatment duration will be up to 13 to 18 months. The primary endpoint of the clinical trial is OS, measured from the time of randomization (not initial diagnosis). No companion diagnostic
will be used as MPM universally expresses WT1. Randomization will be stratified by region (U.S. compared to
non-U.S.),
timing of chemotherapy (neoadjuvant compared to adjuvant setting), and type of
radiotherapy
co-administered
(intensity-modulated radiation therapy compared to other radiotherapy compared to none). The clinical trial will be adequately powered through a Bayesian adaptive approach to
declare a positive result if certain
a priori
criteria are met, such as GPS providing an eight-month OS advantage compared to placebo, namely increasing median OS from approximately 16 months in the control arm to approximately 24 months
in the active,
GPS-treated
arm with a
2-sided
α of 5%; the exact values of the OS in the control and active arms (as well as the difference between the two) may
differ from the above estimates so long as the two look group sequential, adaptive statistical design would be able to deliver at least 90% power with an
one-sided
α of 5% at the time of the
definitive positive signal analysis. Two interim analyses (IA1, IA2) are planned (the second of the two, if positive for efficacy, would lead to main clinical trial early termination) in addition to a final analysis.
The following figure illustrates the MPM Phase 3 GPS clinical trial schema.
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Final N will be dependent on a priori rules from adaptive design implemented during the trial to ensure achievement of 90% power and
1-sided
α of 5%
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^
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All agents are administered subcutaneously
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16
GPS Monotherapy for Multiple Myeloma
MM is a cancer formed by malignant plasma cells, and its cause is unknown. The overgrowth of plasma cells in the bone marrow crowds out normal blood-forming
cells, causing low blood counts and anemia (a shortage of red blood cells). MM can also cause a shortage of platelets (cells responsible for normal blood clotting) and lead to increased bleeding and bruising, along with problems fighting
infections due to low white cell counts and/or lower levels of infection-fighting antibodies. MM causes a host of organ problems and symptoms, including fatigue, bone pain, fractures, circulatory problems (in small vessels of the brain, eye retina,
heart, bowel, etc.) and kidney failure.
Treatment for MM includes chemotherapy, glucocorticoids, drugs that modulate the immune system (immunomodulatory
drugs, or IMiDs), radiation and autologous stem cell transplants, or ASCTs. Recently, several novel targeted agents, such as proteasome inhibitors and immunotherapeutics have been introduced in the treatment paradigms for MM. Most therapies in MM
are applied in combination, sometimes with usage of three to four or even five agents administered concomitantly or sequentially. This has led to a progressive increase in the number of lines of therapy that MM patients receive, which
currently can reach up to five to six or even higher. Of note, ASCT can be used more than once, called tandem ASCTs, to debulk the disease and offer prolonged secondary remissions. Finally, allogeneic HSCT is rarely used in MM, but still has its use
in selected high-risk patients who are or become refractory to antimyeloma therapies.
The prognosis in MM is highly variable and depends on numerous risk
factors, some related to the biology of the disease, others to the host (
e.g.
, age and functional status). Consequently, median survival can vary from up to at least 15 years in
non-high-risk
patients
who achieve CRes, as defined by the International Myeloma Working Group, or IMWG, criteria, to approximately three years (from time of initial treatment) in patients with MM who achieve less than partial response, or PR, after ASCT. There are
patients with MM who fare even more poorly than described above, for example those in the immediately aforementioned group who also have high-risk cytogenetics at baseline who may survive on average less than three years. Similarly, patients who are
ineligible for ASCT and are managed only with chemotherapy and long-term IMiD maintenance (with up to nine cycles of lenalidomide) who also achieve less than CRes and remain
MRD-positive
demonstrate a
three-year OS rate of only about 55%; these landmark three-year OS rates decrease by approximately 40 to 50% in patients who also have high-risk cytogenetics at baseline. Despite significant therapeutic advances in the management of MM, the
prognosis of patients with high risk cytogenetics at the time of diagnosis remains quite poor, even when they successfully complete an ASCT, particularly if such patients continue to have evidence of MRD.
MM represents an intriguing opportunity to study both the clinical and immunologic effects of GPS in a hematologic malignancy. Therapeutic targeting of WT1
through immune pathways has largely not been pursued by others to date, and this indication presents an opportunity to target a malignancy that remains incurable in a strict sense, even in the face of significant advances that have
accorded significant survival and freedom-from-active-disease benefit in standard risk patients. MM was chosen as a target indication for GPS for the following reasons:
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a clinical setting whereby MRD status can be achieved with standard upfront therapy. In this indication, with induction therapy using modern combination regimens followed by melphalan conditioning for myeloablation and
a successful autotransplant, MM patients can achieve either CRes or very good partial response per IMWG criteria. This subgroup of patients would be optimal candidates for GPS therapy, even if they remain MRD(+) by flow cytometry or molecular
markers;
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the detectable expression of WT1 in MM cells (malignant plasmacytes). In the past, MM was considered not to be a tumor type with strong expression of WT1. This was due to the use of immunohistochemical staining analysis
with
anti-WT1
antibodies that had suboptimal diagnostic sensitivity. It has been recently shown that while WT1 is expressed at lower levels in MM compared to other hematologic and solid tumors, this expression
is almost universally seen and is highly relevant from an immunobiological perspective, as the immune system is able to reliably raise vigorous and sustained
WT1-specific
responses against malignant
plasmacytes in the context of both MM and the rare, very aggressive variant of plasma-cell leukemia;
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preliminary evidence that WT1 expression could be involved in the MM tumorigenesis and promotion;
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early anecdotal (at the time) clinical data showing anti-myeloma activity of WT1 monovalent vaccines in Japanese patients (albeit restricted to
HLA-A*2401
type);
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17
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the high degree of unmet medical need in MM patients with high-risk cytogenetics who also remain MRD(+) after frontline induction therapy and successful autotransplant, even when maintenance therapy is applied with
either bortezomib or IMiDs (thalidomide); this has been shown in multiple studies, and
to-date
few options are available for addition of effective therapies in the maintenance setting to be added to agents
such as lenalidomide (which is now standard of care in this setting); and
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a predictive assumption of very low to negligible degree of clinical toxicity with a
WT1-targeted
immunotherapy such as GPS due to the fact that WT1 in normal,
non-cancerous
tissues is both expressed at extremely low levels and limited in number of organs and tissues, but also due to the fact that WT1 fragments, or peptide epitopes, in normal cells are presented to host
APCs in a different manner than are WT1 fragments produced in cancer cells.
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Clinical DataMM
We have reported comprehensive Phase 2 data for GPS in 19 patients with MM, which indicate promising clinical activity among MM patients with high-risk
cytogenetics at initial diagnosis who also remain at least MRD(+) after successful frontline therapy (induction regimen followed by ASCT). This subgroup of MM patients, when serially assessed per IMWG criteria, typically relapse/progress within 12
to 14 months after ASCT, even when they receive maintenance therapy with IMiDs such as thalidomide or proteasome inhibitors such as bortezomib. Of note, 18 of the 19 patients received lenalidomide maintenance starting after the first three GPS
administrations following ASCT; the remaining single patient received bortezomib under the same schedule. All patients had evidence of at least MRD after ASCT, while 15 of the 19 also had high-risk cytogenetics at diagnosis. Combined, these
characteristics typically result in low PFS rates that do not exceed 12 to 14 months following ASCT, even while on maintenance therapy with IMiDs or proteasome inhibitors, which are the current standards of care. As of June 2017, median PFS
with GPS was 23.6 months, while median OS had not been reached. Our results compare favorably with an unmatched cohort of broadly comparable MM patients with high-risk cytogenetics published by the Spanish PETHEMA group from the PETHEMA Network
No. 200500111041 trial. Our GPS therapy demonstrated a
1.87-fold
increase in median PFS, as well as a
1.34-fold
increase in the PFS rate at 18 months
compared to the aforementioned historical cohort, which included MM patients with high-risk cytogenetics and MRD(+) post-ASCT and on continuous intensive maintenance with thalidomide +/- bortezomib. Our Phase 2 clinical trial started in June 2014
and has enrolled a total of 20 patients of which 19 are currently evaluable. The safety profile was devoid of grade 3/4/5 treatment-related adverse events. All
non-progression
events were confirmed and ongoing
as of the time of the latest presentation (median
follow-up
at 20 months for survivors). Immune response data showed that up to 91% of patients had successfully developed
T-cell
(CD8 or CD4) reactivity to any of the 4 peptides within the GPS mixture, while up to 64% of patients demonstrated immune response positivity (CD4/CD8) against more than 1 WT1 peptide (multivalent
responses). Moreover, multifunctional cross-epitope
T-cell
reactivity was observed in 75% of patients to antigenic epitopes against which hosts were not specifically immunized, in a pattern akin to epitope
spreading. Further,a distinctive link was shown between the evolution of immune responses and changes in clinical response status (achievement of CR/very good partial response clinical status per IMWG criteria) over time following treatment with
GPS, with each patient being used as his or her own control for each longitudinal comparison. This association has not been previously described for a peptide vaccine in MM. In summary, the results offer mechanistic underpinnings for immune
activation against WT1 in patients with aggressive, high-risk MM, and support the potential antimyeloma activity of GPS.
GPS Combination Therapy with
PD-1
blocker (nivolumab) for Ovarian Cancer
Epithelial cancer of the ovary, or ovarian cancer, is a relatively
common gynecologic cancer that develops insidiously, and hence is associated with vague or no symptoms that would urge patients to seek medical attention. Not surprisingly, most women with ovarian cancer present with advanced (at least locally or
regionally, and often systemically spread) disease. Ovarian cancer is managed with initial surgical resection followed by platinum-based chemotherapy. During the past decade, incremental advances in chemotherapy, and the introduction of targeted
therapies (such as
poly-ADP-ribose
polymerase inhibitors and several others) and specially formulated compounds (such as liposomal anthracyclines) have resulted in
improved survival and in more effective treatment of relapsed disease. In addition, a better understanding of genetic risk factors, along with aggressive screening, has permitted a tailored approach to preventive strategies, such as bilateral
salpingo-oophorectomy in selected women along in specific patient populations genetically predisposed to this cancer (such as those harboring genetic alterations of the BRCA gene family). Although a complete clinical remission following initial
chemotherapy can be anticipated for many patients, a review of second-look laparotomy, when it was
18
often performed as a matter of routine care, indicates that less than 50% of patients are actually free of disease. Furthermore, nearly half of patients with a negative second-look
procedure relapse and require additional treatment. Many patients will achieve a second complete clinical response with additional chemotherapy. However, almost all patients will relapse after a short remission interval of nine to 11 months.
Effective strategies, such as introduction of novel immunotherapies, to prolong remission or to prevent relapse are required, as subsequent remissions are of progressively shorter duration until chemotherapy resistance broadly develops, leading to
eventual disease-related demise.
Ovarian cancer represents an intriguing opportunity to study both the clinical and immunologic effects of GPS in another
solid tumor. Additionally, therapeutic targeting of WT1 through immune pathways has largely not been pursued by others to date for this indication and ovarian cancer remains incurable once it advances and becomes disseminated, even in
the face of significant advances in the field. Ovarian cancer was chosen as a target indication for the following reasons:
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ovarian cancer presents a clinical setting whereby MRD status can be achieved with standard upfront therapy both immediately after first line therapy, but also after effective debulking of the first relapse.
The latter subgroup of patients (after successful second line treatment/first salvage, lacking demonstrable macroscopic residual disease) would be optimal candidates for GPS therapy, as no standard maintenance therapy exists for such patients and
the subsequent relapse patterns and metrics are known and predictable;
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the high levels of expression of WT1 in ovarian cancer cells. In fact, WT1 expression is so frequent that pathologists routinely use immunohistochemical stains for WT1 (with a standardized convention for describing
expression and determining as positive or negative) to help distinguish epithelial ovarian cancers from other tumors;
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preliminary evidence that WT1 expression may be linked to prognosis in ovarian cancer and that it may play an anti-apoptotic role in ovarian cancer cell lines;
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the high degree of unmet medical need in ovarian cancer patients after first (or subsequent) successful salvage debulking therapy and the absence of effective therapies for such patients; and
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a predictive assumption of very low to negligible degree of clinical toxicity with a
WT1-targeted
immunotherapy such as GPS due to the fact that WT1 in normal,
non-cancerous
tissues is both expressed at extremely low levels and limited in number of organs and tissues, but also due to the fact that WT1 fragments, or peptide epitopes, in normal cells are presented to host
APCs in a different manner than are WT1 fragments produced in cancer cells.
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Clinical DataOvarian Cancer
GPS is being studied in combination with nivolumab, a
PD-1
immune checkpoint inhibitor, in an open-label,
non-randomized
Phase 1/2 clinical trial, which is independently sponsored by MSK. The aim of the study is to evaluate the safety and efficacy of this combination in patients with recurrent ovarian, fallopian tube or
primary peritoneal cancer who are in second or greater clinical remission (after their successful first or subsequent salvage therapy). This Phase 1/2 clinical trial was planned to enroll at least ten patients with recurrent ovarian
cancer who are in second or greater clinical remission at MSK. Patients enrolled in the clinical trial received the combination therapy during the clinical trials
14-week
treatment period. Individuals
who had not progressed by the end of this period also received a maintenance course of GPS. Initial immune response and clinical evolution data are due in the first half of 2018, as is information on the primary endpoint of this clinical trial,
which is the safety of repeated GPS administrations, for a total of six doses, in combination with seven infusions of nivolumab. This clinical trial addresses the safety of GPS when
co-administered
with a
checkpoint inhibitor, with the goal of possibly detecting an efficacy signal based on PFS and OS (versus historical data of monotherapy with nivolumab in this patient population), as well as documenting the pattern of
WT1-specific
immune responses
post-GPS.
Pending the successful progress of this clinical trial a larger,
follow-on,
randomized
clinical trial may be planned.
19
GPS Combination Therapy with PD1 blocker (pembrolizumab) for Other Cancers
In addition, given the potential immunobiologic and pharmacodynamic synergy between GPS and a PD1 blocker, as well as the prevalent expression of WT1 in five
select tumor types (colorectal cancer, triple-negative breast cancer, small cell lung cancer, ovarian cancer and AML), we entered into a clinical trial collaboration and supply agreement through a Merck subsidiary for the conduct of a combination
clinical trial of GPS with pembrolizumab (Keytruda).
The purpose of this
five-arm
basket trial is to
determine if the administration of GPS in combination with pembrolizumab has the potential to demonstrate clinical activity in the presence of macroscopic disease, where monotherapy with either agent would have a more limited effect. The negative
influence of tumor microenvironment factors on the immune response is predicted to be mitigated by PD1 inhibition (by pembrolizumab) thus allowing the patients own immune cells to invade and destroy cancerous growth deposits specifically
sensitized against WT1 (by concomitantly-administered GPS).
NeuVax (nelipepimut-S)
NeuVax (nelipepimut-S) is a cancer immunotherapy targeting HER2 expressing cancers. NeuVax is the immunodominant nonapeptide derived from the extracellular
domain of the HER2 protein, a well-established and validated target for therapeutic intervention in breast and gastric carcinomas. The NeuVax vaccine is combined with
GM-CSF
(Sargramostim) for injection in
between the layers of the skin epidermis, ie., intradermal administration. Data has shown that an increased presence of circulating tumor cells, or CTCs, may predict reduced DFS and OS, suggesting a presence of isolated micrometastases, not
detectable clinically, but, over time, can lead to recurrence of cancer, most often in distant sites. After binding to the specific HLA molecules on antigen presenting cells, the nelipepimut-S sequence stimulates specific cytotoxic T lymphocytes, or
CTLs, causing significant clonal expansion. These activated CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including occult cancer cells and micrometastatic foci. The nelipepimut immune response can also
generate CTLs to other immunogenic peptides through inter- and intra-antigenic epitope spreading.
NeuVax for Breast Cancer
According to NCI, over 230,000 women in the United States are diagnosed with breast cancer annually. While improved diagnostics and targeted therapies have
decreased breast cancer mortality in the United States, metastatic breast cancer remains incurable. Approximately 75% to 80% of breast cancer patients have tissue test positive for some increased amount of the HER2 receptor, which is associated with
disease progression and decreased survival. Only approximately 20% to 30% of all breast cancer patients-those with HER2 immunohistochemistry, or IHC, 3+ disease, or IHC 2+ and fluorescence in situ hybridization, or FISH, amplified-have a HER2
directed, approved treatment option available after their initial standard of care. This leaves the majority of breast cancer patients with
low-to-intermediate
HER2
expression (IHC 1+, 2+) with tumors that are not HER2-amplified by FISH ineligible for targeted therapy with trastuzumab and without an effective targeted treatment option to prevent cancer recurrence.
20
We currently have two investigator-sponsored trials ongoing with NeuVax in combination with trastuzumab
(Herceptin; Genentech/Roche). The combination of trastuzumab and NeuVax has been shown pre-clinically and in a pilot study to be synergistic. Our Phase 2b trial is a multi-center, randomized, single-blinded, placebo-controlled trial in 275 HER2
1+/2+ breast cancer patients with positive nodes and/or TNBC. The study combines NeuVax and trastuzumab (Herceptin) in the adjuvant setting aiming to prevent recurrence or death. Tumors in these women show low levels of expression of HER2, as
measured by IHC, i.e., at a level of either 1+ or 2+ and, hence, these patients are not considered candidates for Herceptin. Patients who are hormone receptor-negative and HER2 1+/2+ by IHC are currently defined as TNBC patients. Eligible patients
are randomized to receive NeuVax + GM-CSF + trastuzumab or trastuzumab + GM-CSF alone. The primary endpoint of the study is DFS. Genentech/Roche is providing the trastuzumab and partial funding for this trial. Data presented in October 2016
demonstrated that this novel combination of trastuzumab and NeuVax with HER2 low-expressing patients is well tolerated and the cardiac effects of trastuzumab are not impacted by the addition of NeuVax. In February 2017, the DSMB reported that there
were no safety concerns with the trial and the trial is not futile. The recommendation from the DSMB was to continue the trial with one revision to the statistical analysis plan regarding the timing of the pre-specified interim analysis. Given the
lengthy duration of enrollment for the trial, the DSMB determined that the pre-specified interim efficacy analysis be moved up from 12 months to 6 months after the last patient is enrolled. Enrollment was completed and the interim efficacy analysis
occurred in late March 2018, as reported by us in a press release dated April 2, 2018.
The interim efficacy analysis, conducted by an independent DSMB of
the efficacy and safety data for the study in an overall population of 275 patients as well as the two primary study target patient populations (node-positive and TNBC) after a median follow-up of 19 months, demonstrated a clinically meaningful
difference in median DFS in favor of the active arm (NeuVax + Herceptin), a primary endpoint of the study, with hazard ratios of 0.67 and 0.61 in the intent to treat and modified intent to treat populations (i.e., those who received at least one
dose of vaccine or control) as well as a 34.9% and 39.5% reduction in relative risk of recurrence in the active versus control arms in the intent to treat and modified intent to treat populations, respectively. A clinically meaningful and also
statistically significant difference was found between the two arms in the cohort of patients (n= 98) with TNBC, with a hazard ratio of 0.26 and a p-value of 0.023 in favor of the NeuVax + Herceptin combination. Similarly, a clinically meaningful
and statistically significant difference was found between the two arms in favor of the combination in the cohort of patients not receiving hormonal therapy (n = 110), with a hazard ratio of 0.24 and a p-value of 0.009. This pre-specified interim
analysis also showed an adverse event profile with no notable differences between treatment arms. This analysis confirmed the 2016 data showing that the addition of NeuVax to Herceptin did not result in any additional cardiotoxicity compared to
Herceptin alone. Based on these results, and the DSMBs recommendation, we plan to expeditiously seek regulatory guidance by the FDA for further development of the combination of NeuVax + Herceptin in TNBC, considering the statistically
significant benefit of the combination therapy seen in this population with large unmet medical need.
21
Our second combination investigator sponsored trial is a Phase 2 in HER2 3+ breast cancer patients who have
completed neoadjuvant therapy with an approved regimen that includes trastuzumab and failed to achieve a pathological complete response, meaning they have microscopic evidence of residual disease and are therefore at an increased risk of disease
recurrence. This multi-center, prospective, randomized, single-blinded Phase 2 clinical trial is enrolled with approximately 100 patients with a diagnosis of HER2 3+ breast cancer who are HLA A2+ or HLA A3+ and are determined to be at high-risk
for recurrence. High-risk is defined as having received neoadjuvant therapy with an approved regimen that includes trastuzumab but not obtaining a pathological complete response at surgery, or those who undergo surgery as a first intervention and
are found to be pathologically node-positive. These high-risk patients are known to have higher recurrence rates than other HER2 3+ breast cancer patients. Eligible patients will be randomized to receive NeuVax +
GM-CSF
+ trastuzumab or trastuzumab +
GM-CSF
alone. The primary endpoint of the study is disease-free survival. Funding for this trial was awarded through the
Congressionally Directed Medical Research Program, funded through the Department of Defense, via a breast cancer research program breakthrough award. In February 2017, the DSMB reported that there were no safety concerns with the trial and the trial
is not futile. The
pre-specified
interim safety analysis was also completed on n=50 patients and demonstrated that the agent is well tolerated with no increased cardiotoxicity associated with giving
NeuVax in combination with trastuzumab. The recommendation from the DSMB was to continue the HER2 3+ trial unmodified.
A Phase 3 PRESENT
(
P
revention of
R
ecurrence in
E
arly-
S
tage, Node- Positive Breast Cancer with Low to Intermediate HER2
E
xpression with
N
euVax
T
reatment) study enrolled 758 HER2 1+/2+ patients who are
node-positive and HLA A2 or A3 positive. On June 27, 2016, the independent data monitoring committee recommended that the Phase 3 PRESENT clinical trial be stopped for futility. The PRESENT trial was stopped, and we initiated an investigation
into the causes of the recommendation. Our analysis of the data showed that there was a separation of the curves, albeit not statistically significant, with the control arm performing better than expected and the NeuVax arm performing consistent
with our protocol assumptions for the control group. Because the study was deemed futile, we closed the PRESENT trial.
NeuVax for Ductal Carcinoma In
Situ of the Breast
DCIS is defined by the NCI as a noninvasive condition in which abnormal cells are found in the lining of a breast duct and have not
spread outside the duct to other tissues in the breast. DCIS is the most common type of breast neoplasm with malignant potential. In some cases, DCIS may become invasive cancer and spread to other tissues, and at this time, there is no way to know
which lesions could become invasive. Current treatment options for DCIS include breast-conserving surgery and radiation therapy with or without tamoxifen, breast-conserving surgery without radiation therapy, or total mastectomy with or without
tamoxifen. According to the American Cancer Society, in the United States, there were over 60,000 diagnoses of DCIS in 2015. We are supporting an independent investigator-sponsored, or IST, Phase 2 trial to evaluate women diagnosed with DCIS who are
HLA-A2
positive, who express HER2 at IHC 1+, 2+, or 3+ levels, and who are pre or post menopausal. Patients will be randomized to one of two arms: NeuVax plus
GM-CSF
or
GM-CSF
alone. The clinical study name is VADIS: Phase 2 Trial of Nelipepimut-S
Va
ccine in Women with
D
C
IS
of the Breast. The trial is sponsored and operationalized by the NCI, studying
NeuVaxs potential clinical effects in earlier stage disease. The trial has an immunological endpoint evaluating NeuVax peptide-specific cytotoxic T lymphocyte (CTL; CD8+
T-cell)
response in vaccinated
patients.
NeuVax for Gastric Cancer
According to
the NCI, gastric (stomach) cancer is a disease in which malignant (cancer) cells form in the lining of the stomach. Almost all gastric cancers are adenocarcinomas (cancers that begin in cells that make and release mucus and other fluids). Other
types of gastric cancer are gastrointestinal carcinoid tumors, gastrointestinal stromal tumors, and lymphomas. Infection with bacteria called Helicobacter pylori is thought to be the cause of gastric cancer and age, diet, and stomach disease can
affect the risk of developing gastric cancer. Gastric cancer is often diagnosed at an advanced stage because there are no early signs or symptoms and is the second-most common cancer among males and third-most common among females in Asia and
worldwide with over 63,000 new cases a year in India, where an initial clinical trial of NeuVax is planned. Overexpression of the HER2 receptor occurs in approximately 20% of gastric and gastro-esophageal junction adenocarcinomas, predominantly
those of the intestinal type. Overall, without regard to the stage of cancer, only approximately 28% of patients with stomach cancer live at least five years following diagnosis and new adjuvant treatments are needed to prevent disease recurrence.
We currently have an agreement with Dr. Reddys Laboratories Ltd., or Dr. Reddys, to conduct a Phase 2 independent
investigator-sponsored study in gastric cancer in India. To date, Dr. Reddys has not initiated the Phase 2 study with NeuVax.
22
GALE-301
and
GALE-302
GALE-301
and
GALE-302
are cancer immunotherapies that target FBP
receptor-alpha. FBP is a well-validated therapeutic target that is highly over-express in ovarian, endometrial and breast cancers, and is the source of immunogenic peptides that can stimulate CTLs to recognize and destroy
FBP-expressing
cancer cells. Current treatments after surgery for these diseases are principally with platinum-based chemotherapeutic agents. These patients suffer a high recurrence rate and most relapse with an
extremely poor prognosis.
GALE-301
and
GALE-302
are immunogenic peptides that consist of a peptide derived from FBP combined with
GM-CSF
for the prevention of cancer recurrence in the adjuvant setting.
GALE-301
is the E39 peptide, while
GALE-302
is an
attenuated version of this peptide, known as E39. Two early stage clinical trials have been completed with our FBP peptides in ovarian, endometrial, and breast cancers. In June 2016, the FDA granted two Orphan Drug Product Designations for the
treatment (including prevention of recurrence) of ovarian cancer: One for
GALE-301
(E39) and one for
GALE-302
(E39).
GALE-301
and
GALE-302
in Ovarian Cancer
According to the NCIs Surveillance, Epidemiology, and End Results, or SEER Program, new cases of ovarian cancer occur at an annual rate of 11.9 per
100,000 women in the United States, with an estimated 22,280 new cases and 14,240 deaths in 2016. Only 46.2% of ovarian cancer patients are expected to survive five years after diagnosis. Approximately 1.3% of women will be diagnosed with ovarian
cancer at some point during their lifetime (2011-2013 data). The prevalence data from 2013 showed an estimated 195,767 women living with ovarian cancer in the United States. Due to the lack of specific symptoms, the majority of ovarian cancer
patients are diagnosed at later stages of the disease, with an estimated 80% of women presenting with advanced-stage (III or IV) disease. These patients have their tumors routinely surgically debulked to minimal residual disease, and then are
treated with platinum- and/or taxane-based chemotherapy. While many patients respond to this treatment regimen and become clinically
free-of-disease,
the majority of
these patients will relapse. Depending upon their level of residual disease, the risk for recurrence after completion of primary therapy is approximately 70%. Unfortunately, for these women, once the disease recurs, treatment options are limited and
the disease is most likely incurable.
GALE-401
(anagrelide controlled release)
GALE-401
contains the active ingredient anagrelide, an
FDA-approved
product,
for the treatment of patients with MPNs to lower abnormally elevated platelet levels. The currently available immediate release, or IR, version of anagrelide causes adverse events that are believed to be dose and plasma concentration dependent and
may limit the use of the IR version of the drug. Therefore, reducing the maximum concentration, or C max, and increasing the half-life of the drug is hypothesized to reduce the side effects, while preserving the efficacy, potentially allowing a
broader use of the drug.
GALE-401
in Essential Thrombocythemia
ET is a myeloproliferative blood disorder and is characterized by the overproduction of platelets in the bone marrow. Elevated platelets alter the normal
process of blood coagulation and can lead to thromboembolic events. About a third of patients are asymptomatic at the time of diagnosis. However, many patients develop symptoms during the course of the disease that affect the quality of life.
Multiple Phase 1 studies in 98 healthy subjects have shown
GALE-401
reduces the C max of anagrelide and increases the
half-life following oral administration, appears to be well tolerated at the doses administered, and to be capable of reducing platelet levels effectively. The Phase 1 program provided the desired PK/PD (pharmacokinetic/pharmacodynamic) profile to
enable the initiation of the Phase 2
proof-of-concept
trial. The Phase 2, open label, single arm, proof-of concept trial enrolled 18 patients in the United States
for the treatment of thrombocytosis, or elevated platelet counts, in patients with MPNs. Final safety and efficacy data from this Phase 2 trial were presented in December 2015 and demonstrated a prolonged clinical benefit with a potentially improved
safety profile.
We have analyzed our data and the treatment landscape for MPNs, with a current focus on ET. Subject to completion of the manufacturing of
the new formulation and other internal work,
GALE-401
would be poised to advance into a Phase 3 clinical trial in ET patients who are intolerant or resistant to hydroxyurea. This trial is designed to compare
GALE-401
(drug arm) versus best available therapy to include a sizable population of patients treated with anagrelide IR.
23
Strategic Collaborations and License Agreements
Although we currently have a number of collaborations with corporate partners for the development of our product candidates in various territories worldwide,
the following development collaborations are those that are most significant to us from a financial statement perspective and where significant ongoing collaboration activity exists.
Exclusive License AgreementMemorial Sloan Kettering Cancer Center
In September 2014, we entered into a license agreement with MSK, under which we were granted an exclusive license to develop and commercialize MSKs WT1
peptide vaccine technology. The MSK original license agreement was first amended in October 2015, further amended in August 2016, amended and restated in May 2017 and again amended and restated in October 2017. In connection with the entry of
the original license agreement and its amendments, MSK was issued or assigned an aggregate of 4,846 ordinary shares of Private SELLAS common stock for the year ended December 31, 2017. These common stock shares were converted into our common
stock shares upon the Merger.
Under the terms of the current amended and restated MSK license agreement, we agreed to pay minimum royalty payments in the
amount of $0.1 million each year commencing in 2015 and research funding costs of $0.2 million in each year and for three years commencing in January 2016. We also agreed to pay MSK a
mid-six
digit
amount over a one year period in exchange for MSKs agreement to further amend and restate the MSK license agreement in October 2017, which resulted in the grant of rights to additional intellectual property to us and extension/relaxing of
certain deadlines. In addition, to the extent certain development and commercial milestones are achieved, we also agreed to pay MSK up to $17.4 million in aggregate milestone payments for each licensed product, and for each additional patent
licensed product, up to $2.8 million in additional milestone payments. We also agreed to pay MSK a tiered royalty in the
mid-single
digits in the event of commercial sales of any licensed products. We
also agreed to raise $25.0 million in gross proceeds no later than December 31, 2018. In the event we do not raise such amount by December 31, 2018, MSK may terminate the license agreement after complying with the notice and cure
periods of the agreement, or MSK may elect to receive additional common stock shares in an amount equal to 1.5% of our then fully diluted share capital, which would stay the right to terminate for a period of time.
Unless terminated earlier in accordance with its terms, the MSK license agreement as amended and restated, will continue on a
country-by-country
and licensed
product-by-licensed
product basis, until the later, of:
(a) expiration of the last valid claim embracing such licensed product; (b) expiration of any market exclusivity period granted by law with respect to such licensed product; or (c) ten (10) years from the first commercial sale in such
country.
Merck & Co., Inc. Clinical Trial Collaboration and Supply Agreement
In September 2017, we entered into a clinical trial collaboration and supply agreement through a Merck subsidiary, whereby we agreed with the Merck subsidiary
to collaborate on a research program to evaluate GPS as it is administered in combination with their PD1 blocker pembrolizumab (Keytruda) in a Phase 1/2 clinical trial enrolling patients in up to five cancer indications, including both hematologic
malignancies and solid tumors.
The Phase 1/2 clinical trial will utilize a combination of GPS plus pembrolizumab (Keytruda) in patients with WT1+
relapsed or refractory tumors. Specifically, the study is expected to explore the following cancer indications: colorectal (arm enriched in but not exclusive to patients with microsatellite
instability-low),
ovarian, small cell lung, triple-negative breast, and AML. This study will assess the efficacy and safety of the combination, comparing overall response rates and immune response markers achieved with the combination compared to prespecified rates
based on those seen with pemrolizumab alone in comparable patient populations. The trial is anticipated to begin in the third quarter of 2018 (pending funding availability).
24
Advaxis, Inc. Research and Development Collaboration Agreement
In February 2017, we entered into a research and development collaboration agreement with Advaxis whereby we agreed to collaborate on a research program to
evaluate, through a PoP trial, a clinical candidate comprised of the combination of Advaxis proprietary
Lm-based
antigen delivery technology and GPS. Unless terminated earlier in accordance with its
terms, the Advaxis agreement will expire upon the earlier of: (a) completion of the PoP trial or (b) a decision by the parties to cease further development of the clinical candidate.
The Advaxis agreement provides for cost-sharing between the parties, with Advaxis being responsible for the costs of performing the research activities and
filing any investigational new drug, or IND, cost-sharing for preparation of the IND, and we being responsible for the costs (exclusive of product costs) of conducting the PoP trial. We also agreed to make certain
non-refundable
milestone payments to Advaxis having an aggregate amount of up to $108.0 million, upon meeting certain clinical, regulatory and commercial milestones. In addition, if net sales exceed
certain targets, we agreed to make
non-refundable
sales milestone payments up to $250.0 million and royalty payments based on specific royalty rates, with a maximum rate capped at a percentage rate in the low
teens if net sales exceed $1.0 billion.
The University of Texas M. D. Anderson Cancer Center and The Henry M. Jackson Foundation for the
Advancement of Military Medicine, Inc. License Agreement
In September 2006, we acquired rights and assumed obligations under a license agreement
between Apthera and The University Texas M.D. Anderson Cancer Center, or MDACC, and The Henry M. Jackson Foundation, or HJF, which granted us exclusive worldwide rights to an United States patent covering the nelipepimut-S peptide and several United
States and foreign patents and patent applications covering methods of using the peptide as a vaccine. Under the terms of this license, we are required to pay an annual maintenance fee, clinical milestone payments and royalty payments based on sales
of NeuVax, or other therapeutic products developed from the licensed technologies.
Biovascular, Inc. Exclusive License Agreement
In December 2013, we acquired worldwide rights to anagrelide controlled release, or CR, formulation,
GALE-401,
through
our acquisition of Mills, LLC, or Mills our wholly owned subsidiary,
GALE-401
contains the active ingredient anagrelide, an
FDA-approved
product that has been in use
since the late 1990s for the treatment of MPNs. Mills entered into an exclusive license agreement with BioVascular, Inc., or BioVascular. The license agreement granted us an exclusive license to develop and commercialize anagrelide CR formulation.
Under the terms of the license agreement and its amendments, Mills agreed to pay BioVascular, a
mid-to-low
single digit royalty on net revenue from the sale of licensed
products, as well as, future cash milestone payments based on the achievement of specified regulatory milestones. We are responsible for patent prosecution and maintenance.
In September 2017, Mills and BioVascular entered into an amendment to our exclusive license agreement to modify the certain terms of the license agreement,
including but not limited to, (i) eliminating the 3% royalty rate on annual net sales of $50.0 million and the 4% royalty now applies to annual net sales of up to $100.0 million, (ii) making an advance payment of approximately $0.4 million for the
milestone related to the initiation of the Phase 3 clinical trial payable in two tranches with the first payment of $0.2 million payable on or before October 31, 2017 and the second payment of approximately $0.2 million payable 30 days after the
consummation of the Merger but no later than December 31, 2017, (iii) adding a payment for a sublicense by Mills to a third party of 25% of any cash received for upfront fees or milestone payments if the sublicense is executed prior to first patient
enrolled in the Phase 3 clinical trial and 17.5% of any cash received for upfront fees or milestone payments if the sublicense is executed after the first patient is enrolled in the Phase 3 clinical trial, and (iv) if the first patient is not
enrolled in the Phase 3 clinical trial by December 31, 2018, BioVascular shall have the right to terminate the license agreement and the advance payment shall not be repaid to Mills. Under the terms of a September 2017 consent between Comerica Bank,
BioVascular and Mills, Comerica Bank shall receive $0.1 million of the approximately $0.4 million advance payment from Mills.
Manufacturing
We do not own or operate manufacturing facilities for the production of our product candidates nor do we have plans to develop our own manufacturing operations
in the foreseeable future. We currently depend on third-party contract manufacturers for all of our required raw materials, active pharmaceutical ingredients, and finished product candidate for our clinical trials. We do not have any current
contractual arrangements for the manufacture of commercial supplies of any product candidates. We currently employ internal resources and third-party consultants to manage our manufacturing contractors.
Sales and Marketing
We have not yet defined our sales,
marketing or product distribution strategy for our product candidates or any future product candidates because they are still in
pre-clinical
or clinical development. Our future commercial strategy may include
the use of strategic partners, distributors, a contract sale force, or the establishment of our own commercial and specialty sales force, as well as similar strategies for regions and territories outside the United States. We plan to further
evaluate these alternatives as we approach approval for the use of our product candidates for one or more indications.
25
Intellectual Property
Our commercial success depends in part on our ability to avoid infringing the proprietary rights of third parties, our ability to obtain and maintain
proprietary protection for our technologies where applicable and to prevent others from infringing our proprietary rights. We seek to protect our proprietary technologies by, among other methods, evaluating relevant patents, establishing defensive
positions, monitoring European Union oppositions and pending intellectual property rights, preparing litigation strategies in view of the United States legislative framework and filing United States and international patent applications on
technologies, inventions and improvements that are important to our business. Patents and other intellectual property rights are crucial to our success. It is our policy to protect our intellectual property rights through available means, including
filing and prosecuting patent applications in the United States and other countries, protecting trade secrets, and utilizing regulatory protections such as data exclusivity. We also include restrictions regarding use and disclosure of our
proprietary information in our contracts with third parties, and utilize customary confidentiality agreements with our employees, consultants, clinical investigators and scientific advisors to protect our confidential information and
know-how.
Together with our licensors, we also rely on trade secrets to protect our combined technology especially where we do not believe patent protection is appropriate or obtainable. It is our policy to operate
without knowingly infringing on, or misappropriating, the proprietary rights of others.
An international patent law treaty, or PCT, provides a unified
procedure for filing patent applications to protect inventions in each of its contracting states. Thus, a single PCT application can be converted into a national stage patent application in any of the more than 145 PCT contracting states, and is
considered a simple, cost-effective means for seeking patent protection in numerous regions or countries. This nationalization (converting into an application in any of the contracting states) typically occurs 18 months after the PCT application
filing date. We also rely on trade secrets,
know-how
and continuing technological innovation to develop and maintain our proprietary position.
The term of individual patents depends upon the legal term of the patents in countries in which they are obtained. In most countries, including the United
States, the patent term is generally 20 years from the earliest date of filing a
non-provisional
patent application in the applicable country. In the United States, a patents term may, in certain cases,
be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office in examining and granting a patent or may be shortened if a patent is terminally disclaimed over a
commonly owned patent or a patent naming a common inventor and having an earlier expiration date.
26
The following chart summarizes our intellectual property rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Candidate
|
|
Product Candidate
Component
|
|
Jurisdiction
|
|
Indication
|
|
Claims
|
|
Scope
|
|
Latest Estimated
Patent Exclusivity
Period
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-A1
|
|
United States
|
|
Any
|
|
Composition of Matter
|
|
1 issued
|
|
03/22/2026*
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-A1
|
|
Australia, Switzerland, Germany, Spain, France, Great Britain, Italy
|
|
Any
|
|
Composition of Matter
|
|
8 issued
|
|
11/30/2024
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-A1
|
|
Canada
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 issued
|
|
11/30/2024
|
|
|
|
|
|
|
|
GPS
|
|
Peptides
WT1-427
long and
WT1-331
long
|
|
United States
|
|
Any
|
|
Composition of Matter
|
|
1 issued
|
|
10/26/2031*
|
|
|
|
|
|
|
|
GPS
|
|
Peptides
WT1-427
long and
WT1-331
long
|
|
United States
|
|
WT1-expressing
cancer
|
|
Method of Use
|
|
1 issued
|
|
10/17/2026
|
|
|
|
|
|
|
|
GPS
|
|
Peptides WT1-427 long
and
WT1-331
long
|
|
United States
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 pending
|
|
10/17/2026**
|
|
|
|
|
|
|
|
GPS
|
|
Peptide WT1-427 long
|
|
Australia, Switzerland, Germany, Spain, France, Great Britain, Ireland, Italy
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
9 issued
|
|
10/17/2026
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-331
long
|
|
Switzerland, Germany, Spain, France, Great Britain, Ireland, Italy
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
8 issued
|
|
10/17/2026
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-427
long
|
|
Canada
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 issued
|
|
10/17/2026
|
|
|
|
|
|
|
|
GPS
|
|
Peptides
WT1-427
long and
WT1-331
long
|
|
Canada
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 pending
|
|
10/17/2026**
|
|
|
|
|
|
|
|
GPS
|
|
Non-product
peptide
|
|
United States
|
|
Any
|
|
Composition of Matter
|
|
1 issued
|
|
12/21/2026
|
|
|
|
|
|
|
|
GPS
|
|
Peptide WT1-122A1 long
|
|
United States
|
|
Any
|
|
Composition of Matter
|
|
1 issued
|
|
02/20/2033*
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-122A1
long
|
|
United States
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 pending
|
|
04/10/2027**
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-122A1
long
|
|
Austria, Belgium, Switzerland, Germany, Spain, Finland, France, Great Britain, Greece, Ireland, Italy, Netherlands, Poland, Romania, Turkey
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
15 issued
|
|
04/10/2027
|
|
|
|
|
|
|
|
GPS
|
|
Peptide
WT1-122A1
long
|
|
Europe, Canada, Hong Kong
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
3 pending
|
|
04/10/2027
|
|
|
|
|
|
|
|
Not applicable
|
|
Non-product
peptide
|
|
United States
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 issued, 1 pending
|
|
01/15/2034
|
|
|
|
|
|
|
|
Not applicable
|
|
Non-product
peptide
|
|
Australia, Canada, China, Europe, Japan
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
5 pending
|
|
01/15/2034**
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Candidate
|
|
Product
Candidate
Component
|
|
Jurisdiction
|
|
Indication
|
|
Claims
|
|
Scope
|
|
Latest Estimated
Patent
Exclusivity
Period
|
|
|
|
|
|
|
|
|
Not applicable
|
|
Not applicable
|
|
United States
|
|
Any
|
|
Composition of Matter and Method of Use
|
|
1 pending
|
|
|
06/30/2038***
|
|
|
|
|
|
|
|
|
NeuVax (nelipepimut-S)
|
|
|
|
United States, Australia, Canada, China, Europe, Hong Kong, Japan, Korea and Mexico
|
|
Recurrence of cancers expressing low to intermediate levels of HER2/neu
|
|
Methods of Use
|
|
6 pending and 10 issued
|
|
|
2028
|
|
|
|
|
|
|
|
|
NeuVax in combination with trastuzumab
|
|
|
|
United States and Australia
|
|
HER2/neu expressing cancer
|
|
Methods of Use
|
|
2 issued
|
|
|
2026
|
|
|
|
|
|
|
|
|
GALE-401
|
|
|
|
United States
|
|
Vaso-occlusive
|
|
Method of Use
|
|
1 issued
|
|
|
2020
|
|
|
|
|
|
|
|
|
GALE-401
(Anagrelide Controlled Release)
|
|
|
|
United States, Europe, India, Japan and UK
|
|
Platelet Lowering
|
|
Anagrelide Controlled Release Formulations & Methods of Use
|
|
4 pending and 7 issued
|
|
|
2029
|
|
|
|
|
|
|
|
|
GALE-301
|
|
|
|
United States and PCT
|
|
Cancers expressing low levels of FBP (IHC 0 or 1+)
|
|
Dosage Regimen
|
|
2 pending
|
|
|
2037
|
|
|
|
|
|
|
|
|
GALE-301
&
GALE-302
Combination
|
|
|
|
United States, Canada, Europe, and Japan
|
|
Cancers expressing Folate Binding Protein (FBP)
|
|
Compositions & Methods of Use
|
|
1 pending and 8 issued
|
|
|
2022
|
|
|
|
|
|
|
|
|
GALE-301
&
GALE-302
Combination
|
|
|
|
United States
|
|
Cancers expressing Folate Binding Protein (FBP)
|
|
Combination Dosage Regimen
|
|
1 allowed
|
|
|
2036
|
|
*
|
Includes patent term adjustment
|
**
|
Projected expiration date of pending application, if granted
|
***
|
Projected expiration date of
non-provisional
application to be filed from provisional application
|
Each of the above-referenced pending or issued patents has been licensed by us. To our knowledge, there are no contested proceedings or third-party claims
relating to any of the above pending or issued patents.
Competition
Cancer immunotherapy has become a significant growth area for the biopharmaceutical industry, attracting large pharmaceutical companies as well as small niche
players. Generally, our principal competitors in the cancer immunotherapy market comprise both companies with currently approved products for various indications, such as manufactures of approved bispecific antibodies,
CAR-T
cells, and checkpoint inhibitors, as well as companies currently engaged in cancer immunotherapy clinical development. The large and
medium-size
players who have
successfully obtained approval for cancer immunotherapy products include Bristol-Myers Squib Company, Merck & Co., Inc., Genentech, Inc. (a subsidiary of Roche Holding AG), AstraZeneca PLC, Celgene Corporation, Johnson &
Johnson/Janssen Pharmaceuticals, Amgen, Novartis, Acerta Pharmaceuticals, Juno Therapeutics, Inc., Kite Pharm, Inc., a wholly-owned subsidiary of Gilead Sicencies, Inc. and Pfizer, Inc./EMD Serono, Inc.
28
Companies developing novel products with similar indications to those we are pursuing are expected to influence
our ability to penetrate and maintain market share. Principal competitors for our AML indication include both companies with currently approved products in AML, such as Agios Pharmaceuticals, Inc. (the holder of U.S. rights to Idhifa), Novartis AG
(the holder of rights to Rydapt), among others, as well as those with front-line chemotherapy drugs and maintenance therapies such as Jazz Pharmaceuticals plc (the holder of rights to Vyxeos), as well as Pfizer (the holder of rights to Mylotarg),
among others, as well as companies with drugs currently in development in AML. Our principal competitors for the MPM indication include both companies with currently approved products in MPM, such as Eli Lilly and Co. (the holder of rights to
Alimta), among others, as well as those with drugs currently in development in MPM. Our principal competitor for ET patients who are intolerant or resistant to hydroxyurea indication is Incyte Corporation in the United States (the holder of rights
for Jakafi) and Novartis outside the United States (the holder of rights for JAKAVI).
For patients with MPNs, current treatment options include Agrylin
(anagrelide hydrochloride) and its generic equivalents, hydorxyurea and interferon alpha. Agents currently being studied in patients with MPNs include investigational JAK2 inhibitors (e.g., LY2784544 (Eli Lilly), momelotinib (Gilead Sciences),
ruxolitinib (Incyte), fedratinib (Impact Biomedicines/Celgene) and pegylated interferon
alfa-2a
(Pegasys, Genentech/Roche).
For patients with early stage breast cancer, adjuvant therapy is often given to prevent recurrence and increase the chance of long-term disease free survival.
Adjuvant therapy for breast cancer can include chemotherapy, hormonal therapy, radiation therapy, or combinations thereof. In addition, the HER2 targeted drug trastuzumab (Herceptin) alone or in combination with pertuzumab (Perjeta), both
manufactured and marketed by Roche/Genentech- may be given to patients with tumors with high expression of HER2 (IHC 3+), as well as other novel targets such as MUC1 which may be useful in treating breast cancer.
There are a number of cancer vaccines in development for breast cancer, including but not limited to Lapuleucel-T (Dendreon),
AE-37
(Antigen Express), and Stimuvax (Merck KgA). While these development candidates are aimed at a number of different targets, and
AE-37
has published data in the
HER2 breast cancer patient population, there is no guarantee that any of the these compounds will not in the future be indicated for treatment of
low-to-intermediate
HER2 breast cancer patients and become directly competitive with NeuVax.
A number of chemotherapeutic agents have demonstrated activity in gynecological
carcinomas (ovarian and endometrial), particularly platinum-based regimens. New chemotherapy agents are being evaluated including trabectedin (Yondelis) and belotecan, as well as targeted agents such as bevacizumab (Avastin) and pazopanib
(Votrient). Monoclonal antibodies are also being developed including farletuzumab and catumaxomab. We are not aware of any of these agents being evaluated in the adjuvant setting where
GALE-301
is being
considered for further development. TPIV200 (TapImmune) is in development targeting FBP in ovarian cancer.
Many of our competitors, either alone or with
their strategic partners, have substantially greater financial, technical and human resources than we do, and experience in obtaining FDA and other regulatory approvals of treatments and commercializing those treatments. Accordingly, our competitors
may be more successful than us in obtaining approval for cancer immunotherapy products and achieving widespread market acceptance. Our competitors treatments may be more effectively marketed and sold than any products we may commercialize,
thus causing limited market share before we can recover the expenses of developing and commercializing of our cancer immunotherapy product candidate.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our
competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These activities may lead to consolidated efforts that allow for more
rapid development of cancer immunotherapy product candidates.
These competitors also compete with us in recruiting and retaining qualified scientific and
management personnel, the ability to work with specific clinical contract organizations due to conflict of interest, and also the conduct of trials in the ability to recruit clinical trial sites and subjects for our clinical trials.
29
We expect any products that we develop and commercialize to compete on the basis of, among other things,
efficacy, safety, price and the availability of reimbursement from government and other third-party payors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are viewed as safer,
more convenient or less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our current product candidates or any other
future product candidate, which could result in our competitors establishing a strong market position before we are able to enter the market.
Government Regulation
The FDA and other regulatory
authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging,
storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing. Along with third-party contractors, we will be required to
navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of its current or future product candidates. The
process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:
|
|
|
completion of preclinical laboratory tests and animal studies performed in accordance with the FDAs current Good Laboratory Practices, or GLP, regulation;
|
|
|
|
submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;
|
|
|
|
approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the trial is begun;
|
|
|
|
performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;
|
|
|
|
preparation of and submission to the FDA of a Biologics License Application, or BLA, after completion of all pivotal clinical trials;
|
|
|
|
satisfactory completion of an FDA Advisory Committee review, if applicable;
|
|
|
|
a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
|
|
|
|
satisfactory completion of an FDA
pre-approval
inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with current
Good Manufacturing Practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve the biological products continued safety, purity and potency, and of selected clinical investigations to assess compliance
with current Good Clinical Practices, or cGCP; and
|
|
|
|
FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States, which must be updated annually when significant changes are made.
|
The testing and approval process requires substantial time, effort and financial resources, and, or cGCP, we cannot be certain that any
approvals for our current or future product candidates will be granted on a timely basis, if at all. Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from
the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general
30
investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and
pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical
trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the
30-day
time period, raises safety concerns or questions about the proposed clinical trial.
In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization
to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified
investigators in accordance with cGCP, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other
things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during
product development and for any subsequent protocol amendments. Furthermore, an IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial
begins at that site and must monitor the clinical trial until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an
unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as DSMB, which provides
authorization for whether or not a clinical trial may move forward at designated check points based on access to certain data from the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for
subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical trial results to public registries.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
|
|
|
Phase 1
The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance,
absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.
|
|
|
|
Phase 2
The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to
identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
|
|
|
|
Phase 3
The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for
safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.
|
|
|
|
Phase 4
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These
so-called
Phase 4 studies may be made a condition to approval of the BLA.
|
Phase 1, Phase 2 and Phase 3
testing may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials, companies may complete
additional animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the
safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
31
BLA Submission and Review by the FDA
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development,
nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical
studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the products chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from
company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a BLA requires payment of a
substantial user fee to FDA, and the sponsor of an approved BLA is also subject to annual product and establishment user fees. These fees are typically increased annually. A waiver of user fees may be obtained under certain limited circumstances.
Once a BLA has been submitted, the FDAs goal is to review the application within ten months after it accepts the application for filing, or, if the
application relates to an unmet medical need in a serious or life-threatening indication, six months after the FDA accepts the application for filing. The review process is often significantly extended by FDA requests for additional information or
clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the products
continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not
acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does
not satisfy the regulatory criteria for approval.
The testing and approval process requires substantial time, effort and financial resources, and each
may take several years to complete. The FDA may not grant approval on a timely basis, or at all, and we may encounter difficulties or unanticipated costs in its efforts to secure necessary governmental approvals, which could delay or preclude us
from marketing its products. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response
Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application
is not ready for approval. A Complete Response Letter may request additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information
and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication
guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed
labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with
pre-
and post-marketing regulatory standards is not maintained
or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the products safety and effectiveness after commercialization and may
limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDAs policies may change, which
could delay or prevent regulatory approval of our products under development.
32
A sponsor may seek approval of its product candidate under programs designed to accelerate FDAs review and
approval of new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate
the potential to address unmet medical needs for the condition. For a product candidate with Fast Track designation, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted if relevant
criteria are met. A Fast Track designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at six months after the FDA accepts the application for filing. Priority review is
granted when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If criteria are not met for priority review, the
application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to
support approval. We have obtained Fast Track designation for GPS in AML, MPM, and NeuVax.
Under the Accelerated Approval program, the FDA may approve a
BLA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies
after marketing approval are generally required to verify the biologics clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit.
In addition, a sponsor may seek FDA designation of its product candidate as a Breakthrough Therapy, if the product candidate is intended, alone or in
combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the
application. Breakthrough designation also allows the sponsor to file sections of the BLA for review on a rolling basis. we plan to seek designation as a breakthrough therapy for GPS in one or more indications.
Fast Track, Priority Review and Breakthrough Therapy designations do not change the standards for approval but may expedite the development or approval
process.
Orphan Drugs
Under the Orphan Drug
Act, the FDA may grant Orphan Drug Product Designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a
patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the
United States for that drug or biologic. Orphan Drug Product Designation must be requested before submitting a BLA. After the FDA grants Orphan Drug Product Designation, the generic identity of the therapeutic agent and its potential orphan use are
disclosed publicly by the FDA.
If a product that has Orphan Drug Product Designation subsequently receives the first FDA approval for a particular active
ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same
indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the
availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for
the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of Orphan Drug Product Designation are tax credits for certain research and a waiver of the BLA application user fee.
A drug with Orphan Drug Product Designation may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which
it received Orphan Drug Product Designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable
to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We plan to seek Orphan Drug Product Designation for GPS in specific orphan indications in which there is a medically plausible basis for
the use of GPS for such indications, if applicable. We have obtained Orphan Drug Product Designation for GPS in AML and MPM and for
GALE-301
and one for
GALE-302.
33
Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other
things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as
adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well
as new application fees for supplemental applications with clinical data. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon our third-party manufacturers and us. Changes to the manufacturing process are strictly regulated, and,
depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party
manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. We cannot
be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If we or our present or future suppliers are not able to comply with these requirements, the FDA may, among
other things, halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the BLA.
We rely, and expect to
continue to rely, on third parties for the production of clinical quantities of our product candidates and we expect to rely in the future on third parties for the production of commercial quantities. Future FDA and state inspections may identify
compliance issues at the facilities of our contract manufacturers that may disrupt production, distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply
with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary,
FDA-initiated
or judicial action that could delay or prohibit further marketing. The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add
new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other
things:
|
|
|
restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
|
|
|
|
fines, warning letters or holds on post-approval clinical studies;
|
|
|
|
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;
|
|
|
|
product seizure or detention, or refusal to permit the import or export of products; or
|
|
|
|
injunctions or the imposition of civil or criminal penalties.
|
34
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make
only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the
promotion of
off-label
uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
Physicians may prescribe legally available products for uses that are not described in the products labeling and that differ from those tested by us and approved by the FDA. Such
off-label
uses are
common across medical specialties. Physicians may believe that such
off-label
uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in
their choice of treatments. The FDA does, however, restrict manufacturers communications on the subject of
off-label
use of their products.
Other Healthcare Laws and Compliance Requirements
Our sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous regulatory and law
enforcement authorities in the United States in addition to FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human
Services and state and local governments. Our promotional and scientific/educational programs must comply with the federal Anti-Kickback Statute, the Foreign Corrupt Practices Act, the False Claims Act, or FCA, the Veterans Health Care Act,
physician payment transparency laws, privacy laws, security laws, and additional state laws similar to the foregoing.
The federal Anti-Kickback Statute
prohibits, among other things, the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal
health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. The government has enforced the Anti-Kickback Statute to reach large
settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have
committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. Many states have
similar laws that apply to their state health care programs as well as private payors.
The FCA, imposes liability on persons who, among other things,
present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided
as claimed, or for services that are not medically necessary. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the FCA can result in significant
monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for
example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multibillion dollar settlements under the FCA in addition to individual criminal
convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in
which they conduct their business. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any
healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of
or payment for healthcare benefits, items or services. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers and
manufacturers compliance with applicable fraud and abuse laws.
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In addition, there has been a recent trend of increased federal and state regulation of payments made to
physicians and other healthcare providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposed new reporting
requirements on drug manufacturers for payments or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit
required information may result in civil monetary penalties
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Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting
of gifts, compensation and other remuneration to physicians and other healthcare professionals.
We may also be subject to data privacy and security
regulation by both the federal government and the states in which it conducts its business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective implementing regulations, imposes specified
requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAAs privacy and security standards directly applicable to business associates,
defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and
criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal
HIPAA laws and seek attorneys fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in
significant ways and may not have the same effect.
If our operations are found to be in violation of any of such laws or any other governmental
regulations that apply to it, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state
healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.
Also, the U.S.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. We cannot assure you
that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could
result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.
Coverage and
Reimbursement
Sales of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party
payors include government health administrative authorities, managed care providers, private health insurers and other organizations. Although we currently believe that third-party payors will provide coverage and reimbursement for our product
candidates, if approved, these third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly
approved healthcare products. We may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of its products. GPS for the indications that we develop may not be considered cost-effective. It is time consuming and
expensive for us to seek coverage and reimbursement from third-party payors. Moreover, a payors decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be
available or sufficient to allow us to sell our products on a competitive and profitable basis.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare
system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
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By way of example, in March 2010, the Affordable Care Act was signed into law, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Efforts to replace or repeal the
Affordable Care Act have been repeatedly made, and we cannot know how any legislation that may be passed to repeal or replace the Affordable Care Act will impact our business and potential future business.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include aggregate reductions to
Medicare payments to providers of up to 2% per fiscal year, starting in 2013, which will remain in effect through 2024 unless additional congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, which, among other
things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new
laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved for one or more indications, and, accordingly, our financial
operations.
We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result in more
rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar
reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
Foreign Regulation
In addition to regulations in
the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of its products to the extent we choose to develop or sell any products outside of the United States. The
approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. Additionally, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement
vary greatly from country to country.
In the European Union, member states require both regulatory clearances by the national competent authority and a
favorable ethics committee opinion prior to the commencement of a clinical trial. Under the European Union regulatory systems, marketing authorization applications may be submitted under either a centralized or decentralized procedure. The
centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states. It is compulsory for medicines produced by certain biotechnological processes. Because our products are produced in
that way, we would be subject to the centralized procedure. Under the centralized procedure, pharmaceutical companies submit a single marketing authorization application to the EMA. Once granted by the European Commission, a centralized marketing
authorization is valid in all European Union member states, as well as the European Economic Area countries Iceland, Liechtenstein and Norway. By law, a company can only start to market a medicine once it has received a marketing authorization.
Corporate Information
Our principal executive offices
are located at 315 Madison Avenue, 4
th
Floor, New York, NY 10017, and our phone number is (917)
438-4353.
Our website address is www.sellaslife.com. We do
not incorporate the information on our website into this annual report on Form
10-K,
and you should not consider such information part of this annual report on Form
10-K.
We were incorporated on April 3, 2006 in Delaware as Argonaut Pharmaceuticals, Inc. On
November 28, 2006, we changed our name to RXi Pharmaceuticals Corporation and began operations January 2007. On September 26, 2011, we changed our name to Galena Biopharma, Inc. In December 2017, we completed the Merger with Private SELLAS
and changed our name to SELLAS Life Sciences Group, Inc.
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ITEM 1A.
RISK FACTORS
You should consider carefully the risks and uncertainties described below, together with all of the other information in this annual report on Form
10-K.
We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties,
including those that we do not currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected.
This annual report on Form
10-K
also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks we face as described below and elsewhere in this annual report on Form
10-K.
Risks Relating to Our Financial Position and Capital Needs
We have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the
foreseeable future.
We are a clinical-stage biopharmaceutical company focused on development of novel cancer immunotherapies for a broad range of
cancer indications. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory
approval or become commercially viable. We do not have any products approved by regulatory authorities and have not generated any revenues from collaboration and licensing agreements or product sales to date, and have incurred significant research,
development and other expenses related to our ongoing operations and expect to continue to incur such expenses. As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception.
For the years ended December 31, 2017 and 2016, we reported a net loss of $23.8 million and $17.7 million, respectively, and as of December 31, 2017 and 2016, had an accumulated deficit of $54.2 million and
$30.4 million, respectively.
We do not expect to generate revenues for many years, if at all. We expect to continue to incur significant expenses
and operating losses for the foreseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory approvals for our product candidates and any additional product candidates we may acquire, and
potentially begin to commercialize product candidates that may achieve regulatory approval. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our
future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If any of our product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve
market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. We anticipate that our expenses will increase in the future as we continue to
invest in research and development of our existing product candidates, investigate and potentially acquire new product candidates and expand our manufacturing and commercialization activities.
There is substantial doubt about our ability to continue as a going concern.
As of December 31, 2017, we had a cash balance of approximately $2.3 million and restricted cash of $10.4 million. In addition, we had
outstanding accounts payable and accrued expenses of $14.9 million and an outstanding principal amount of $10.2 million as of December 31, 2017, which consists of our senior secured debenture with JGB (Cayman) Newton Ltd, or JGB, that
is due November 2018. The outstanding principal amount is maintained in a restricted cash. We expect our existing cash as of December 31, 2017, together with the $6.0 million of proceeds from the initial closing of our private
placement of Series A 20% convertible preferred stock, or Series A Convertible Preferred, and warrants in March 2018, will enable us to fund our operating expenses and capital expenditure requirements through June 2018. Assuming that all conditions
to the initial closing are met, we expect an additional $4.7 million of cash proceeds from the second closing of the sale of our Series A Convertible Preferred and warrants in the second quarter of 2018. Accordingly, our management concluded that
these matters raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our auditors have included an
explanatory paragraph in their audit report for this uncertainty. If we cannot continue as a viable entity, our securityholders may lose some or all of their investment in us.
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We may fail to realize the anticipated benefit of the Merger.
Our ability to achieve our business objectives and raise the necessary capital to fund our operations, including the successful development of our current and
future product candidates, has substantial risk. If we are not able to achieve these objectives, the anticipated benefit of the Merger may not be realized fully, may take longer to realize than expected, or may not be realized at all.
It is possible that the integration and transition process could result in the loss of key employees, the disruption of our ongoing business, an adverse
impact on the value of the our assets, or inconsistencies in standards, controls, procedures or policies that could adversely affect our ability to comply with reporting obligations as a public company, an inability to satisfy our obligations to
third parties or to achieve the anticipated benefit of the Merger, or an inability to raise the necessary capital to fund our operations. Integration efforts between the two companies will also divert managements attention and resources. Any
delays in the integration process or inability to realize the full extent of the anticipated benefit of the Merger could have an adverse effect on our business and the results of our operations. Such an adverse effect may impact the value of the
shares of the our common stock.
Potential difficulties that may be encountered in the integration process include, among other things, the following:
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raising sufficient capital to fund our operations and current clinical programs;
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using our cash and other assets efficiently to develop our business;
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appropriately managing our liabilities;
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potential unknown or currently unquantifiable liabilities associated with the Merger and our business operations; and
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performance shortfalls at one or both of the companies as a result of the diversion of managements attention caused by completing the Merger and integrating the companies operations.
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We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to
delay, limit, reduce or terminate our product development or commercialization efforts.
We expect to expend substantial resources for the
foreseeable future to continue the clinical development and manufacturing of GPS, our WT1 peptide cancer immunotherapy product candidate exclusively licensed from MSK, the clinical development of our other product candidates including NeuVax,
GALE-301
and
GALE-302,
and the advancement and expansion of our preclinical research pipeline. These expenditures will include costs associated with research and development,
potentially acquiring new product candidates or technologies, conducting preclinical studies and clinical trials and potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale,
if any. Under the terms of our amended and restated license agreement with MSK, we are obligated to make royalty payments and payments upon the achievement of certain development and commercial milestones in addition to paying guaranteed annual
minimum royalties, sponsoring research and making other guaranteed payments to MSK. In addition, other unanticipated costs may arise. Further, under the terms of the amended and restated MSK license agreement, we are required to obtain
$25.0 million of financing by December 31, 2018, and if such financing conditions are not met, MSK has the right to terminate with prior written notice, unless we cure during the notice period. We are agreed to fund the NeuVax programs in
the amount of $3.0 million. Moreover, we have additional payment obligations under our BioVascular license agreement. Because the design and outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate
the actual amounts necessary to successfully complete the development and commercialization of our current or future product candidates.
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Our future capital requirements depend on many factors, including:
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the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
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the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates if clinical trials are successful;
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the cost of commercialization activities for our product candidates, if any of these product candidates is approved for sale, including marketing, sales and distribution costs;
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the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval;
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our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements;
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the costs associated with current
in-licensed
product candidates;
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the costs to
in-license
future product candidates or technologies;
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the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
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the costs in defending and resolving current derivative and securities class action litigation;
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our operating expenses; and
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the timing, receipt and amount of sales of, or royalties on, our future products, if any; and
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the emergence of competing technologies or other adverse market developments.
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We expect our existing cash as
of December 31, 2017, together with the proceeds from the initial closing of our Series A Convertible Preferred in March 2018, will enable the us to fund our planned operations through June 2018. Assuming that all conditions to the initial
closing are met, we expect an additional $4.7 million of cash proceeds from the second closing of the sale of our Series A Convertible Preferred and warrants in the second quarter of 2018. However, our operating plan may change as a result of many
factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our
current or future operating plans. We have only one limited committed external source of funds. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a
timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of our product candidates or target indications, or delay, limit, reduce or terminate our
establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.
We currently
have no source of revenues. We may never generate revenues or achieve profitability.
Currently, we do not generate any revenues from product sales
or otherwise. Even if we are able to successfully achieve regulatory approval for our product candidates, we do not know when we will generate revenues or become profitable, if at all. Our ability to generate revenues from product sales and achieve
profitability will depend on our ability to successfully commercialize products, including our current product candidate, and other product candidates that we may develop,
in-license
or acquire in the future.
Our ability to generate revenues and achieve profitability also depends on a number of additional factors, including our ability to:
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successfully complete development activities, including the necessary clinical trials;
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complete and submit either BLAs, or NDAs to the FDA, and obtain United States regulatory approval for indications for which there is a commercial market;
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complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities in Europe, Asia and other jurisdictions;
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obtain coverage and adequate reimbursement from third parties, including government and private payors;
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set commercially viable prices for our products, if any;
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establish and maintain supply and manufacturing relationships with reliable third parties and/or build our own manufacturing facility and ensure adequate, legally globally compliant manufacturing of bulk drug substances
and drug products to maintain that supply;
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develop manufacturing and distribution processes for our product candidate;
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develop commercial quantities of our product candidates, once approved, at acceptable cost levels;
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achieve market acceptance of our products, if any;
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attract, hire and retain qualified personnel;
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protect our rights in our intellectual property portfolio;
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develop a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves, in the markets in which we choose to commercialize on our own; and
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find suitable distribution partners to help us market, sell and distribute our approved products in other markets.
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Our revenues for any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories
for which it gains regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is not as
significant as our estimates, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate
significant revenues from sales of such products, even if approved. In addition, we anticipate incurring significant costs associated with commercializing any approved product candidate. As a result, even if we generate revenues, we may not become
profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be
forced to reduce our operations.
Following the Merger, our business and management is largely that of Private SELLAS, which has a limited operating
history. This may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Private SELLAS was
formed in January 2012. Its operations prior to the Merger were limited to organizing and staffing its company, acquiring product and technology rights and conducting product development activities for its product candidate GPS. As a combined
company, we have not yet demonstrated our ability to start or successfully complete any Phase 3 clinical trials, obtain regulatory approval, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales
and marketing activities necessary for successful commercialization for any of our product candidates. In addition, the adoptive cancer immunotherapy technology underlying our peptide cancer immunotherapy product candidate is new and largely
unproven. Any predictions about our future success, performance or viability, particularly in view of the rapidly evolving cancer immunotherapy field, may not be as accurate as they could be if we had a longer operating history as a combined company
or approved products on the market.
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In addition, our management team is largely composed of Private SELLAS who have limited experience of operating
as an United States public company. We may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a
company capable of supporting commercial activities. We may not be successful in such a transition. We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a
variety of factors, many of which are beyond our control. Accordingly, any of our interim or annual periods results are not indicative of future operating performance.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product
candidates on unfavorable terms to us.
We may seek additional capital through a variety of means, including through private and public equity
offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, or through the issuance of shares under management or other types of contracts, or upon exercise or conversion
of outstanding derivative securities, the ownership interest of our stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect our rights as a stockholder. Debt financing, if available, may involve
additional agreements similar to those that we have in place under our senior secured debenture with JGB, and could include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital
expenditures, entering into licensing arrangements, or declaring dividends. If we raise additional funds from third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not
favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for our product candidates, or
grant to others the rights to develop and market product candidates that we would otherwise prefer to develop and market.
We expect to continue to
incur significant operating and
non-operating
expenses, which may make it difficult for us to secure sufficient financing and may lead to uncertainty about our ability to continue as a going concern.
Substantial funds were expended to develop our technologies and product candidates, and additional substantial funds will be required for further
preclinical testing and clinical trials of our product candidates, and to manufacture and market any products that are approved for commercial sale. Because the successful development of our products is uncertain, we are unable to precisely estimate
the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate enough revenue, even if we are able to commercialize any of our product candidates, to become profitable.
In the event that we are unable to obtain additional financing if needed or if we incur significant expense related to the resolution of the ongoing
government investigation, we may not be able to meet our obligations as they come due, that in turn may raise substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our
common stock holders losing their entire investment. There is no guaranty that we will be able to secure additional financing if we need such financing. Our financial statements contemplate that we will continue as a going concern and do not contain
any adjustments that might result if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated working capital needs, defense costs related to the recent securities and derivative lawsuits, the
acceleration or modification of our development activities, any near-term or future expansion plans, increased expenses, potential acquisitions or other events may affect our ability to continue as a going concern. Future financing may be obtained
through, and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on our security holders or may otherwise adversely affect our business.
If we raise funds through the issuance of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to
those of holders of our common stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise
funds through the issuance of additional equity, whether through private placements or additional public offerings, such an issuance would dilute our security holders.
We are, and in the future may be, subject to legal or administrative actions that could adversely affect our financial condition and our business.
Our predecessor company, Galena was involved in multiple legal proceedings and administrative actions, including stockholder class actions, both
state and federal, some of which are ongoing and to which we are now subject as a result of the Merger. These legal and administrative actions, which we refer to as the Galena Legacy Matters, included allegations relating to federal securities
law violations, claims under the False Claims Act, claims regarding breaches of contract, and other stockholder allegations, including claims of breaches of fiduciary duty by our former directors. In addition, on or about April 9, 2018, JGB
filed a lawsuit in the U.S. District Court for the Southern District of New York. The complaint asserts claims under state law and federal securities law against us, our Chief Executive Officer and our Interim Chief Financial Officer relating to a
debenture agreement between JGB and us. These matters are described in Item 3 Legal Proceedings of this annual report on Form 10-K. These legal and administrative proceedings require our management and board of directors to devote a
significant amount of time and resources to defending such claims and addressing such allegations, rather than focusing on executing on our business plans and operations. The settlement of the Galena Legacy Matters has resulted in substantial
payments, some of which have not been covered by our insurance policies. We may continue to incur substantial unreimbursed legal fees and other expenses in connection with the Galena Legacy Matters, the JGB lawsuit or other future legal and
regulatory proceedings that may not qualify for coverage under, or may exceed the limit of, our applicable directors and officers liability insurance policies and could have a material adverse effect on our financial condition, liquidity, and
results of operations. An unfavorable outcome in any of these matters could damage our business and reputation or result in additional claims or proceedings against us. Moreover, in addition to these ongoing and prior matters, we may be exposed
to claims as a result of the Merger, or other legal or administrative actions in the future, which could result in the payment of additional amounts and have a material adverse effect on our financial condition and results of operations. We can make
no assurances as to the time or resources that will need to be devoted to these matters or their outcome, or the impact, if any, that these matters or any resulting legal or administrative proceedings may have on our business or financial condition
but any further action in respect of any such matter by a governmental agency could have a material adverse effect on our results of operation and our business and prospects. Please read Item 3 Legal Proceedings of this annual report on
Form 10-K for more information regarding our legal and administrative proceedings.
The recently passed comprehensive tax reform bill could
adversely affect our business and financial condition.
On December 22, 2017, President Trump signed into law new legislation that
significantly revises the Internal Revenue Code of 1986, as amended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal
rate of 35% to a flat rate of 21%,
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limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year
taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important
exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reduction of tax credits under the Orphan Drug Act).
Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent
various states will conform to the newly enacted federal tax law.
Our ability to use net operating losses to offset future taxable income may be
subject to limitations.
As of December 31, 2017, we had federal and state net operating loss, or NOL, carryforwards of $7.4 million. The
federal and state NOL carryforwards will begin to expire, if not utilized, beginning in 2027. These NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the newly enacted federal income tax law,
federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal NOLs is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In
addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an ownership change, which is generally defined as a greater than 50% change, by
value, in its equity ownership over a three-year period, the corporations ability to use its
pre-change
NOL carryforwards and other
pre-change
tax attributes to
offset its post-change income or taxes may be limited. The Merger constituted an ownership change and as such, our ability to use our NOL carryforwards is materially limited, which may harm our future operating results by effectively increasing our
future tax obligations.
Risks Relating to Our Former Commercial Operations
We are subject to U.S. federal and state health care fraud and abuse and false claims laws and regulations, and we recently have been subpoenaed in
connection with marketing and promotional practices related to Abstral
®
(fentanyl) sublingual tablets. Prosecutions under such laws have increased in recent years and we may become subject to
such prosecutions or related litigation under these laws. If we have not fully complied with such laws, we could face substantial penalties.
Our
former commercial operations and development programs are subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal False Claims Act, federal Anti-Kickback Statute, and the federal Sunshine Act. A
federal investigation led by the U.S. Attorneys Office for the Southern District of Alabama, or the SDAL, of two of the high-prescribing physicians for Abstral (fentanyl) sublingual tablets resulted in the criminal prosecution of the two
physicians for alleged violations of the federal False Claims Act and other federal statutes. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians
and provided information regarding the facts and circumstances involving a rebate agreement between us and the defendant physicians pharmacy as well as their ownership of our common stock. The criminal trial, which began on January 4,
2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts. In May 2017, one physician was sentenced to 20 years in prison, and the other physician was sentenced to 21 years in
prison.
At the end of the SDAL case, SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. To our knowledge, we
were not a target or subject of that investigation. We have also received a subpoena from the U.S. Attorneys Office for the Southern District of New York in February 2018, seeking documents related to specific physicians. To our knowledge, we
are not a target or subject of that investigation.
There have also been federal and state investigations of companies that have products that are in the
same therapeutic class as Abstral, and we have learned that the FDA, and other governmental agencies were investigating our Abstral promotion practices. In December 2015, we announced we had received a subpoena from the U.S. Attorneys Office
for the District of New Jersey, or the USAO NJ, requesting the production of a broad range of documents pertaining to marketing and promotional practices related to Abstral, a product which we sold to Sentynl Therapeutics Inc. for aggregate gross
43
consideration of $12 million in November 2015. In January 2016, we announced that the USAO NJ and the
Department of Justice, or DOJ, were conducting a criminal and civil investigation of us, as well as, possibly one or more then-current and/or former employees. On September 8, 2017, DOJ announced a settlement agreement with our company
regarding the USAO NJ and DOJs investigation. The settlement involves a
non-criminal
resolution agreement and a civil payment of approximately $7.551 million, plus interest accrued since the date of
reaching an agreement in principle payable in equal installments over twelve months, in return for a release of government claims of our company in connection with the investigation. The civil payment was fully paid by us on or about
December 29, 2017.
We may be subject to additional legal or administrative actions as a result of these matters, or the impact of such matters. If
we are found to be in violation of the False Claims Act, Anti-Kickback Statute, Patient Protection and Affordable Care Act, or any other applicable state or any federal fraud and abuse laws, we may be subject to penalties, such as civil and criminal
penalties, damages, fines, or an administrative action of exclusion from government health care reimbursement programs. We can make no assurances as to the time or resources that will need to be devoted to these matters or outcomes, or the impact,
if any, that these matters or any resulting legal or administrative proceedings may have on our business or financial condition.
Many of the
regulatory provisions that we are subject to include criminal provisions. If we are unable to comply with these provisions in the operation of our business we may become subject to civil and criminal investigations and proceedings that could have a
material adverse effect on our business, financial condition and prospects.
The federal False Claims Act prohibits persons from knowingly filing,
or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Qui tam lawsuit filed under the False Claims Act can be brought by any individual on behalf of the government and such
individuals, commonly known as relators or whistleblowers, may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent
years, causing greater numbers of health care companies to have to defend such qui tam actions and pay substantial sums to settle such actions. A qui tam action had been filed against us and others as described in the settlement agreement with DOJ
and USAO NJ. As set forth in that settlement agreement, for a release of all claims against us and our officers and directors and dismissal with prejudice of the qui tam lawsuit, the relator received a portion of the $7.551 million payment to
the federal government. As a result of the payment of the settlement amount, the federal government and the relator will dismiss with prejudice their claims against us in the qui tam lawsuit. In a separate settlement agreement, we paid
$0.30 million in cash to the relators counsel for the statutory mandated attorneys fees. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration,
directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as the Medicare and Medicaid
programs. Several courts have interpreted the statutes intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated.
The Anti-Kickback Statute is broad, and despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback
Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation of the Anti- Kickback Statute may be
used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the
referral of patients for health care items or services reimbursed by any source, not only Medicare and Medicaid programs.
The federal Patient Protection
and Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to
pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims acts to be at least as
effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws including qui
tam provisions. The federal Patient Protection and Affordable Care Act includes provisions known as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and medical
44
supplies covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to the Centers for Medicare and
Medicaid Services for subsequent public disclosures. Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to
$1 million per year for knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been enacted on the state level in the United States, and an increasing number of countries
worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states such as Massachusetts and Vermont imposed an outright ban on certain gifts to physicians.
These laws could affect our product promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential purchasers or users of our system. Both the disclosure laws and gift bans also will impose
administrative, cost and compliance burdens on us.
We face product liability exposure and, if successful claims are brought against us, we may
incur substantial liability if our insurance coverage for those claims is inadequate.
The commercial sale of our products after we are approved as
well as the use of our product candidates in clinical trials exposes us to possible product liability claims. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the
FDA, if our products were sold to third parties, or if our products are provided in clinical trials. Our products are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated
with our products could result in injury to a patient or even death. For example, because the placebo may have performed better than NeuVax in the PRESENT (
P
revention of
R
ecurrence in
E
arly-
S
tage, Node-Positive Breast
Cancer with Low to Intermediate HER2
E
xpression with
N
euVax
T
reatment) Trial, the use of NeuVax may have worsened the patients condition.
Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into
contact with our products or generic versions of our products. If we cannot successfully defend ourselves against product liability claims we could incur substantial liabilities. Because we have sold Abstral and Zuplenz (ondansetron) oral soluble
film and provided NeuVax as a study drug in the PRESENT Trial and other clinical trials, regardless of merit or eventual outcome, product liability claims may result in:
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impairment of our business reputation;
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costs of related litigation;
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distraction of managements attention from our primary business; or
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substantial monetary awards to patients or other claimants.
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We have obtained product liability insurance
coverage for commercial product sales with a $10 million per occurrence and a $10 million annual aggregate coverage limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and
may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon
adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability coverage based on sales of our products, we may be unable to obtain this increased product liability insurance
on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuit based on drugs that had unanticipated side effects, including side effects that may be less severe than those of our products. A
successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of
operations, financial condition and prospects.
45
Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers
must comply with environmental laws and regulations, which can be expensive and restrict how we do business.
Our third-party manufacturers and
suppliers activities involve the controlled storage, use and disposal of hazardous materials. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these
hazardous materials even after we sell or otherwise dispose of the products. In some cases, these hazardous materials and various wastes resulting from their use will be stored at our contractors or manufacturers facilities pending use and
disposal. We cannot completely eliminate the risk of contamination, which could cause injury to our employees and others, environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations governing the use,
storage, handling and disposal of these materials and specified waste products. Although we expect that the safety procedures utilized by our third-party contractors and manufacturers for handling and disposing of these materials will generally
comply with the standards prescribed by these laws and regulations, we cannot guarantee that this will be the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any
resulting damages and such liability could exceed our resources. We do not currently carry biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for
damages and fines arising from biological or hazardous waste exposure or contamination.
We will continue to be responsible for certain liabilities
and obligations related to Abstral and Zuplenz, and if unknown liabilities were to arise it could have a material adverse effect on us.
Under our
respective asset purchase agreements with Sentynl Therapeutics, Inc. and Midatech Pharma PLC, our future obligations under our former agreements with Orexo AB and MonoSol Rx have been assumed by Sentynl and Midatech, respectively, except that we
will continue to be responsible for chargebacks, rebates, patient assistance and certain other product distribution channel liabilities related to Abstral and Zuplenz for a specified period of time post-closing. With respect to Zuplenz, we will
continue to be responsible for any downstream returns from end user customers or returns from wholesalers from inventory existing as of December 24, 2015 that was sold by us prior to December 24, 2015. As presently believed by us,
responsibilities to Sentynl and Midatech are not material, but if substantial unknown liabilities were to arise, it could have a material adverse effect on our financial condition. In this regard, we have been advised by one of our wholesale
customers that Zuplenz inventory held by that customer under an alleged agreement with us is approaching our expiration date and needs to be swapped with better dated Zuplenz product. We have settled the swap by us paying the customer
$0.50 million on October 24, 2017. Midatech has advised us that the same Zuplenz inventory is reaching our expiration date and will be returned. Under the terms of the asset purchase agreement, Midatech maintained that the cost of the
return is $1.5 million and we need to pay Midatech for the return. Midatech has since withdrawn that claim. We believe the settlement with the customer has resolved any return issues with Midatech without additional cost to us. However, no
assurance can be given that we will not face additional liabilities under these asset purchase agreements.
Risks Related to the Development of Our
Product Candidates
We are currently a clinical-stage biopharmaceutical company with product candidates in clinical development. If we are unable
to successfully develop and commercialize product candidates or experiences significant delays in doing so, our business may be materially harmed.
We are currently a clinical-stage biopharmaceutical company with product candidates in clinical development. We have invested substantially all of our efforts
and financial resources in identifying and developing potential product candidates and conducting preclinical studies, clinical trials and manufacturing activities. Our ability to generate revenues, which we do not expect will occur for many years,
if ever, will depend heavily on the successful development and eventual commercialization of our product candidates. The success of our product candidates will depend on several factors, including the following:
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completion of preclinical studies and clinical trials with positive results;
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receipt of regulatory approvals from applicable authorities;
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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
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establishing or making arrangements with third-party manufacturers or building our own manufacturing facility for commercial manufacturing purposes;
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developing manufacturing and distribution processes for our novel WT1 peptide cancer immunotherapy product candidate and other product candidates;
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manufacturing our product candidates at an acceptable cost;
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launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others;
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acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
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effectively competing with other therapies;
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obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our product candidates;
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protecting our rights in our intellectual property portfolio;
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maintaining a continued acceptable safety profile of the products following approval; and
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maintaining and growing an organization of scientists and business people who can develop and commercialize our products and technology.
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If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop
and commercialize our product candidates, which could materially harm our business.
Our future success is dependent on the regulatory approval of
our product candidates.
Our business is substantially dependent on our ability to obtain regulatory approval for, and, if approved, to
successfully commercialize our product candidates in a timely manner. We cannot commercialize product candidates in the United States without first obtaining regulatory approval for the product from the FDA; similarly, we cannot commercialize
product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we
must demonstrate with substantial evidence gathered in preclinical studies and clinical trials, generally including two well-controlled Phase 3 trials, that the product candidate is safe and effective for use for that target indication and that the
manufacturing facilities, processes and controls are adequate with respect to such product candidate.
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 preclinical studies and 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 the course of a product candidates clinical development and may vary among jurisdictions. We have
not obtained regulatory approval for any product candidate and it is possible that our existing product candidate or any future product candidates will ever obtain regulatory approval.
Our current and future product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many
reasons, including:
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disagreement with the design or implementation of our clinical trials;
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failure to demonstrate that a product candidate is safe and effective for our proposed indication;
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failure of clinical trials to meet the level of statistical significance required for approval;
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failure to demonstrate that a product candidates clinical and other benefits outweigh our safety risks;
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disagreement with our interpretation of data from preclinical studies or clinical trials;
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the insufficiency of data collected from clinical trials of our product candidates to support the submission and filing of a BLA, NDA or other submission or to obtain regulatory approval;
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failure to obtain approval of our manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical and commercial supplies or our own manufacturing facility; or
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changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.
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The FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support approval or
additional studies, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer
or more limited indications than it requests (including failing to approve the most commercially promising indications), may grant approval contingent on the performance of costly post-marketing clinical trials, or 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.
Even if a
product candidate were to successfully obtain approval from the FDA and comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or
contraindications, or may be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for one of our product candidates in one or more jurisdictions, or any approval contains
significant limitations, we may not be able to obtain sufficient funding to continue the development of that product or generate revenues attributable to that product candidate. Also, any regulatory approval of our current or future product
candidates, once obtained, may be withdrawn.
Our lead product candidate, GPS, represents a new therapeutic approach that presents significant
challenges.
Our future success is dependent in part on the successful development of WT1 peptide immunotherapies in general and GPS in particular.
Because this program represents a new approach to cancer immunotherapy for the treatment of cancer and other diseases, developing and commercializing GPS subjects us to a number of challenges, including:
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obtaining regulatory approval from the FDA and other regulatory authorities, which have very limited experience with the development and commercialization of WT1 cancer immunotherapies;
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the ability to obtain, store and use the three components required for administration, GPS,
GM-CSF,
and Montanide;
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training medical personnel regarding the proper preparation of GPS for administration and proper handling thereof once prepared;
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utilizing GPS in combination with other therapies, which may increase the risk of adverse side effects;
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educating medical personnel regarding the potential side effect profile of GPS for each target indication;
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developing processes for the safe administration of GPS, including long-term
follow-up
for all patients who receive these product candidate;
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sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process GPS;
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developing a manufacturing process and distribution network that can provide a stable supply with a cost of goods that allows for an attractive return on investment;
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establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement and pricing by third-party payors and government
authorities; and
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developing therapies for types of diseases beyond those initially addressed by GPS.
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We cannot be sure that
the manufacturing processes used in connection with GPS will yield a satisfactory product that is safe and effective, scalable or profitable.
Moreover,
public perception of safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the
novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training
to adopt this novel therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new
therapy do not or will not outweigh our costs.
Our product candidates, NeuVax,
GALE-301
and
GALE-302
may not be a viable product candidates to prevent the recurrence of breast, ovarian cancer or other types of cancers.
In June 2016, an independent data monitoring committee conducted the
pre-planned
interim analysis of the PRESENT Trial
for NeuVax and recommended that we stop the clinical trial because of futility, as the placebo may have performed better than NeuVax in the PRESENT trial. While there may have been factors about the design of the trial that caused the failure, on
factor it may be that NeuVax is not effective as a monotherapy in the treatment of the recurrence of breast cancer. As our product candidates
GALE-301
and
GALE-302
have
a similar mechanism of action to NeuVax, they may no longer be effective product candidates as monotherapies for the prevention of the recurrence of ovarian cancer or other types of cancer.
The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our existing product candidates in
clinical trials, and any other product candidates which may advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.
Success in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacy and
safety of an investigational drug. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in clinical trials, even after seeing
promising results in earlier preclinical studies or clinical trials. Any of our product candidates which are in, or may advance to, clinical trials may not succeed in clinical trials despite promising
pre-clinical
data. For example, with respect to GPS, a broadly similar anti-cancer peptide immunotherapeutic against melanoma-specific antigen being developed by GlaxoSmithKline for advanced unresectable
melanoma initially produced positive efficacy data in a Phase 2 clinical study, but subsequently failed to prove more beneficial than placebo in a controlled, blinded and randomized Phase 3, registration-enabling clinical trial in the same
indication in patients after tumor resection. Despite the results reported in earlier preclinical studies or clinical trials for our product candidates, we do not know whether the clinical trials we may conduct will demonstrate adequate efficacy and
safety to result in regulatory approval to market GPS or any of our product candidates for a particular indication, either as a monotherapy or in combination, in any particular jurisdiction. Although we are currently studying GPS as a treatment for
up to eight types of cancers, only two indications (acute myeloid leukemia, or AML, and malignant pleural mesothelioma, or MPM) have completed Phase 2 clinical trials and have Phase 3 clinical trials planned (pending funding availability). Efficacy
data from prospectively designed trials may differ significantly from those obtained from retrospective subgroup analyses. If later-stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for GPS may be
adversely impacted. Even if we believe that we have adequate data to support an application for regulatory approval to market any of our current or future product candidates, the FDA or other regulatory authorities may not agree and may require that
it conducts additional clinical trials.
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We may find it difficult to enroll patients in our clinical trials given the limited number of patients who
have the diseases for which our product candidates are being studied. Difficulty in enrolling patients for this or other reasons could delay or prevent clinical trials of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our current and future product candidates is essential to our success. The timing of
our clinical trials depends in part on the rate at which we can recruit patients to participate in clinical trials of our product candidates, and we may experience delays in our clinical trials if we encounters difficulties in enrollment.
The eligibility criteria of our planned clinical trials may further limit the available eligible trial participants as we expect to require that patients have
specific characteristics that we can measure or meet the criteria to assure their conditions are appropriate for inclusion in our clinical trials. For instance, in our planned AML Phase 3 clinical trial, only patients who meet specific inclusion
criteria will enter the study. Primary entry restrictions include being greater than or equal to 60 years of age, having received upfront treatment with chemotherapy agents only, having achieved CRem, as well as demonstrating adequate hematologic
recovery. The estimated prevalence of AML is 12,000 to 20,000 cases in the United States (across all ages) and only a subset of this group satisfies the enrollment criteria for our AML Phase 3 clinical trial. We may not be able to identify, recruit,
and enroll a sufficient number of patients to complete our clinical trials in a timely manner because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical trials,
and the willingness of physicians to participate in our planned clinical trials. If patients are unwilling to participate in our clinical trials for any reason, the timeline for conducting trials and obtaining regulatory approval of our product
candidates may be delayed.
If we experience delays in the completion of, or termination of, any clinical trials of our current or future product
candidates, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented. In addition, any delays in completing our clinical trials
would likely increase our overall costs, impair product candidate development and jeopardize our ability to obtain regulatory approval relative to our current plans. Any of these occurrences may harm our business, financial condition, and prospects
significantly.
A number of different factors could prevent us from obtaining regulatory approval or commercializing our product candidates on a
timely basis, or at all.
Clinical trials of a drug candidate may be suspended at any time for various reasons, including if we or other regulatory
agencies believe the subjects or patients participating in such trials are being exposed to unacceptable health risks. A suspension may come from: us; the FDA or other applicable regulatory authorities; an independent DSMB, governing our clinical
trials; or an institutional review board, which is an independent committee registered with and overseen by the U.S. Department of Health and Human Services, or the HHS, that functions to approve, monitor and review biomedical and behavioral
research involving humans. Among other reasons, adverse side effects of a drug candidate on subjects or patients in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve
a particular drug candidate for any or all indications of use.
Clinical trials of a new drug candidate require the enrollment of a sufficient number of
patients, including patients who are suffering from the disease the drug candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, and delays in patient enrollment can result in
increased costs and longer development times than we expect at present. Patients who are enrolled at the outset of the trial may eventually choose for personal reasons not to participate in the study. We also compete for eligible patients with other
clinical trials underway, and we may experience delays in patient enrollment due to the dependency of other trials underway in the same patient population.
Clinical trials also require the review and oversight of institutional review boards, which approve and continually review clinical investigations to protect
the rights and welfare of human subjects. An inability or delay in obtaining institutional review board approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or information
derived from a clinical investigation not subject to initial and continuing institutional review board review and approval.
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In addition, cancer vaccines are a relatively new form of therapeutic treatment and a very limited number of such
products have received regulatory approval. Therefore, the FDA or other regulatory authority may apply standards for approval of a new cancer vaccine that is different from past experience.
Numerous factors could affect the timing, cost or outcome of our drug development efforts, including the following:
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difficulties or delays in enrolling patients in our planned clinical trials in conformity with required protocols or projected timelines;
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Challenges in locating and enrolling a sufficient number of patients of our clinical trials due to competitors numerous ongoing trials for the same or similar indications;
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conditions imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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difficulties or delays in arranging for third parties to conduct clinical trials of our product candidates;
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problems in engaging institutional review boards to oversee trials or problems in obtaining or maintaining institutional review board approval of studies;
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third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;
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our drug candidates having very different chemical and pharmacological properties in humans than in laboratory testing and interacting with human biological systems in unforeseen, ineffective or harmful ways, and the
possibility that our previous Phase 1 or Phase 2 trials will not be indicative of our drug candidates performance in larger patient populations;
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the need to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;
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insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical trials;
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disruption at our clinical trial sites resulting from local social or political unrest or other geopolitical factors;
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effects of our drug candidates not having the desired effects or including undesirable side effects or the drug candidates having other unexpected characteristics;
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negative or inconclusive results from our clinical trials or the clinical trials of others for drug candidates similar to our own or inability to generate statistically significant data confirming the efficacy of the
product being tested;
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adverse results obtained by other companies developing similar drugs;
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modification of the drug during testing;
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our capital resources; and
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reallocation of our financial and other resources to other clinical programs.
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It is possible that none of the
product candidates that we develop will obtain the appropriate regulatory approvals necessary for us to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may
market the product. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis we perform of data
from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material adverse effect on
our ability to generate revenue from the particular drug candidate.
In addition, the length of time to develop the product candidates as well as any
regulatory delays in the development and regulatory approval process could cause the patent exclusivity to be unavailable or greatly reduced for each product candidate. The lack of patent exclusivity could have a material adverse effect on our
ability to generate revenue from the particular drug candidate.
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We are also subject to numerous foreign regulatory requirements governing the conduct of clinical trials,
manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above as well as risks attributable to the satisfaction of
local regulations in foreign jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of the United States.
We
may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and human resources, we may forego or delay pursuit of opportunities with some programs or potential product
candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or more profitable market opportunities. Our spending on
current and future research and development programs and future product candidates for specific indications may not yield any commercially viable products. We may also enter into additional strategic collaboration agreements to develop and
commercialize some of our programs and potential product candidates in indications with potentially large commercial markets. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, it may
relinquish valuable rights to that product candidate through strategic collaborations, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to
such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome.
Clinical testing is expensive and can take many years to complete, and our outcome is inherently uncertain. Failure can occur at any time during the clinical
trial process. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical and clinical trials.
We may experience delays in our ongoing or future clinical trials and we do not know whether planned clinical trials will begin or enroll subjects on time,
will need to be redesigned or will be completed on schedule, if at all. There can be no assurance that the FDA will not put clinical trials of any of our product candidates on clinical hold in the future. Clinical trials may be delayed, suspended or
prematurely terminated for a variety of reasons, such as:
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delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a clinical trial design that we are able to execute;
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delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a trial;
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delay or failure in reaching 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;
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delay or failure in obtaining institutional review board, approval or the approval of other reviewing entities, including comparable foreign regulatory authorities, to conduct a clinical trial at each site;
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withdrawal of clinical trial sites from our clinical trials or the ineligibility of a site to participate in our clinical trials;
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delay or failure in recruiting and enrolling suitable subjects to participate in a trial;
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delay or failure in subjects completing a trial or returning for post-treatment
follow-up;
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clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;
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inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication;
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failure of our third-party clinical trial managers, CROs, clinical trial sites, contracted laboratories or other third-party vendors to satisfy their contractual duties, meet expected deadlines or return trustworthy
data;
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delay or failure in adding new trial sites;
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interim results or data that are ambiguous or negative or are inconsistent with earlier results or data;
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alteration of trial design necessitated by
re-evaluation
of design assumptions based upon observed data;
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feedback from the FDA, the IRB, DSMBs or a comparable foreign regulatory authority, or results from earlier stage or concurrent preclinical studies and clinical trials, that might require modification to the protocol
for a trial;
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a decision by the FDA, the IRB, a comparable foreign regulatory authority, or us, or a recommendation by a DSMB or comparable foreign regulatory authority, to suspend or terminate clinical trials at any time for safety
issues or for any other reason;
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unacceptable risk-benefit profile, unforeseen safety issues or adverse side effects;
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failure to demonstrate a benefit from using a product candidate;
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difficulties in manufacturing or obtaining from third parties sufficient quantities of a product candidate to start or to use in clinical trials;
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lack of adequate funding to continue a trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional studies or increased expenses associated with the services of our
CROs and other third parties; or
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changes in governmental regulations or administrative actions or lack of adequate funding to continue a clinical trial.
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Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient
population, the severity of the disease under investigation, the proximity of subjects to clinical sites, the patient referral practices of physicians, the eligibility criteria for the trial, the design of the clinical trial, ability to obtain and
maintain patient consents, risk that enrolled subjects will drop out or die before completion, competition for patients from other clinical trials, competing clinical trials and clinicians and patients perceptions as to the potential
advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. We may not be able to initiate or continue to support clinical trials of
of our product candidates for one or more indications, or any future product candidates if we are unable to locate and enroll a sufficient number of eligible participants in these trials as required by the FDA or other regulatory authorities. Even
if we are able to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the development costs for our product candidates may increase and the completion of our trials may be delayed or our
trials could become too expensive to complete. We rely on CROs, other vendors and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited
influence over their actual performance.
If we experience delays in the completion or termination of any clinical trial of our product candidates, the
approval and commercial prospects of such product candidate will be harmed, and our ability to generate product revenues from such product candidate will be delayed. In addition, any delays in completing our clinical trials will increase our costs,
slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any delays in completing our clinical trials for our product candidates may also decrease the period of
commercial exclusivity. In addition, many of the factors that could cause a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
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Our current and future product candidates, the methods used to deliver them or their dosage levels may
cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following any regulatory approval.
Undesirable side effects caused by our current or future product candidates, their delivery methods or dosage levels could cause us 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 authority. For example, although no high-grade
delayed type hypersensitivity in the skin or systemic anaphylaxis events have been noted after GPS administration in patients treated in our clinical studies to date, it is theoretically possible that such toxicities, or other type of adverse
events, may occur in future clinical studies. As a result of safety or toxicity issues that we may experience in our clinical trials, we may not receive approval to market any product candidates, which could prevent us from ever generating revenues
or achieving profitability. Results of our trials could reveal an unacceptably high severity and incidence of side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could
order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or
result in potential product liability claims. Any of these occurrences may have a material adverse effect on our business, results of operations, financial condition, cash flows and future prospects.
Additionally, if any of our product candidates receives regulatory approval, and we or others later identify undesirable side effects caused by such product,
a number of potentially significant negative consequences could result, including that:
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we may be forced to suspend marketing of such product;
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regulatory authorities may withdraw their approvals of such product;
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regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success of such products;
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we may be required to conduct post-marketing studies;
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we may be required to change the way the product is administered;
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we could be sued and held liable for harm caused to subjects or patients; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved.
Our product development program may not uncover all possible adverse events that
patients who take our product candidates may experience. The number of subjects exposed to product candidates and the average exposure time in the clinical development program may be inadequate to detect rare adverse events, or chance findings, that
may only be detected once the product is administered to more patients and for greater periods of time.
Clinical trials by their nature utilize a
sample of the potential patient population. However, with a limited number of subjects and limited duration of exposure, we cannot be fully assured that rare and severe side effects of our product candidates will be uncovered. Such rare and severe
side effects may only be uncovered with a significantly larger number of patients exposed to our product candidates. If such safety problems occur or are identified after our product candidates reaches the market, the FDA may require that we amend
the labeling of the product or recall the product, or may even withdraw approval for the product.
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We currently have orphan drug exclusivity for certain product candidates, and may seek Orphan Drug Product
designation for additional product candidates or indications, which might not be received or provide the intended benefit thereof.
Regulatory
authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug
intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. We received Orphan Drug Product designations, from the FDA as well as orphan medicinal
product designations, from the EMA, for GPS in AML and MPM. We also have received Orphan Drug Product designation for
GALE-301
and for
GALE-302
from the FDA.
Generally, if a product with an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such
designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same drug for that time period. The applicable period is seven years in the United
States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug product designation or if the drug is sufficiently profitable so that market exclusivity is no longer
justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the
rare disease or condition.
Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from
competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a new drug for the same condition if the FDA concludes that the later drug is clinically superior in
that it is shown to be safer, more effective or makes a major contribution to patient care.
We currently have Fast Track designation for certain
product candidates, and may seek Fast Track designation for additional product candidates or indications, which might not be received or provide the intended benefits thereof.
If a product candidate is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical
need for this condition, a product sponsor may apply to the FDA for Fast Track designation, which may or may not be granted by the FDA. The FDA has given us Fast Track designation for GPS in AML and MPM and for NeuVax.
However, Fast Track designation does not ensure that we will receive marketing approval or that approval will be granted within any particular timeframe. We
may not experience a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no
longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDAs priority review procedures.
Failure to obtain regulatory approval in international jurisdictions would prevent our product candidates from being marketed abroad.
In addition to regulations in the United States, to market and sell our product candidates in the European Union, many Asian countries and other jurisdictions,
we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ
substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. Clinical trials accepted in one country may not be
accepted by regulatory authorities in other countries. In addition, many countries outside the United States require that a product be approved for reimbursement before it can be approved for sale in that country. A product candidate that has been
approved for sale in a particular country may not receive reimbursement approval in that country. We may not be able to obtain approvals from regulatory authorities
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outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by
regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able
to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of any of our current or future product candidates by regulatory authorities in the European
Union, Asia or elsewhere, the commercial prospects of that product candidate may be significantly diminished, our business prospects could decline and this could materially adversely affect our business, results of operations and financial
condition.
Even if our current and future product candidates receive regulatory approval, they may still face future development and regulatory
difficulties.
Even if our obtains regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and
comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, adverse event reporting, safety surveillance, import, export, advertising, promotion,
recordkeeping and reporting of safety and other post-marketing information. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance by us and/or our contract
manufacturing organizations, or CMOs, and CROs for any post-approval clinical trials that it conducts. The safety profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval.
If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of our product candidates, they may require labeling changes or establishment of a risk evaluation and mitigation strategy, impose
significant restrictions on a products indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.
In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with cGMP, cGCP, and other regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where
the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product
candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
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issue warning letters or untitled letters;
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mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
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refuse to approve pending applications or supplements to applications filed by us;
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suspend or impose restrictions on operations, including costly new manufacturing requirements; or
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seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.
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The occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our products and generate revenues.
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Advertising and promotion of any product candidate that obtains approval in the United States will be heavily
scrutinized by the FDA, the DOJ, the Office of Inspector General of HHS, state attorneys general, members of Congress and the public. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States
will be heavily scrutinized by comparable foreign regulatory authorities. Violations, including actual or alleged promotion of our products for unapproved or
off-label
uses, are subject to enforcement letters,
inquiries and investigations, and civil and criminal sanctions by the FDA. Any actual or alleged failure to comply with labeling and promotion requirements may have a negative impact on our business.
We may not successfully identify, acquire, develop or commercialize new potential product candidates.
Part of our business strategy is to explore and evaluate opportunities to expand our product candidate pipeline by identifying and validating new product
candidates, which we may develop,
in-license
or acquire. In addition, in the event that our existing product candidates do not receive regulatory approval or are not successfully commercialized, then the
success of our business will depend on our ability to expand our product pipeline through
in-licensing
or acquisitions. We may be unable to identify relevant product candidates. If we do identify such product
candidates, we may be unable to reach acceptable terms with any third party from which we desire to
in-license
or acquire them.
We may not realize the benefits our of strategic alliances that we may form in the future.
We may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will
complement or augment our existing business. These relationships, or those like them, may require us to incur nonrecurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders or
disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic alliances and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a
strategic alliance or other alternative arrangements for any future product candidates and programs because our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of
development for collaborative effort and third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy. If we license products or acquire businesses, we may not be able to realize
the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net
income that justifies such transaction. Any delays in entering into new strategic alliances agreements related to our product candidates could also delay the development and commercialization of our product candidates and reduce their
competitiveness even if they reach the market.
GALE-401
must successfully complete a Phase 3 clinical trial
and obtain regulatory approval before we can market the product and our competitors may obtain a successful clinical trial result and regulatory approval before we do.
GALE-401
contains the active ingredient, anagrelide, an
FDA-approved
product
for the treatment of patients with MPNs, to lower abnormally elevated platelet levels. The currently available IR, version of anagrelide causes adverse reactions that are believed to be dose and plasma concentration dependent. According to the
Highlights section of the
FDA-approved
prescribing information for AGRYLIN (anagrelide hydrochloride) capsules, for oral use (as revised in July 2015), the most common adverse reactions (incidence >
5%) are headache, palpitations, diarrhea, asthenia, edema, nausea, abdominal pain, dizziness, pain, dyspnea, cough, flatulence, vomiting, fever, peripheral edema, rash, chest pain, anorexia, tachycardia, malaise, paresthesia, back pain, pruritus and
dyspepsia. These adverse reactions may limit the use of the IR version of the drug. Therefore, reducing the maximum concentration, is hypothesized to reduce the adverse reactions, while preserving efficacy, potentially allowing broader use of the
drug. We have analyzed data from multiple Phase 1 and 2
GALE-401
clinical trials and the treatment landscape for MPNs, with a current focus on ET, where we see an unmet medical need in patients who are
intolerant to the current standard of care. The risks include but are not limited to regulatory (agreement with regulatory agency on the development plan), operational (rate of enrollment), and statistical confirmation of the safety and efficacy
endpoints. In addition, pursuant to the terms of the amended Exclusive License Agreement with BioVascular, dated December 20, 2013, if the first patient is not enrolled in the Phase 3 clinical trial by December 31, 2018, BioVascular shall
have the right to terminate the license agreement. Even if we successfully complete a Phase 3 trial, there are other potential competitors whose clinical trials may be successful and obtain regulatory approval prior to our regulatory approval.
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We are dependent on technologies we license, and if we lose the right to license such technologies or we
fail to license new technologies in the future, our ability to develop new products would be harmed.
We currently are dependent on licenses from
third parties for technologies relating to our product candidates. Our current licenses impose, and any future licenses we enter into are likely to impose, various development, funding, royalty, diligence, sublicensing, insurance and other
obligations on us. If our license with respect to any of these technologies is terminated for any reason, the development of the products contemplated by the licenses would be delayed, or suspended altogether, while we seek to license similar
technology or develop new
non-infringing
technology. The costs of obtaining new licenses are high.
Risks
associated with operating in foreign countries could materially adversely affect our product development.
We may conduct future studies in
countries outside of the United States. Consequently, we may be subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:
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differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;
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more stringent privacy requirements for data to be supplied to the our operations in the United States, e.g. General Data Protection Regulation, in the European Union;
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unexpected changes in tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance with tax, employment,
immigration and labor laws for employees living or traveling abroad; foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism.
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Risks Related to
Our Manufacturing
We have limited to no manufacturing, sales, marketing or distribution capability and must rely upon third parties for such.
We currently have agreements with various third-party manufacturing facilities for production of our product candidates for research and
development and testing purposes. We depend on these manufacturers to meet our deadlines, quality standards and specifications. Our reliance on third parties for the manufacture of our active pharmaceutical ingredient and drug product and, in the
future, any approved products, creates a dependency that could severely disrupt our research and development, our clinical testing, and ultimately our sales and marketing efforts if the source of such supply proves to be unreliable or unavailable.
If the contracted manufacturing source is unreliable or unavailable, we may not be able to manufacture clinical drug supplies of our product candidates, and our preclinical and clinical testing programs may not be able to move forward and our entire
business plan could fail.
Both the active pharmaceutical ingredient and drug product for our product candidates are currently single sourced. We believe
these single sources are currently capable of supplying all anticipated needs of our proposed clinical studies, as well as initial commercial introduction. If we are able to commercialize our products in the future, there is no assurance that our
manufacturers will be able to meet commercialized scale production requirements in a timely manner or in accordance with applicable standards or cGMP. Once the nature and scope of additional indications and their commensurate drug product demands
are established, we will seek secondary suppliers of both the active pharmaceutical ingredient and drug product for our product candidates, but we cannot assure that such secondary suppliers will be found on terms acceptable to us, or at all.
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We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs
and limit supply of our product candidates.
Our company and our CMOs will need to conduct significant development work for each product candidate
for each target indication for studies, trials and commercial launch readiness. For example, the processes by which GPS is manufactured were initially developed by MSK for clinical purposes. Concurrent with the license of GPS, we acquired certain
supplies intended for clinical use, from MSK. These MSK clinical supplies may not be adequate for future clinical studies.
We intend to improve the
existing processes for GPS for more advanced clinical trials or commercialization. Developing commercially viable manufacturing processes is a difficult and uncertain task, and there are risks associated with scaling to the level required for
advanced clinical trials or commercialization, including cost overruns, potential problems with process
scale-up,
process reproducibility, stability issues, consistency and timely availability of reagents or
raw materials. The manufacturing facilities in which our product candidates will be made could be adversely affected by earthquakes and other natural disasters, equipment failures, labor shortages, power failures, and numerous other factors.
Additionally, the process of manufacturing our product candidates is complex, highly regulated and subject to several risks, including but not limited to:
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the manufacturing process is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from
normal manufacturing and distribution processes for our product candidates could result in reduced production yields, product defects, and other supply disruptions. Product defects can also occur unexpectedly. If microbial, viral, or other
contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates is made, such manufacturing facilities may need to be closed for an extended period of time to allow us to investigate and
remedy the contamination; and
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GPSs active pharmaceutical ingredient manufacturing is sensitive to heavy metal contamination. As such, extremely low levels of heavy metals are part of the active pharmaceutical ingredient manufacturing process;
GPSs drug product manufacturing is sensitive to water and oxygen contamination, as such the drug product is lyophilized (to reduce and residual water) and under a nitrogen blanket (to reduce any oxygen). The presence of heavy metals in the
active pharmaceutical ingredient and excess water and oxygen in the drug product can lead to higher than acceptable levels of impurities, which can lead to the active pharmaceutical ingredient or drug product being unacceptable for use.
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Any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages,
lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product, which could delay the development of our product candidates. We may also have to write off inventory, incur other charges and expenses
for supply of drug product that fails to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. Inability to meet the demand for our product candidates could damage our reputation and the
reputation of our products among physicians, healthcare payors, patients or the medical community, and cancer treatment centers, which could adversely affect our ability to operate our business and our results of operations.
In the clinical trials using NeuVax and GPS,
GM-CSF
is also administered and our availability is dependent upon
a third-party manufacturer, which may or may not reliably provide
GM-CSF,
thus jeopardizing the completion of the trials.
Some of our product candidates are administered in combination with
GM-CSF,
available in both liquid and lyopholyzed
forms exclusively from one manufacturer. We will continue to be dependent on that manufacturer for our supply of
GM-CSF
in connection with the ongoing NeuVax and GPS trials and the potential commercial
manufacture of these programs. We have not entered into a supply agreement with the manufacturer for
GM-CSF,
and instead rely on purchase orders to meet our supply needs. Any temporary interruptions or
discontinuation of the availability of
GM-CSF,
or any determination by us to change the
GM-CSF
used with NeuVax or GPS, may have a material adverse effect on our
clinical trials and any commercialization of the assets.
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If any of our CMOs clinical manufacturing facilities are damaged or destroyed or production at such
facilities is otherwise interrupted, our business and prospects would be negatively affected.
If our CMOs manufacturing facilities or the
equipment in them is damaged or destroyed, we may not be able to quickly or inexpensively replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or equipment, we might not be able to
transfer manufacturing to another CMO. Even if we could transfer manufacturing to another CMO, the shift would likely be expensive and time-consuming, particularly because the new facility would need to comply with the necessary regulatory
requirements and we would need FDA approval before selling any products manufactured at that facility. Such an event could delay our clinical trials or reduce our product sales.
Currently, we maintain insurance coverage against damage to our property and to cover business interruption and research and development restoration expenses.
However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any expenses or losses we may suffer. We may be unable to meet our requirements for our product candidates if there were a catastrophic event or
failure of our current manufacturing facility or processes.
Risks Related to Our Dependence on Third Parties
We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual
duties or meet expected deadlines, or if we lose any of our CROs or other key third-party vendors, we may not be able to obtain regulatory approval for or commercialize our current or future product candidates on a timely basis, if at all.
We have relied upon and plan to continue to rely upon third-party CROs, vendors and contractors to monitor and manage data for our ongoing
preclinical and clinical programs. For example, our collaborating investigators at MSK, along with their clinical and clinical operations teams, manage the conduct of the ongoing clinical trials for GPS as well as perform the analysis, publication
and presentation of data and results related to this program. We also rely on collaborating investigators, along with their clinical and clinical operations teams, at MSK for the collection and transfer of various types of
follow-up
data regarding studies previously conducted by MSK. We plan to rely on CROs and other third-party vendors for all currently contemplated clinical studies, with services to be rendered by such CROs ranging
from, in the case of assorted Phase 2 trials, specific and need-tailored (
e.g.
, data management and biostatistics) only to, in the case of in the case of our immune combination (PD1 blockade) Phase 2 trial and all planned Phase 3 trials,
all-encompassing.
We rely on these parties for the execution of our preclinical studies and clinical trials, and we control only some aspects of their activities. Nevertheless, we are responsible for ensuring that
each of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We also rely on third parties to assist
in conducting our preclinical studies in accordance with Good Laboratory Practices, and the Animal Welfare Act requirements. Our company and our CROs are required to comply with federal regulations, and GCP, which are international standards meant
to protect the rights and health of patients that are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of our products in clinical development.
Regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If our company, or any of our partners or CROs, fail to comply with applicable regulations, the clinical data generated in
our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our regulatory applications. We cannot assure you that upon inspection by a
given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with applicable requirements. In addition, our clinical trials must be conducted with product produced under cGMP and other requirements. We
are also required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, clinicaltrials.gov, within a specified timeframe. Failure to comply with these regulations may require us to
repeat preclinical studies and clinical trials, which would delay the regulatory approval process and result in adverse publicity.
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Our CROs, third-party vendors and contractors are not our employees, and except for remedies available to us
under our agreements with such CROs, third-party vendors and contractors, we cannot control whether or not they devote sufficient time and resources, including experienced staff, to our ongoing clinical, nonclinical and preclinical programs. They
may also have relationships with other entities, some of which may be our competitors. If CROs, third-party vendors and contractors do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or
accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to
obtain regulatory approval for or successfully commercialize our current or future product candidates. CRO, vendor or contractor errors could cause our results of operations and the commercial prospects for our current or future product candidates
to be harmed, our costs to increase and our ability to generate revenues to be delayed.
Our internal capacity for clinical trial execution and management
is limited and therefore we have relied on third parties. Outsourcing these functions involves risk that third parties may not perform to our standards, may not produce results or data in a timely manner or may fail to perform at all. Other data or
data updates from studies or trials previously conducted by MSK or others may emerge in the future. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the
risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we are unable to identify and
successfully manage the performance of third-party service providers in the future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges
or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
Our CROs, third-party vendors and contractors have the right to terminate their agreements with us in the event of an uncured material breach. In addition,
some of our CROs, third-party vendors and contractors have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such
termination, if we make a general assignment for the benefit of our creditors or if we are liquidated. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays in our
development programs. In addition, there is a natural transition period when a new CRO, third-party vendor or contractor commences work and the new CRO, third-party vendor or contractor may not provide the same type or level of services as the
original provider. If any of our relationships with our third-party CROs, third-party vendors or contractors terminate, we may not be able to enter into arrangements with alternative CROs, third-party vendors or contractors on a timely basis, on
commercially reasonable terms or at all.
We may not be able to establish or maintain the third-party relationships that are necessary to develop or
potentially commercialize some or all of our product candidates.
We expect to depend on collaborators, partners, licensees, clinical research
organizations and other third parties to support our discovery efforts, to formulate product candidates, to manufacture our product candidates, and to conduct clinical trials for some or all of our product candidates. We cannot guarantee that we
will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and other third parties on favorable terms, if at all. Our ability to successfully negotiate
such agreements will depend on, among other things, potential partners evaluation of the superiority of our technology over competing technologies and the quality of the preclinical and clinical data that we have generated, and the perceived
risks specific to developing our product candidates. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize our product candidates.
Under certain license agreements that we have already entered into, we have minimum dollar amounts per year that we are obligated to spend on the development of the technology we have licensed from our contract partners and other obligations to
maintain certain licenses. If we fail to meet this requirement under any of our licenses that contain such requirements or any other obligations under these licenses, we may be in breach of our obligations under such agreement, which may result in
the loss of the technology licensed. We cannot necessarily control the amount or timing of resources that our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot
guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion. We may not be able to readily terminate any such agreements with contract partners even if such contract partners do not fulfill our
obligations to us.
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In addition, we may receive notices from third parties from time to time alleging that our technology or product
candidates infringe upon the intellectual property rights of those third parties. Any assertion by third parties that our activities or product candidates infringe upon our intellectual property rights may adversely affect our ability to secure
strategic partners or licensees for our technology or product candidates or our ability to secure or maintain manufacturers for our compounds.
If
we fail to meet our obligations under our license agreements, we may lose the ability to develop our product candidates.
Our business depends on
our ability to license therapeutic compounds from third parties. If we fail to meet our obligations under our license agreements, we may lose the ability to develop our product candidates, which would adversely affect our business.
We enter into various contracts in the normal course of our business in which we indemnify the other party to the contract. In the event we have to
perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.
In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other agreements that
contain indemnification provisions. With respect to our academic and other research agreements, we typically indemnify the institution and related parties from losses arising from claims relating to the products, processes or services made, used,
sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our or our sublicensees exercise of rights under the agreement. With respect to our collaboration agreements, we indemnify our
collaborators from any third-party product liability claims that could result from the production, use or consumption of the product, as well as for alleged infringements of any patent or other intellectual property right by a third party. With
respect to consultants, we indemnify them from claims arising from the good faith performance of their services.
Should our obligation under an
indemnification provision exceed applicable insurance coverage or if we were denied insurance coverage, our business, financial condition and results of operations could be adversely affected. Similarly, if we are relying on a collaborator to
indemnify us and the collaborator is denied insurance coverage or the indemnification obligation exceeds the applicable insurance coverage, and if the collaborator does not have other assets available to indemnify us, our business, financial
condition and results of operations could be adversely affected.
Risks Related to Our Intellectual Property
We may not be able to obtain and enforce patent rights or other intellectual property rights that cover our product candidates and that are of sufficient
breadth to prevent third parties from competing against us.
Our success with respect to our product candidates will depend in part on our ability
to obtain and maintain patent protection in the United States and abroad, to preserve our trade secrets, and to prevent third parties from infringing upon our proprietary rights. Our patents and patent applications, however, may not be sufficient to
provide protection for GPS, NeuVax or our other products and product candidates against commercial competition.
The four peptide components of GPS are
WT1-A1,
WT1-427
long,
WT1-331
long, and
WT1-122A1
long. We have an exclusive license to United
States and foreign patents relating to these peptides from MSK, for all therapeutic and diagnostic uses. Under the license, we have issued patents covering the composition of matter of the
WT1-A1
peptide in
the United States, Australia, Switzerland, Germany, Spain, France, Great Britain, and Italy, and an issued Canadian patent covering the composition of matter and its use for inducing a cytotoxic T cell response in a human that cross-reacts with a
cancer cell that presents a native form of the peptide. The U.S. patent on the
WT1-A1
peptide (U.S. Patent No. 7,488,718) will expire on March 22, 2026, including patent term adjustment, and the
foreign patents will expire on November 30, 2024, absent patent term extension.
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We have licensed, issued patents covering the composition of matter of the
WT1-427
long peptide, and methods of use, in the United States, Australia, Switzerland, Germany, Spain, France, Great Britain, Ireland, Italy, and Canada. The United States composition of matter patent on the
WT1-427
long peptide (U.S. Patent No. 8,765,687) will expire on October 26, 2031, including patent term adjustment. The United States method of use patent (U.S. Patent No. 9,233,149) will expire on
October 17, 2026, absent patent term extension, and covers treating a subject with a
WT1-expressing
cancer, reducing an incidence of a
WT1-expressing
cancer, or its
relapse, and inducing the formation and proliferation of a cytotoxic T lymphocyte specific for a
WT1-expressing
cancer. The foreign patents will expire on October 17, 2026, absent patent term extension.
We have licensed, issued patents covering the composition of matter of the
WT1-331
long peptide, and methods of
use, in the United States, Switzerland, Germany, Spain, France, Great Britain, Ireland, and Italy. The United States composition of matter patent on the
WT1-331
long peptide (U.S. Patent No. 8,765,687)
will expire on October 26, 2031, including patent term adjustment. The United States method of use patent (U.S. Patent No. 9,233,149) will expire on October 17, 2026, absent patent term extension, and covers treating a subject with a
WT1-expressing
cancer, reducing an incidence of a
WT1-expressing
cancer, or its relapse, and inducing the formation and proliferation of a cytotoxic T lymphocyte specific for
a
WT1-expressing
cancer. The foreign patents will expire on October 17, 2026, absent patent term extension.
We have a licensed, issued United States patent covering the composition of matter of the
WT1-1221A1
long peptide, and
issued patents covering the composition of matter and methods of use, in Austria, Belgium, Switzerland, Germany, Spain, Finland, France, Great Britain, Greece, Ireland, Italy, Netherlands, Poland, Romania, and Turkey. The United States composition
of matter patent on the
WT1-1221A1
long peptide (U.S. Patent No. 9,265,816) will expire on February 20, 2033, including patent term adjustment. The European patents will expire on April 10,
2027, absent patent term extension, and cover the composition of matter and use of the peptide for the preparation of a medicament for treating a
WT1-expressing
cancer or for reducing an incidence of a
WT1-expressing
cancer or its relapse in a subject.
The active peptide found in NeuVax, the E75 peptide, has been known
and studied for many years. We have one issued U.S. patent, US 6,514,942, covering the composition of matter of the E75 peptide, which expired in
mid-2015,
prior to any potential commercialization of NeuVax.
We do not have and will not be able to obtain any composition of matter patent protection for E75, the active peptide in NeuVax. We also have a license from HJF to issued United States, European, Japanese, Korean, Mexican and Australian method of
use patents, which expire in 2028, that are directed to a method of inducing immunity against breast cancer recurrence by administering a composition comprising the E75 peptide to patients who have both an immunohistochemistry, or IHC, rating of 1+
or 2+ for HER2/neu protein expression, as well as a fluorescence in situ hybridization, or FISH, rating of less than about 2.0 for HER2/neu gene expression. The license further includes an issued United States method of use patent directed to a
method of inducing immunity against recurrence of any HER2/neu expressing tumors by administering the E75 peptide to patients with tumors having a FISH rating of less than about 2.0 for HER2/neu gene expression; an issued United States patent which
includes claims to the use of E75 to reduce the risk of cancer recurrence, including bone only recurrence; and pending applications with similar claims in a number of foreign jurisdiction, all of which expire in 2028. Also included in the license is
a method of use patent, which expires in 2026, that is directed to the use of NeuVax in combination with Herceptin (trastuzumab) to treat any HER2/neu expressing cancer. Thus, our method of use patents may not prevent competitors from seeking to
develop and market NeuVax for use in cancer patients who do not meet these criteria. If any such alternative uses were approved, this could lead to
off-label
use and price erosion for our NeuVax product. We
may seek FDA approval for use of NeuVax to treat cancer patients who fall outside the claimed IHC and FISH ranges and for other cancers as well. Although we are pursuing additional patent protection for NeuVax through pending patent applications, we
may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.
Anagrelide hydrochloride, the sole
active pharmaceutical ingredient in
GALE-401,
has been approved for many years and, thus, it is not possible to obtain composition of matter patents that cover anagrelide hydrochloride. As a result,
competitors who obtain the requisite regulatory approval can offer products with the same active pharmaceutical ingredients as
GALE-401,
so long as the competitors do not infringe any formulation patents that
we may have or may obtain or license, if any. The only patent protection that we have or are likely to obtain covering
GALE-401
are patents relating to specific formulations, methods using these formulations,
and methods of manufacturing and packaging. We have an issued United States patent, which expires in 2020, covering methods of
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Using anagrelide to reduce platelet count in patients subject to veno-occlusive events. We have granted patents
in the United States, United Kingdom and Japan, which expire in 2029, covering controlled release formulations of anagrelide and methods of use. We also are prosecuting pending patent applications in other territories including, but not limited to,
the United States, Europe, India, and Japan, which may not issue prior to any potential commercialization of
GALE-401.
We may seek FDA approval for use of
GALE-401
to
treat patients with myeloproliferative neoplasms that include several hematological disorders, including essential thrombocythemia. Although we are pursuing additional patent protection for
GALE-401
through
pending patent applications, we may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.
The
active peptides found in
GALE-301
and
GALE-302
are derived from Folate Binding Protein. One of the active peptides, E39, has been known and studied for many years. The
other active peptide,
GALE-302
(peptide E39), is a derivative of E39. We have a license from MDACC and HJF to issued and granted patents in the United States, Europe, Canada, and Japan, covering
composition of matter for the E39 derivative peptides, including
GALE-302,
alone and in combination with E39, as well as the use of these compositions for the treatment of cancer. These patents are expected to
expire in 2022, prior to any potential commercialization of
GALE-301.
We also have an allowed United States application with claims to combination dosage regimens of
GALE-301
and
GAL-302
which will expire in 2036 (excluding PTA). We also have pending United States and International (PCT) applications with claims to methods of
inducing an immune response to tumors with an immunohistochemistry (IHC) rating of 0 or 1+ for folate binding protein expression which, if granted, would expire in 2037. We do not have and will not be able to obtain any composition of matter patent
protection for the E39 peptide in any territory. The license we have from MDACC and HJF grants us the right to develop and market
GALE-301
for any use, including methods of treating cancer. Our patents may not
prevent competitors from seeking to develop and market the E39 peptide alone. If any such alternative uses of compositions containing the E39 peptide were approved, this could lead to off label use and price erosion for
GALE-301.
We may seek FDA approval for use of
GALE-301,
alone or in combination with
GALE-302,
to treat cancer patients with ovarian
and endometrial cancers and for other cancers, as well. Although we are pursuing additional patent protection for
GALE-301
and the combination of
GALE-301
and
GALE-302
through pending patent applications, we may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.
Our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any patents we
have or may obtain or license may not provide us with sufficient protection for our commercial product and product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic
pharmaceutical companies. In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Nor can we guarantee that the claims of these patents will be held valid or enforceable
by the courts or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us.
Changes in
either the patent laws or in the interpretations of patent laws in the United States or abroad may diminish the value of our intellectual property. In addition, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act,
was signed into law. The Leahy-Smith Act includes a number of significant changes to the U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. Accordingly, it is
not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act, in particular the
first-to-file
provision
and our implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement of or defense of our issued patents, all of which could have a material adverse effect on our business and
financial condition. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.
In
addition, United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances in certain situations. From time to time, the United States Supreme Court, other federal courts, the United States
Congress, or interpretation by the United States Patent and Trademark Office or USPTO, may change the standards of patentability and any such changes could have a negative impact on our business.
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Some cases decided by the United States Supreme Court have involved questions of when claims reciting abstract
ideas, laws of nature, natural phenomena and/or natural products are eligible for a patent, regardless of whether the claimed subject matter is otherwise novel and inventive. These cases include
Association for Molecular Pathology v.
Myriad Genetics, Inc.
, 569 U.S. 576 (2013), also known as the Myriad decision;
Alice Corp. v. CLS Bank International
, 573 U.S.
13-298
(2014), also known as the Alice decision; and
Mayo
Collaborative Services v. Prometheus Laboratories, Inc.
, also known as the Prometheus decision, 566 U.S. 66 (2012). The full impact of these decisions is not yet known. In view of these and subsequent court decisions, the USPTO has issued
materials to patent examiners providing guidance for determining the patent eligibility of claims reciting laws of nature, natural phenomena, or natural products.
Our current product candidates include products, or components, derived to various extents from nature; therefore, these decisions and their interpretation by
the courts and the USPTO may impact prosecution, defense, and enforcement of certain types of patent claims in our patent portfolio. In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of
events has created uncertainty with respect to the value of patents, once obtained. Depending on these and other decisions by United States Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change or
be interpreted in unpredictable ways that would weaken our ability to obtain some patent claims or to enforce patents that may issue to us in the future. In addition, these events may adversely affect our ability to defend patents that may issue in
procedures in the USPTO or in United States courts.
While we intend to take actions reasonably necessary to enforce our patent rights, we may not be
able to detect infringement of our own or
in-licensed
patents, which may be especially difficult for methods of manufacturing or formulation products, and we depend, in part, on our licensors and collaborators
to protect a substantial portion of our proprietary rights. In addition, third parties may challenge our
in-licensed
patents and any of our own patents that we may obtain, which could result in the
invalidation or unenforceability of some or all of the relevant patent claims. Litigation or other proceedings to enforce or defend intellectual property rights is very complex, expensive, and may divert our managements attention from our core
business and may result in unfavorable results that could adversely affect our ability to prevent third parties from competing with us.
If another party
has reason to assert a substantial new question of patentability against any of our claims in our own and
in-licensed
patents, the third party can request that the patent claims be reexamined, which may result
in a loss of scope of some claims or a loss of the entire patent. In addition to potential infringement suits, and interference and reexamination proceedings, we may become a party to patent opposition proceedings where eiher the patentability of
the inventions subject of our patents are challenged, or we are challenging the patents of others. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful. As the medical device, biotechnology
and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert our commercial product and/or product candidates infringe their patent rights. If a third-partys patents were found to cover our
commercial product and product candidates, proprietary technologies or our uses, we or our collaborators could be enjoined by a court and required to pay damages and could be unable to continue to commercialize our products or use our proprietary
technologies unless we or it obtained a license to the patent. A license may not be available to us or our collaborators on acceptable terms, if at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other
equitable relief, which could prohibit us from making, using or selling our commercial product and product candidates pending a trial on the merits, which could be years away.
Proprietary trade secrets and unpatented
know-how
are also very important to our business. Although we have taken
steps to protect our trade secrets and unpatented
know-how,
by entering into confidentiality agreements with third parties, and proprietary information and invention agreements with certain employees,
consultants and advisors, third parties may still obtain this information or we may be unable to protect our rights. We also have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. There can be
no assurance that binding agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets and unpatented
know-how
will not otherwise become known or be
independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their use. Enforcing a claim that a third party illegally obtained and is using our trade secrets or unpatented
know-how
is expensive and time consuming, and the outcome is unpredictable.
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We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or
disclosed to us alleged trade secrets of their other clients or former employers. As is common in the biotechnology and pharmaceutical industry, certain of our employees were formerly employed by other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Moreover, we engage the services of consultants to assist us in the development of our commercial product and product candidates, many of whom were previously employed at or may have previously
been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees and consultants or we have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these types of claims. Even if we are successful in defending
against any such claims, any such litigation would likely be protracted, expensive, a distraction to our management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.
Our product candidates may face competition sooner than expected after the expiration of our composition of matter patent protection for such products.
Our composition of matter patents for many of our product candidates have expired or will expire prior to any product approval. We intend to seek
data exclusivity or market exclusivity for our GPS as well as our NeuVax,
GALE-301
and
GALE-302
product candidates provided under the Federal Food, Drug and Cosmetic
Act, or FDCA, and similar laws in other countries. We believe that these product candidates will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which was enacted as part of the
Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 enacted in March 2010. Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA until four
years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological
products. The new abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as interchangeable based on our similarity to an
existing brand product. The new law is complex and is only beginning to be interpreted and implemented by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material adverse effect
on the future commercial prospects for our biological product candidates. There is also a risk that the U.S. Congress could amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner
than anticipated after the expiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution for
non-biological
products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
If our product candidates are not considered biologics that would qualify for exclusivity under the BPCIA, they may be eligible for market exclusivity as
drugs under the FDCA. The FDCA provides a five-year period of
non-patent
marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a
new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for
review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.
However, an application may be submitted after four years if it contains a certification of patent invalidity or
non-infringement.
The FDCA also provides three years of marketing exclusivity for an NDA,
505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval of the application, for example,
for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the
original active agent.
Even if, as we expect, GPS, NeuVax,
GALE-301
and
GALE-302
are considered to be reference products eligible for 12 years of exclusivity under the BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA
approves a full BLA or full NDA for such product containing the sponsors own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products.
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In some countries outside of the United States, peptide vaccines, such as GPS, NeuVax,
GALE-301
and
GALE-302,
are regulated as chemical drugs rather than as biologics and may or may not be eligible for
non-patent
exclusivity.
Although we have received orphan drug designation for both GPS,
GALE-301
and
GALE-302,
there is no guarantee that these products will be successfully approved by the FDA, that they will be commercially successful in the marketplace, or that another product will not be approved for the same
indication ahead of our product candidate.
If we are sued for infringing the intellectual property rights of third parties, such litigation could
be costly and time-consuming and could prevent or delay our development and commercialization efforts.
Our commercial success depends, in part, on
us and our collaborators not infringing the patents and proprietary rights of third parties. There is a substantial amount of litigation and other adversarial proceedings, both within and outside the United States, involving patent and other
intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interference or derivation proceedings, oppositions, and
inter partes
and post-grant review proceedings before the USPTO
and
non-U.S.
patent offices. Numerous U.S. and
non-U.S.
issued patents and pending patent applications owned by third parties exist in the fields in which we are
developing and may develop our current and future product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as our product pipeline grows, the risk increases that our product candidates may be
subject to claims of infringement of third parties patent rights as it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to
interpretation by the courts, and the interpretation is not always uniform or predictable.
Third parties may assert infringement claims against us based
on existing or future intellectual property rights, alleging that we are 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 use or manufacturing of our product candidates that we failed to identify. For example, applications filed before November 29, 2000, and certain applications filed on or after that date that
will not be filed outside the United States, remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of
approximately 18 months after the earliest filing date. Therefore, patent applications covering our product candidates, or their use or manufacture, could have been filed by others without our knowledge. In addition, pending patent applications that
have been published, including some of which we are aware, could be later amended in a manner that could cover our product candidates or their use or manufacture. We may analyze patents or patent applications of our competitors that we believe are
relevant to our activities and believe that we are free to operate in relation to any of our product candidates, but our competitors may obtain issued claims, including in patents we consider to be unrelated, which may block our efforts or
potentially result in any of our product candidates or our activities infringing such claims. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products and methods either do not infringe the patent
claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity in a district court proceeding requires a
showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents, and proving invalidity in an
inter partes
review proceeding in the USPTO requires a showing of a preponderance of the evidence. Even
if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted, which could have a material adverse effect on us. If any issued third-party patents
were held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture or methods for treatment, we could be forced, including by court order, to cease developing, manufacturing or commercializing the
relevant product candidate until such patent expired. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and to continue developing, manufacturing or marketing the infringing product
candidate. However, we may not be able to obtain any required license on commercially reasonably terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the
same intellectual property licensed to us. Ultimately, we could be prevented from commercializing a product candidate, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims,
we are unable to enter into licenses on acceptable terms. This could harm our business significantly.
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Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block
our ability to further develop and commercialize one or more of our product candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the outcome. Thus, even if
we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of
our management team, distracting them from the pursuit of other company business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys fees if we are
found to have willfully infringed a patent, or to redesign our infringing product candidates, which may be impossible or require substantial time and monetary expenditure. we may also elect to enter into license agreements in order to settle patent
infringement claims prior to litigation, and any such license agreement may require us to pay royalties and other fees that could be significant.
We may
face claims that we misappropriated the confidential information or trade secrets of a third party. If we are found to have misappropriated a third partys trade secrets, we may be prevented from further using such trade secrets, which could
limit our ability to develop our product candidates. We are not aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If we fail in defending any
such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to
management. During the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or
investors regard these announcements as negative, the perceived value of our product candidates, programs or intellectual property could be diminished. Accordingly, the market price of our shares of common stock may decline.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of
third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who
were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we have written agreements and makes every effort to ensure that our employees, consultants,
and independent contractors do not use the proprietary information or intellectual property rights of others in their work for us, we may in the future be subject to any claims that our employees, consultants, or independent contractors have
wrongfully used or disclosed confidential information of third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, enforcing and defending patents on our current and future product candidates in all countries throughout the world would be prohibitively
expensive. We or our licensors intellectual property rights in certain countries outside the United States may be less extensive than those in the United States. In addition, the laws of certain foreign countries do not protect intellectual
property rights to the same extent as laws in the United States. Consequently, we and our licensors may not be able to prevent third parties from practicing our and our licensors inventions in countries outside the United States, or from
selling or importing infringing products made using our and our licensors inventions in and into the United States or other jurisdictions. Competitors may use our and our licensors technologies in jurisdictions where we have not obtained
patent protection or where we do not have exclusive rights under the relevant patent(s) to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors have patent protection but where
enforcement is not as strong as that in the United States. These infringing products may compete with our product candidates in jurisdictions where we or our licensors have no issued patents or where we do not have exclusive rights under the
relevant patent(s), or our patent claims and other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual
property rights
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in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do
not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us and our licensors to stop the infringement of our and our licensors
patents or marketing of competing products in violation of our and our licensors proprietary rights generally. Proceedings to enforce our and our licensors patent rights in foreign jurisdictions could result in substantial costs and
divert our attention from other aspects of our business, could put our and our licensors patents at risk of being invalidated or interpreted narrowly, could put our and our licensors patent applications at risk of not issuing, and could
provoke third parties to assert claims against our or our licensors. We or our licensors may not prevail in any lawsuit that we or our licensors initiate, and even if we or our licensors are successful the damages or other remedies awarded, if any,
may not be commercially meaningful.
We have
in-licensed
a significant portion of our intellectual property
from MSK. If we breach our license agreement with MSK, we could lose the ability to continue the development and potential commercialization of GPS.
We do not currently own any patents or patent applications related to our lead product candidate, GPS. GPS is
licensed-in
from MSK, and includes an exclusive license to United States and foreign patent applications. Under the MSK license agreement, we are subject to various obligations, including diligence obligations
with respect to funding, development and commercialization activities, payment obligations upon achievement of certain milestones and royalties on product sales, as well as other material obligations. If there is any conflict, dispute, disagreement
or issue of nonperformance between us and MSK regarding our rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy diligence or payment obligations under any such
agreement, we may be liable to pay damages and MSK may have a right to terminate the affected license. The loss of our license agreement with MSK could materially adversely affect our ability to proceed to utilize the affected intellectual property
in our development efforts, our ability to enter into future collaboration, licensing and/or marketing agreements for GPS and our ability to commercialize GPS. The risks described elsewhere pertaining to our patents and other intellectual property
rights also apply to the intellectual property rights that we license, and any failure by us or our licensors to obtain, maintain and enforce these rights could have a material adverse effect on our business.
We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and have a
material adverse effect on the success of our business and on our stock price.
Third parties may infringe our patents, the patents of our
licensors, or misappropriate or otherwise violate our or our licensors intellectual property rights. We and our licensors patent applications cannot be enforced against third parties practicing the technology claimed in such applications
unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology. In the future, we or our licensors may elect to initiate legal proceedings to enforce or defend our or our licensors
intellectual property rights, to protect our or our licensors trade secrets or to determine the validity or scope of intellectual property rights we own or control. Any claims that we assert against perceived infringers could also provoke
these parties to assert counterclaims against us alleging that we infringe their intellectual property rights or that our intellectual property rights are invalid. In addition, third parties may initiate legal proceedings against us or our licensors
to challenge the validity or scope of intellectual property rights we own or control. The proceedings can be expensive and time-consuming. Many of our or our licensors adversaries in these proceedings may have the ability to dedicate
substantially greater resources to prosecuting these legal actions than we or our licensors can. Accordingly, despite our or our licensors efforts, we or our licensors may not be able to prevent third parties from infringing upon or
misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect our rights as fully as in the United States. Litigation could result in substantial costs and diversion of management
resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us are invalid or unenforceable, in whole or in part, or may refuse to stop the
other party from using the technology at issue on the grounds that our or our licensors patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our or our licensors patents
at risk of being invalidated, held unenforceable or interpreted narrowly.
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Interference or derivation proceedings provoked by third parties, brought by us or our licensors or
collaborators, or brought by the USPTO or any
non-U.S.
patent authority may be necessary to determine the priority of inventions or matters of inventorship with respect to our or our licensors patents or
patent applications. We may also become involved in other proceedings, such as reexamination or opposition proceedings,
inter partes
review, post-grant review or other
pre-issuance
or post-grant
proceedings in the USPTO or our foreign counterparts relating to our intellectual property or the intellectual property of others. An unfavorable outcome in any such proceeding could require us or our licensors to cease using the related technology
and commercializing the affected product candidate, or to attempt to license rights to it from the prevailing party.
Our business could be harmed if the
prevailing party does not offer us or our licensors a license on commercially reasonable terms if any license is offered at all. Even if we or our licensors obtain a license, it may be
non-exclusive,
thereby
giving our competitors access to the same technologies licensed to us or our licensors. In addition, if the breadth or strength of protection provided by us or our licensors patents and patent applications is threatened, it could dissuade
companies from collaborating with us to license, develop or commercialize current and future product candidates. Even if we successfully defend such litigation or proceeding, we may incur substantial costs and it may distract our management and
other employees. We could be found liable for monetary damages, including treble damages and attorneys fees, if we are found to have willfully infringed a patent.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation. In addition, there could 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 substantial adverse effect on the price of shares of our common stock.
If we are
unable to protect the confidentiality of our trade secrets and other proprietary information, the value of our technology could be materially adversely affected and our business could be harmed.
In addition to seeking the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary
know-how
that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and other elements of our technology, discovery and development processes that involve
proprietary
know-how,
information or technology that is not covered by patents. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to
quickly duplicate or surpass our technological achievements, including by enabling them to develop and commercialize products substantially similar to or competitive with our current or future product candidates, thus eroding our competitive
position in the market. Trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements and invention assignment agreements with our employees, consultants,
and outside scientific advisors, contractors and collaborators. These agreements are designed to protect our proprietary information. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or
outside scientific advisors might intentionally or inadvertently disclose our trade secrets or confidential, proprietary information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop
substantially equivalent information and techniques. If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that
technology or information to compete with us, which could harm our competitive position.
Enforcing a claim that a third party illegally obtained and is
using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, the laws of certain foreign countries do not protect proprietary rights such as trade secrets to the same extent or in the same manner as
the laws of the United States. Misappropriation or unauthorized disclosure of our trade secrets to third parties could impair our competitive advantage in the market and could materially adversely affect our business, results of operations and
financial condition.
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Significant disruptions of information technology systems or breaches of information security could
adversely affect our business.
We rely to a large extent upon sophisticated information technology systems to operate our business. In the
ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to
third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The
size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially
vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by
groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be
no assurance that our efforts will prevent service interruptions or security breaches. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential
information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.
Risks Related to Commercialization of Our Current and Future Product Candidates
Our commercial success depends upon attaining significant market acceptance of our current and future product candidates, if approved, among physicians,
patients, healthcare payors and cancer treatment centers.
Even if we obtain regulatory approval for any of our current or future product
candidates, the product may not gain market acceptance among physicians, healthcare payors, patients or the medical community, including cancer treatment centers. Market acceptance of any product candidates for which we receive approval depends on a
number of factors, including:
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the efficacy and safety of such product candidates as demonstrated in clinical trials;
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the clinical indications and patient populations for which the product candidate is approved;
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acceptance by physicians, major cancer treatment centers and patients of the drug as a safe and effective treatment;
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the adoption of novel immunotherapies by physicians, hospitals and third-party payors;
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the potential and perceived advantages of product candidates over alternative treatments;
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the safety of product candidates seen in a broader patient group, including our use outside the approved indications;
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any restrictions on use together with other medications;
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the prevalence and severity of any side effects;
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product labeling or product insert requirements of the FDA or other regulatory authorities;
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the timing of market introduction of our products as well as competitive products;
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the development of manufacturing and distribution processes for commercial scale manufacturing for our novel WT1 peptide cancer immunotherapy product candidate;
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the cost of treatment in relation to alternative treatments;
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the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities;
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relative convenience and ease of administration; and
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the effectiveness of our sales and marketing efforts and those of our collaborators.
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If any of our current and future product candidates are approved but fail to achieve market acceptance among
physicians, patients, healthcare payors or cancer treatment centers, we will not be able to generate significant revenues, which would compromise our ability to become profitable.
Even if we are able to commercialize our current or future product candidates, the products may not receive coverage and adequate reimbursement from
third-party payors in the United States and in other countries in which we seek to commercialize our products, which could harm our business.
Our
ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private
health insurers and other organizations.
Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, determine which medications they will cover and establish reimbursement levels. A primary trend in the healthcare industry is cost containment. Government authorities and third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical
products. Third-party payors may also seek additional clinical evidence, beyond the data required to obtain regulatory approval, demonstrating clinical benefit our and value in specific patient populations before covering our products for those
patients. We cannot be sure that coverage and adequate reimbursement will be available for any product that it commercializes and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the
demand for, or the price of, any product candidate for which we obtain regulatory approval. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we
obtain regulatory approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more
limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that
covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary
according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be
reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the
United States. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable reimbursement rates from
both government-funded and private payors for any approved products that it develops could have a material adverse effect on our operating results, ability to raise capital needed to commercialize products and overall financial condition.
Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the
difficulty and cost for us to obtain regulatory approval of and commercialize our current or future product candidates and affect the prices we may obtain.
The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug products vary widely from country to
country. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our current or
future product candidates, restrict or regulate post-approval activities and affect our ability to successfully sell any product candidates for which we obtain regulatory approval. Legislative and regulatory proposals have been made to expand
post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be
changed, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be.
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In the United States, the European Union and other potentially significant markets for our current and future
product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower
average selling prices. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing,
reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to
Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.
Price controls may be imposed in foreign
markets, which may adversely affect our future profitability.
In some countries, particularly member states of the European Union, the pricing of
prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory approval for a product. In addition, there can be considerable
pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations
may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between
low-priced
and high-priced member states, can
further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain
reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of our
products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
Our
relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages,
reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors will play a primary role in
the recommendation and prescription of any product candidates for which we obtain regulatory approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we would market, sell and distribute our products. As a pharmaceutical company, even though we do not and will not control referrals of healthcare
services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients rights are and will be applicable to our business. Restrictions under
applicable federal and state healthcare laws and regulations that may affect our ability to operate include the following:
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the federal healthcare Anti-Kickback Statute will constrain our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other
things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, 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, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
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federal civil and criminal false claims laws and civil monetary penalty laws 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 federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to
pay money to the federal government;
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HIPAA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services;
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HIPAA, as amended by HITECH, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal physician sunshine requirements under the Patient Protection Affordable Care Act requires manufacturers of drugs, devices, biologics and medical supplies to report annually to HHS information related to
payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group
purchasing organizations;
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
non-governmental
third-party payors, including private insurers; some state laws require pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers; and
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state and foreign laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and
regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other
healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages,
fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any physicians or other healthcare providers or entities with whom we expect 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.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could
cause significant liability for us and harm our reputation.
We are exposed to the risk of employee fraud or other misconduct, including
intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we
have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately
or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not
always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have
a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit
commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our
current or future product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our clinical
trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidates or products that we may develop;
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termination of clinical trial sites or entire trial programs;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend the related litigation;
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substantial monetary awards to trial subjects or patients;
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diversion of management and scientific resources from our business operations; and
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the inability to commercialize any products that we may develop.
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We currently hold product liability
insurance coverage at a level that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance
coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our insurance coverage for products to include the sale
of commercial products if we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. Large judgments
have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our
cash and adversely affect our business.
Risks Related to our Business Operations
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
We face competition from numerous pharmaceutical and biotechnology enterprises, as well as from academic institutions, government agencies and
private and public research institutions for our current product candidates. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects or
are less expensive than any products that we may develop. Competition could result in reduced sales and pricing pressure on our current or future product candidates, if approved, which in turn would reduce our ability to generate meaningful revenues
and have a negative impact on our results of operations. In addition, significant delays in the development of our product candidates could allow our competitors to bring products to market before we and impair any ability to commercialize our
product candidates. The biotechnology industry, including the cancer immunotherapy market, is intensely competitive and involves a high degree of risk. We compete with other companies that have far greater experience and financial, research and
technical resources than us. Potential competitors in the United States and worldwide are numerous and include pharmaceutical and biotechnology companies, educational institutions and research foundations, many of which have substantially greater
capital resources, marketing experience, research and development staffs and facilities than ours. Some of our competitors may develop and commercialize products that compete directly with those incorporating our technology, introduce products to
market earlier than our products or on a more cost effective basis. In addition, our technology may be subject to competition from other technology or methods developed using techniques other than those developed by traditional biotechnology
methods. Our competitors compete with us in recruiting and retaining
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qualified scientific and management personnel as well as in acquiring technologies complementary to our technology. Our company and our collaborators may face competition with respect to product
efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price and patent position, including the
potentially dominant patent positions of others. An inability to successfully complete our product development or commercializing those product candidates could lead having limited prospects for establishing market share or generating revenue from
our technology.
There are several agents in clinical development in similar settings to our planned Phase 3 AML clinical development program for GPS. The
most advanced of these products is oral Vidaza (azacytidine), under development by Celgene Corporation, which is anticipated to report Phase 3 results by the end of 2018. There are a number of other investigational immunotherapies advancing through
Phase 2 and Phase 3 trials for target indications that we believe are also potential target indications for GPS. If these or other therapies are successful in their development, it could negatively impact our ability to enroll our clinical trials
and could negatively impact the commercial potential of GPS.
We are also planning a clinical development program in combination with cancer checkpoint
inhibitors. This is a highly competitive field, with hundreds of such combination trials with various checkpoint inhibitors ongoing. If one or more of these combinations produce positive results in indications which we believe are targets for GPS
(either in combination or in stand-alone administration) this could increase the difficulty for us to conduct our trials and could negatively impact our path to regulatory approval and our ability to successfully commercialize our products.
Many of our competitors or potential competitors have significantly greater established presence in the market, financial resources and expertise in research
and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than it does, and as a result may have a competitive advantage over us. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.
As a result of these factors, these competitors may obtain regulatory approval of their products before we are able to obtain patent protection or other
intellectual property rights, which will limit our ability to develop or commercialize our current or future product candidates. Our competitors may also develop drugs that are safer, more effective, more widely used and cheaper than ours, and may
also be more successful than us in manufacturing and marketing their products. These appreciable advantages could render our product candidates obsolete or noncompetitive before we can recover the expenses of development and commercialization.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our
competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific, management and commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our current or future
product candidates, we may be unable to generate any revenue.
We do not currently have an organization for the sale, marketing and distribution of
pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved by the FDA and comparable foreign regulatory authorities,
we must build our sales, marketing, managerial and other
non-technical
capabilities or make arrangements with third parties to perform these services. There are significant risks involved in building and
managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed
sales and marketing team. Any failure or delay in the development of our
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internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. If we are unable to establish adequate sales, marketing and distribution
capabilities, whether independently or with third parties, we may not be able to generate product revenues and may not become profitable. We will be competing with many companies that currently have extensive and well-funded sales and marketing
operations. Without an internal commercial organization or the support of a third party to perform sales and marketing functions, we may be unable to compete successfully against these more established companies. If we are not successful in
commercializing our current or future product candidates either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we would incur significant additional losses.
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
As of April 6, 2018, we had eleven full-time employees. We need to grow the size of our organization in order to support our continued development and
potential commercialization of our product candidates. In particular, we will need to add substantial numbers of additional personnel and other resources to support our development and potential commercialization of our product candidates. As our
development and commercialization plans and strategies continue to develop, or as a result of any future acquisitions, our need for additional managerial, operational, manufacturing, sales, marketing, financial and other resources will increase. Our
management, personnel and systems currently in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members of management, including:
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managing our clinical trials effectively;
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identifying, recruiting, maintaining, motivating and integrating additional employees;
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managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties;
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improving our managerial, development, operational, information technology, and finance systems; and
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expanding our facilities.
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As our operations expand, we will also need to manage additional relationships with
various strategic partners, suppliers and other third parties. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth
effectively. To that end, we must be able to manage our development efforts and preclinical studies and clinical trials effectively and hire, train and integrate additional management, research and development, manufacturing, administrative and
sales and marketing personnel. The failure to accomplish any of these tasks could prevent us from successfully growing our company.
If we fail to
develop and maintain proper and effective internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.
Our management team is required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other
things, the effectiveness of our internal control over financial reporting. In particular, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the
effectiveness of its internal control over financial reporting. Prior to the Merger, Private SELLAS, whose financial statements are now our financial statements, was not required to do such an analysis. Testing may reveal deficiencies in our
internal control over financial reporting that are deemed to be material weaknesses. We were informed by our independent registered public accounting firm that we have a material weakness in our internal control over financial reporting due to our
lack of sufficient management and personnel with appropriate expertise in GAAP and SEC rules and regulations with respect to financial reporting. Although, we have since hired three additional finance and accounting personnel to build out our
infrastructure and further develop and document our accounting policies and financial reporting procedures, we cannot assure you that we will be successful in retaining these new hires or that these measures will significantly improve or remediate
the material weakness described above, or any others that it may identify once we conduct a full Section 404 evaluation. We also cannot assure you that we have identified all material weaknesses at this time, or that additional material
weaknesses may occur in the future. Accordingly, material weaknesses may still exist.
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Our independent registered public accounting firm will not be required to attest to the effectiveness of our
internal control over financial reporting for so long as we remain a smaller reporting company as defined in applicable SEC regulations. Our management team is required to disclose changes made in our internal controls and procedures on
a quarterly basis. We need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Our audit committee must also be advised and regularly updated on
managements review of internal controls. We are still in early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform our evaluation of its internal control over financial
reporting needed to comply with Section 404, and we may not be able to complete its evaluation, testing and any required remediation in a timely fashion. Moreover, if we are not able to comply with the requirements of Section 404 in a
timely manner or if it identifies or its independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common stock could
decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.
The requirements of being a public company may strain our resources, divert managements attention and affect our ability to attract and retain
qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the
Dodd-Frank Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations has increased, and will likely continue to increase, our legal and financial compliance costs, make
some activities more difficult, time-consuming or costly, and place significant strain on our personnel, systems and resources. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating
uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may evolve over time. This could result in continuing uncertainty regarding compliance matters, higher administrative expenses and a diversion of managements time and attention.
Further, if our compliance efforts differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Being a
public company that is subject to these rules and regulations also makes it more expensive for us to obtain and retain director and officer liability insurance, and we may in the future be required to accept reduced coverage or incur substantially
higher costs to obtain or retain adequate coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.
We may become involved in securities class action litigation that could divert managements attention and harm our business, and insurance coverage
may not be sufficient to cover all costs and damages.
In the past, securities class action or stockholder derivative litigation often follows
certain significant business transactions, such as the sale of a business division or announcement of a merger. We may become involved in this type of litigation in the future. Litigation often is expensive and diverts managements attention
and resources, which could adversely affect the continuing companys business.
Our future success depends on our ability to retain our
executive officers and to attract, retain and motivate qualified personnel.
We are highly dependent upon our personnel, including
Dr. Angelos M. Stergiou (M.D., Sc.D. h.c.), our President and Chief Executive Officer, and member of our board of directors. Our employment agreement with Dr. Stergiou does not prevent him from terminating his employment with us at
any time. The loss of Dr. Stergious services could impede the achievement of our research, development and commercialization objectives. We have not obtained, do not own, nor are we the beneficiary of,
key-person
life insurance.
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Governance changes, becoming subject to enhanced regulatory requirements and increased responsibilities
associated with becoming a public company may influence our management personnel and our employees to terminate their employment with us. To enhance our ability to retain our executive management personnel, we have entered into retention agreements
with certain executive officers and may find it beneficial to enter into additional retention agreements with other key personnel in the future, potentially increasing payroll and operating expenses.
Our future growth and success depend on our ability to recruit, retain, manage and motivate our employees. The loss of any member of our senior management
team or the inability to hire or retain experienced management personnel could compromise our ability to execute our business plan and harm our operating results. Because of the specialized scientific and managerial nature of our business, we rely
heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel in the pharmaceutical field is intense and as a result, we may be unable to continue to attract and retain
qualified personnel necessary for the development of our business.
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If we and our third-party manufacturers fail to comply with environmental, health and safety laws and
regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We and our third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce
hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from
us or our third-party manufacturers use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and
penalties.
Although we maintain workers compensation insurance to cover the costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials with a policy limit that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, this insurance may not provide adequate cover
age against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or
future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions, which could adversely affect our business,
financial condition, results of operations and prospects.
Our business and operations would suffer in the event of computer system failures or
security breaches.
Our internal computer systems, and those of MSK, our CROs, our CMOs, and other business vendors on which we rely, are
vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. We exercise little or no control over these third parties, which increases our vulnerability to
problems with their systems. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed, ongoing or
planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data
or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the further development of our current and future product candidates could be delayed and our business could be otherwise adversely
affected.
Business disruptions could seriously harm our future revenues and financial condition and increase our costs and expenses.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme
weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which We are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and
financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce our product candidates and intends to rely on third-party manufacturers to produce any future product candidates. Our ability to obtain clinical
supplies of product candidates could be disrupted, if the operations of these suppliers are affected by a
man-made
or natural disaster or other business interruption. The ultimate impact on us, our significant
suppliers and our general infrastructure is unknown, but our operations and financial condition could suffer in the event of a major earthquake, fire, hurricane or other natural disaster.
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Our principal stockholders own a significant percentage of our stock and will be able to exert significant
control over matters subject to stockholder approval.
Our principal stockholders and their affiliates currently beneficially own approximately 46%
of the outstanding shares of our common stock. Therefore, these stockholders have the ability and may continue to have the ability to influence us through this ownership position. These stockholders may be able to determine some or all matters
requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.
This may prevent or discourage unsolicited acquisition proposals or offers for shares of our common stock that you may believe are in your best interest as one of our stockholders.
Risks Relating to Ownership of Our Common Stock
The market price and trading volume of shares of our common stock may be volatile.
The market price of shares of our common stock has exhibited substantial volatility recently. Between January 1, 2017 and April 6, 2018, the trading
price of shares of our common stock as reported on Nasdaq ranged from a low of $3.43 to a high of $72.30. The market price of shares of our common stock could continue to fluctuate significantly for many reasons, including the following factors:
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reports of the results of our clinical trials regarding the safety or efficacy of our product candidates and surrogate markers;
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announcements of regulatory developments or technological innovations by us or our competitors;
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announcements of business or strategic transactions or our success in finalizing such a transaction;
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announcements of legal or regulatory actions against us or any adverse outcome of any such actions;
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changes in our relationships with our licensors, licensees and other strategic partners;
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low volume in the number of shares of our common stock traded on Nasdaq;
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our quarterly operating results;
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announcements of dilutive financing;
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announcements of additional potential reverse stock split;
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developments in patent or other technology ownership rights;
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additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our stockholders;
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government regulation of drug pricing; and
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general changes in the economy, the financial markets or the pharmaceutical or biotechnology industries.
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Factors beyond our control may also have an impact on the market price of shares of our common stock. For example, to the extent that other companies within
our industry experience declines in their stock prices, the market price of shares of our common stock may decline as well.
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Future sales of substantial amounts of our common stock, or the possibility that such sales could occur,
could adversely affect the market price of our common stock.
Future sales in the public market of shares of our common stock, including shares
referred to in the foregoing risk factors or shares issued upon exercise of our outstanding stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it
difficult for us to raise additional capital.
As of December 31, 2017, we had reserved for issuance 10,171 shares of our common stock issuable upon
the exercise of outstanding stock options at a weighted-average exercise price of $1,240.54 per share and 963,000 shares of our common stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $94.58 per share.
Upon exercise of these options and warrants, the underlying shares may be resold into the public market. In the case of outstanding options and warrants that have exercise prices that are below the market price of our common stock from time to time,
our stockholders would experience dilution upon the exercise of these options.
We have issued and may issue additional preferred stock in the
future, and the terms of the preferred stock may reduce the value of our common stock.
We are authorized to issue up to 5 million shares of
preferred stock in one or more series. Our Board of Directors may determine the terms of future preferred stock offerings without further action by our stockholders. If we issue additional preferred stock, it could affect stockholder rights or
reduce the market value of our outstanding common stock. In particular, specific rights granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking
fund provisions, and restrictions on our ability to merge with or sell our assets to a third party.
Our Board of Directors has designated 17,500 shares
of our preferred stock as our Series A Convertible Preferred and we have issued or agreed to issue up to an aggregate of 10,700 shares of such Series A Convertible Preferred. The Series A Convertible Preferred is initially convertible into our
common stock based on an initial conversion price of $5.80 per share, which is subject to adjustment in certain circumstances, including anti-dilution price protection through completion of a Qualified Offering as defined in the terms of
such Series A Convertible Preferred set out in the Certificate of Designation.
We have in the past and expect in the future to settle legal claims
through the issuance of freely tradable shares of our common stock, which will result in dilution to holders of our common stock and may adversely affect the market price of our common stock
We have in the past and expect in the future to settle legal claims through the issuance of freely tradable shares of our common stock. As described under the
heading, Our BusinessLegal Proceedings, we currently expect to (i) issue $1,250,000 in unrestricted shares of our common stock valued at based on the volume-weighted average closing price for the 20 trading days immediately preceding the
day before the transfer of the settlement stock to the settlement fund to settle the case entitled
Patel vs. Galena Biopharma, Inc. et. al
and (ii) $200,000 in cash to settle the claim for attorneys fees in the pending qui tam action in
the U.S. District Court of the District of New Jersey. Payment of these amounts in our common stock will cause significant dilution to our stockholders, and the amount of that dilution will vary depending on the price of our common stock at the time
of the payment (and the 20 trading days prior to such payment in the case of payments made in connection with the
Patel
litigation). In addition, the issuance of such a significant number of shares of our may cause a decrease in the trading
price of our common stock.
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Our senior secured debenture has resulted, and may continue to result, in dilution to the holders of our
common stock.
In May 2016, Galena entered into a securities purchase agreement with JGB, pursuant to which Galena sold to JGB, at a 6.375%
original issue discount, a $25,530,000 senior secured debenture, which was subsequently amended, and warrants to purchase Galenas common stock. As of December 31, 2017, (i) there were 5,766,891 shares of our common stock outstanding
and (ii) 647,061 shares of our common stock had been issued by us pursuant to the terms of the senior secured debenture. As of April 6, 2018, we issued an additional 635,894 shares of our common stock to satisfy $3.2 million of outstanding
principal and interest redemptions. Assuming all the shares issuable pursuant to the terms of the senior secured debenture subsequent to April 6, 2018 are issued at a stock payment price of $3.23 the lowest stock payment price as of April 6, 2018,
we estimate that the maximum number of shares of common stock that we could issue pursuant to the terms of the senior secured debenture subsequent to April 6, 2018 is approximately 372,443.
We may enter or amend our senior secured debenture and with respect to our other liabilities which may result or continue to result, in dilution to the
holders of our common stock.
Anti-takeover provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws
and provisions of Delaware law could delay or prevent a change of control.
Anti-takeover provisions of our Amended and Restated Certificate of
Incorporation and our Amended and Restated Bylaws may discourage, delay or prevent a merger or other change of control that stockholders may consider favorable or may impede the ability of the holders of our common stock to change our management and
may be constrained by other contractual agreements with third parties. These provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws, among other things:
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divide our Board of Directors into three classes, with members of each class to be elected for staggered three-year terms;
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limit the right of securityholders to remove directors;
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prohibit stockholders from acting by written consent;
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regulate how stockholders may present proposals or nominate directors for election at annual meetings of stockholders; and
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authorize our Board to issue preferred stock in one or more series, without stockholder approval.
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In
addition, Section 203 of the Delaware General Corporation Law provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware
corporation such as We shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares for a three-year period following the date on which that person or our affiliate
crosses the 15% stock ownership threshold. Section 203 could operate to delay or prevent a change of control of us.
The terms of our
outstanding indebtedness may inhibit potential acquirers.
We are prohibited by the terms of our outstanding indebtedness from disposing of any of
our business or property, except with the consent of our lenders or if we were to prepay, which we are not able to do without our lenders consent, the outstanding indebtedness and related fees in accordance with the loan security agreement. Our
outstanding indebtedness may inhibit potential acquirers or other interested parties from seeking to acquire all or a part of our business or assets, and there is no assurance that our lenders would consent to any proposed future transaction that
might be beneficial to our stockholders.
If our common stock becomes subject to the penny stock rules, it may be more difficult to sell our common
stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or system). The OTC Bulletin Board does not meet such requirements and if the price of our common stock is less than $5.00 and our common stock is no longer listed on a national
securities exchange such as Nasdaq, our may be deemed a penny stock. The penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver to the customer
a standardized risk disclosure document containing specified information and to obtain from
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the customer a signed and date acknowledgement of receipt of that document. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise
exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchasers written acknowledgment of the receipt of a risk disclosure
statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the
secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
We have never declared or paid cash
dividends on our capital stock and we do not anticipate paying cash dividends in the foreseeable future.
Our business requires significant
funding. We currently plan to invest all available funds and future earnings in the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future and are prohibited by the terms
of our outstanding indebtedness from paying dividends on any common stock, except with the prior consent of our lenders. As a result, capital appreciation, if any, of our common stock will be our stockholders sole source of potential gain for
the foreseeable future.