Item
1A. Risk Factors
You
should carefully consider the risks described below as well as other information provided to you in this Quarterly Report on Form
10-Q, including information in the section of this document entitled “Cautionary Note Regarding Forward Looking Statements.”
The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently
known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks
actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of
our Common Stock could decline, and you may lose all or part of your investment.
Risks
Related to our Business and Industry
We
are a clinical stage company.
We
are a clinical stage biotechnology company with a history of losses and can provide no assurance as to future operating results.
As a result of losses that will continue throughout our clinical stage, we may exhaust our financial resources and be unable to
complete the development of our products. We anticipate that our ongoing operational costs will increase significantly as we continue
conducting our clinical development program. Our deficit will continue to grow during our drug development period.
We
have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the indefinite
future due to the substantial investment in research and development. As of July 31, 2018, and October 31, 2017, we had an accumulated
deficit of approximately $349.1 million and $301.1 million, respectively, and stockholders’ equity of approximately $33.3
million and $54.3 million, respectively. We expect to spend substantial additional sums on the continued administration and research
and development of proprietary products and technologies with no certainty that our immunotherapies will become commercially viable
or profitable as a result of these expenditures. If we fail to raise a significant amount of capital, we may need to significantly
curtail operations or cease operations in the near future. If any of our product candidates fail in clinical trials or does not
gain regulatory approval, we may never become profitable. Even if we achieve profitability in the future, we may not be able to
sustain profitability in subsequent periods.
Our
ability to raise additional capital to fund our growth and to support our operations may be uncertain.
The
Company’s products that are being developed have not generated significant revenue. As a result, the Company has suffered
recurring losses and requires significant cash resources to execute its business plans. These losses are expected to continue
for an extended period of time. The aforementioned factors raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification
of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date
the financial statements are issued.
Historically,
our major sources of cash have comprised proceeds from various public and private offerings of our common stock, option and warrant
exercises, and interest income. From October 2013 through August 2018, we raised approximately $245 million in gross proceeds
from various public and private offerings of our common stock.
As
of July 31, 2018 and August 31, 2018, the Company had approximately $40.4 million and $36.3 million, respectively, in cash,
restricted cash and cash equivalents. Management’s plans to mitigate an expected shortfall of capital, to support future
operations, include raising additional funds. On September 7, 2018 the Company announced the pricing of an underwritten public
offering which is expected to gross $20 million in proceeds. It is the belief of the Company, that should the financing close
on September 11, 2018 the Company expects to have sufficient capital to fund its obligations, as they become due, in the ordinary
course of business through September 2019. The actual amount of cash that it will need to operate, is subject to many factors.
The
Company also recognizes it will need to raise additional capital in order to continue to execute its business plan in the future.
There is no assurance that additional financing will be available when needed or that management will be able to obtain financing
on terms acceptable to the Company or whether the Company will become profitable and generate positive operating cash flow. If
the Company is unable to raise sufficient additional funds, it will have to scale back its operations.
Drug
discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure.
Product
candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy in humans.
Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming and expensive process that takes many years.
We cannot be sure that pre-clinical testing or clinical trials of any of our product candidates will demonstrate the safety, efficacy
and benefit-to-risk profile necessary to obtain marketing approvals. In addition, product candidates that experience success in
pre-clinical testing and early-stage clinical trials will not necessarily experience the same success in larger or late-stage
clinical trials, which are required for marketing approval.
Even
if we are successful in advancing a product candidate into the clinical development stage, before obtaining regulatory and marketing
approvals, we must demonstrate through extensive human clinical trials that the product candidate is safe and effective for its
intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory authorities and to the
independent committees responsible for the ethical review of clinical studies. There may be delays in preparing protocols or receiving
approval for them that may delay the start or completion of the clinical trials. In addition, clinical practices vary globally,
and there is a lack of harmonization among the guidance provided by various regulatory bodies of different regions and countries
with respect to the data that is required to receive marketing approval, which makes designing global trials increasingly complex.
There are a number of additional factors that may cause our clinical trials to be delayed, prematurely terminated or deemed inadequate
to support regulatory approval, such as:
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safety
issues up to and including patient death (whether arising with respect to trials by third parties for compounds in a similar
class as tour product or product candidate), inadequate efficacy, or an unacceptable risk-benefit profile observed at any
point during or after completion of the trials;
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slower
than expected rates of patient enrollment, which could be due to any number of factors, including failure of our third-party
vendors, including our CROs, to effectively perform their obligations to us, a lack of patients who meet the enrollment criteria
or competition from clinical trials in similar product classes or patient populations, or onerous treatment administration
requirements;
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the
risk of failure of our clinical investigational sites and related facilities, including our suppliers, to maintain compliance
with the FDA’s cGMP regulations or similar regulations in countries outside of the U.S., including the risk that these
sites fail to pass inspections by the appropriate governmental authority, which could invalidate the data collected at that
site or place the entire clinical trial at risk;
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any
inability to reach agreement or lengthy discussions with the FDA, equivalent regulatory authorities, or ethical review committees
on trial design that we are able to execute;
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changes
in laws, regulations, regulatory policy or clinical practices, especially if they occur during ongoing clinical trials or
shortly after completion of such trials.
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clinical
trial record keeping or data quality and accuracy issues.
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Any
deficiency in the design, implementation or oversight of our development programs could cause us to incur significant additional
costs, conduct additional trials, experience significant delays, prevent us from obtaining marketing approval for any product
candidate or abandon development of certain product candidates, any of which could harm our business and cause our stock price
to decline.
Our
operating history does not afford investors a sufficient history on which to base an investment decision.
We
commenced our
Lm
-LLO based immunotherapy development business in February 2002 and today exist as a clinical stage company.
We have no approved products and therefore have not derived any significant revenue from the sales of products and have not yet
demonstrated ability to obtain regulatory approval, formulate and manufacture commercial scale products, or conduct sales and
marketing activities necessary for successful product commercialization. Consequently, there is limited information for investors
to use as basis for assessing our future viability. Investors must consider the risks and difficulties we have encountered in
the rapidly evolving vaccine and immunotherapy industry. Such risks include the following:
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difficulties,
complications, delays and other unanticipated factors in connection with the development of new drugs;
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competition
from companies that have substantially greater assets and financial resources than we have;
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need
for acceptance of our immunotherapies;
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ability
to anticipate and adapt to a competitive market and rapid technological developments;
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need
to rely on outside funding due to the length of drug development cycles and governmental approved protocols associated with
the pharmaceutical industry; and
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dependence
upon key personnel including key independent consultants and advisors.
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We
cannot be certain that our strategy will be successful or that we will successfully address these risks. In the event that we
do not successfully address these risks, our business, prospects, financial condition and results of operations could be materially
and adversely affected. We may be required to reduce our staff, discontinue certain research or development programs of our future
products and cease to operate.
We
expect that we will need to raise additional funding to complete the development and commercialization of our product candidates.
This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed
may force us to delay, limit, or terminate our product development efforts or other operations.
We
estimate that our current cash, cash equivalents and investments will be sufficient for us to fund our operating expenses and
capital expenditure requirements through 2019. We have based this estimate on assumptions that may prove to be wrong, and we could
utilize our available capital resources sooner than we currently expect. In addition, we will need to raise substantial additional
capital to complete the development and commercialization of our product candidates. We will continue to seek funds through equity
or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate
additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed,
as a result of insufficient authorized shares or otherwise, could have a negative impact on our financial condition and on our
ability to pursue our business plans and strategies.
We
may face legal claims; litigation is expensive and we may not be able to afford the costs.
We
may face legal claims involving stockholders, consumers, competitors, regulators and other parties. As described in “Legal
Proceedings” in Part I Item 3 of this Form 10-K, we are engaged in a number of legal proceedings. Litigation and other legal
proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us
from engaging in business practices, or requiring other remedies, such as compulsory licensing of patents.
The
costs of litigation or any proceeding relating to our intellectual property or contractual rights could be substantial, even if
resolved in our favor. Some of our competitors or financial funding sources have far greater resources than we do and may be better
able to afford the costs of complex litigation. Also, a lawsuit, even if frivolous, will require considerable time commitments
on the part of management, our attorneys and consultants. Defending these types of proceedings or legal actions involve considerable
expense and could negatively affect our financial results.
We
can provide no assurance of the successful and timely development of new products.
Our
immunotherapies are at various stages of research and development. Further development and extensive testing will be required
to determine their technical feasibility and commercial viability. We will need to complete significant additional clinical trials
demonstrating that our product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory
authorities. The drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number
of factors, including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits
demonstrated in the clinical trials. Our success will depend on our ability to achieve scientific and technological advances and
to translate such advances into licensable, FDA-approvable, commercially competitive products on a timely basis. Failure can occur
at any stage of the process. If such programs are not successful, we may invest substantial amounts of time and money without
developing revenue-producing products. As we enter a more extensive clinical program for our product candidates, the data generated
in these studies may not be as compelling as the earlier results.
The
proposed development schedules for our immunotherapies may be affected by a variety of factors, including technological difficulties,
clinical trial failures, regulatory hurdles, clinical holds, competitive products, intellectual property challenges and/or changes
in governmental regulation, many of which will not be within our control. Any delay in the development, introduction or marketing
of our products could result either in such products being marketed at a time when their cost and performance characteristics
would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of
our projects, the unproven technology involved and the other factors described elsewhere in this section, there can be no assurance
that we will be able to successfully complete the development or marketing of any new products which could materially harm our
business, results of operations and prospects.
Our
research and development expenses are subject to uncertainty.
Factors
affecting our research and development expenses include, but are not limited to:
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competition
from companies that have substantially greater assets and financial resources than we have;
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need
for acceptance of our immunotherapies;
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ability
to anticipate and adapt to a competitive market and rapid technological developments;
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amount
and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
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need
to rely on multiple levels of outside funding due to the length of drug development cycles and governmental approved protocols
associated with the pharmaceutical industry; and
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dependence
upon key personnel including key independent consultants and advisors.
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There
can be no guarantee that our research and development expenses will be consistent from period to period. We may be required to
accelerate or delay incurring certain expenses depending on the results of our studies and the availability of adequate funding.
We
are subject to numerous risks inherent in conducting clinical trials.
We
outsource the management of our clinical trials to third parties. Agreements with clinical research organizations, clinical investigators
and medical institutions for clinical testing and data management services, place substantial responsibilities on these parties
that, if unmet, could result in delays in, or termination of, our clinical trials. For example, if any of our clinical trial sites
fail to comply with FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical
investigators, medical institutions or other third parties do not carry out their contractual duties or regulatory obligations
or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their
failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated,
and we may be unable to obtain regulatory approval for, or successfully commercialize, our agents. We are not certain that we
will successfully recruit enough patients to complete our clinical trials nor that we will reach our primary endpoints. Delays
in recruitment, lack of clinical benefit or unacceptable side effects would delay or prevent the initiation of future development
of our agents.
We
or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate
our clinical trials if at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials
or do not demonstrate clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation
of our clinical trials, or place our products on temporary or permanent hold, at any time if they believe that the clinical trials
are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk
to the patients enrolled in our clinical trials.
Our
clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our
clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive
reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions we or our clinical trial
sites have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may be criminally prosecuted.
The
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval for our product candidates, which would materially harm our business, results of operations and prospects.
If
we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our
strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of our clinical
product candidates, and we rely on strategic collaborations for research, development, marketing and commercialization for some
of our immunotherapies. To date, we have been heavily reliant upon third party outsourcing for our clinical trials execution and
production of drug supplies for use in clinical trials.
We
are currently seeking a partner to fund the development and commercialization of axalimogene filolisbac in cervical cancer. If
a partner is not found, subject to ongoing discussions with our collaboration partners over our obligations with respect the program,
we anticipate winding down the program in a clinically responsible manner. We may incur additional costs in connection with such
a wind-down, including in severing our relationship with our collaboration partners. Some of the costs are indeterminable at this
time and there is no guarantee that we will be able to wind down the program effectively, which could lead to considerable expense
and could negatively affect our financial results.
Establishing
strategic collaborations is difficult and time-consuming. Our discussions with potential collaborators may not lead to the establishment
of collaborations on favorable terms, if at all. For example, potential collaborators may reject collaborations based upon their
assessment of our financial, clinical, regulatory or intellectual property position. Our current collaborations, as well as any
future new collaborations, may never result in the successful development or commercialization of our immunotherapies or the generation
of sales revenue. To the extent that we have entered or will enter into co-promotion or other collaborative arrangements, our
product revenues are likely to be lower than if we directly marketed and sold any products that we may develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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financial
funding to support said collaboration;
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coordination
of our research and development programs with the research and development priorities of our collaborators; and
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effective
allocation of our resources to multiple projects.
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If
we continue to enter into research and development collaborations, our success will in part depend on the performance of our corporate
collaborators. We will not directly control the amount or timing of resources devoted by our corporate collaborators to activities
related to our immunotherapies. Our corporate collaborators may not commit sufficient resources to our research and development
programs or the commercialization, marketing or distribution of our immunotherapies. If any corporate collaborator fails to commit
sufficient resources, our preclinical or clinical development programs related to this collaboration could be delayed or terminated.
Also, our collaborators may pursue existing or other development-stage products or alternative technologies in preference to those
being developed in collaboration with us. If we fail to make required milestone or royalty payments to our collaborators or to
observe other obligations in our agreements with them, our collaborators may have the right to terminate those agreements. Additionally,
our collaborators may seek to renegotiate agreements we have entered into, or may disagree with us about the terms and implementation
of these agreements. If collaborators disagree with us about the terms or implementation of our agreements, we may face legal
claims that may involve considerable expense and could negatively affect our financial results.
The
successful development of immunotherapies is highly uncertain.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control.
Immunotherapies that appear promising in the early phases of development may fail to reach the market for several reasons including:
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preclinical
study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary
objectives) or to have harmful or problematic side effects;
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clinical
study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet its primary
endpoint) or to have unacceptable side effects;
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failure
to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may
be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements
for data analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical
or clinical data, or unexpected safety or manufacturing issues;
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manufacturing
costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and
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the
proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized.
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Success
in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results
are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time
necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory
authority varies significantly from one immunotherapy to the next, and may be difficult to predict.
Even
if we are successful in getting market approval, commercial success of any of our product candidates will also depend in large
part on the availability of coverage and adequate reimbursement from third-party payers, including government payers such as the
Medicare and Medicaid programs and managed care organizations, which may be affected by existing and future health care reform
measures designed to reduce the cost of health care. Third-party payers could require us to conduct additional studies, including
post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and
divert our resources. If government and other health care payers were not to provide adequate coverage and reimbursement levels
for one any of our products once approved, market acceptance and commercial success would be reduced.
In
addition, if one of our products is approved for marketing, we will be subject to significant regulatory obligations regarding
product promotion, the submission of safety and other post-marketing information and reports and registration, and will need to
continue to comply (or ensure that our third party providers) comply with cGMPs, and Good Clinical Practices (“GCP”),
for any clinical trials that we conduct post-approval. In addition, there is always the risk that we or a regulatory authority
might identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency.
Compliance with these requirements is costly, and any failure to comply or other issues with our product candidates’ post-market
approval could have a material adverse effect on our business, financial condition and results of operations.
We
must comply with significant government regulations.
The
research and development, manufacturing and marketing of human therapeutic and diagnostic products are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies and other
federal, state, local and foreign entities regulate, among other things, research and development activities (including testing
in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and
promotion of the products that we are developing. If we obtain approval for any of our product candidates, our operations will
be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statue and the federal False Claims Act, and privacy laws. Noncompliance with applicable
laws and requirements can result in various adverse consequences, including delay in approving or refusal to approve product licenses
or other applications, suspension or termination of clinical investigations, revocation of approvals previously granted, fines,
criminal prosecution, civil and criminal penalties, recall or seizure of products, exclusion from having our products reimbursed
by federal health care programs, the curtailment or restructuring of our operations, injunctions against shipping products and
total or partial suspension of production and/or refusal to allow a company to enter into governmental supply contracts.
The
process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA requirements for a new
human biological product to be marketed in the United States include: (1) the successful conclusion of preclinical laboratory
and animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an
IND to conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human
clinical trials to establish the safety and efficacy of the investigational new drug for its recommended use; and (4) filing by
a company and acceptance and approval by the FDA of a BLA for marketing approval of a biologic, to allow commercial distribution
of a biologic product. The FDA also requires that any drug or formulation to be tested in humans be manufactured in accordance
with its cGMP regulations. This has been extended to include any drug that will be tested for safety in animals in support of
human testing. The cGMPs set certain minimum requirements for procedures, record-keeping and the physical characteristics of the
laboratories used in the production of these drugs. A delay in one or more of the procedural steps outlined above could be harmful
to us in terms of getting our immunotherapies through clinical testing and to market.
We
can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
We
are currently evaluating the safety and efficacy of several of our candidates in a number of ongoing pre-clinical and clinical
trials. However, even though the initiation and conduct of the clinical trials is in accordance with the governing regulatory
authorities in each country, as with any investigational new drug (under an IND in the United States, or the equivalent in countries
outside of the United States), we are at risk of a clinical hold at any time based on the evaluation of the data and information
submitted to the governing regulatory authorities.
There
can be delays in obtaining FDA (U.S.) and/or other necessary regulatory approvals in the United States and in countries outside
the United States for any investigational new drug and failure to receive such approvals would have an adverse effect on the investigational
new drug’s potential commercial success and on our business, prospects, financial condition and results of operations. The
time required to obtain approval by the FDA and non-U.S. regulatory authorities is unpredictable but typically takes many years
following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory
authorities. For example, the FDA or non-U.S. regulatory authorities may disagree with the design or implementation of our clinical
trials or study endpoints; or we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh
its safety risks. In addition, the FDA or non-U.S. regulatory authorities may disagree with our interpretation of data from preclinical
studies or clinical trials or the data collected from clinical trials of our product candidates may not be sufficient to support
the submission of a New Drug Application (“NDA”) or other submission or to obtain regulatory approval in the United
States or elsewhere. The FDA or non-U.S. regulatory authorities may fail to approve the manufacturing processes or facilities
of third-party manufacturers with which we contract for clinical and commercial supplies; and the approval policies or regulations
of the FDA or non-U.S. regulatory authorities may significantly change in a manner rendering our clinical data insufficient for
approval.
In
addition to the foregoing, approval policies, regulations, or the type and amount of clinical data necessary to gain approval
may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not
submitted for nor obtained regulatory approval for any product candidate in-humans (US & EU) and it is possible that none
of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory
approval.
We
may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.
Although
we have been granted FDA orphan drug designation for axalimogene filolisbac for use in the treatment of anal cancer, HPV-associated
head and neck cancer, Stage II-IV invasive cervical cancer and for ADXS-HER2 for the treatment of osteosarcoma in the United States,
as well as EMA orphan drug designation for axalimogene filolisbac for the treatment of anal cancer and for ADXS-HER2 for the treatment
of osteosarcoma in the EU, and intend to continue to expand our designation for these uses where applicable , we may not receive
the benefits associated with orphan drug designation. This may result from a failure to maintain orphan drug status, or result
from a competing product reaching the market that has an orphan designation for the same disease indication. Under U.S. rules
for orphan drugs, if such a competing product reaches the market before ours does, the competing product could potentially obtain
a scope of market exclusivity that limits or precludes our product from being sold in the United States for seven years. Even
if we obtain exclusivity, the FDA could subsequently approve the same 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.
A competitor also may receive approval of different products for the same indication for which our orphan product has exclusivity,
or obtain approval for the same product but for a different indication for which the orphan product has exclusivity.
In
addition, if and when we request orphan drug designation in Europe, the European exclusivity period is ten years but can be reduced
to six years if the drug no longer meets the criteria for orphan drug 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 EMEA 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.
The
recently enacted tax reform bill could adversely affect our business and financial condition.
On
December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act,” or the TCJA, which significantly amends
the Internal Revenue Code of 1986. The TCJA, among other things, reduces the corporate tax rate from a top marginal rate of 35%
to a flat rate of 21%, limits the tax deduction for interest expense to 30% of adjusted earnings, eliminates net operating loss
carrybacks, imposes a one-time tax on offshore earnings at reduced rates regardless of whether they are repatriated, allows immediate
deductions for certain new investments instead of deductions for depreciation expense over time, and modifies or repeals many
business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in
the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”). We continue
to examine the impact these changes may have on our business. Notwithstanding the reduction in the corporate income tax rate,
the overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected. The impact of
the TCJA on holders of our common stock is also uncertain and could be adverse. This prospectus supplement and the accompanying
prospectus do not discuss the TCJA or the manner in which it might affect us or purchasers of our common stock. We urge our stockholders,
including purchasers of common stock in this offering, to consult with their legal and tax advisers with respect to the TCJA and
the potential tax consequences of investing in our common stock.
We
are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money
laundering laws and regulations. We can face criminal liability and other serious consequences for violations which can harm our
business.
We
are subject to U.S. export control and economic sanctions laws and regulations and other restrictions on international trade.
As such, we are required to export our technology, products, and services in compliance with those laws and regulations. If we
export our technology, products, or services, the exports may require authorizations, including a license, a license exception
or other appropriate government authorization. In addition, the United States and other governments and their agencies impose
sanctions and embargoes on certain countries, their governments and designated parties, which may prohibit the export of certain
technology, products, and services to such persons altogether.
We
are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in
18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money
laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies
and their employees, third-party intermediaries, and other associated persons from authorizing, promising, offering, providing,
soliciting, or accepting directly or indirectly, improper payments or benefits to or from any person whether in the public or
private sector. We have direct or indirect interactions with officials and employees of government agencies. We can be held liable
for the corrupt or other illegal activities of our employees, representatives, contractors, business partners, and agents, in
violation of U.S. and applicable foreign anti-corruption, export, import, sanctions, or anti-money laundering laws and regulations,
even if we do not explicitly authorize or have actual knowledge of such activities.
Any
violation of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment,
the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm,
and other consequences.
We
rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable
for infringing the intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies, including the
Lm
-LLO based immunotherapy platform technology, and the proprietary technology of others with whom we have entered into
collaboration and licensing agreements.
Currently,
we own or have rights to approximately 433 patents and applications, which are owned, licensed from, or co-owned with Penn, Merck,
NIH, and/or Augusta University. We have obtained the rights to all future patent applications in this field originating in the
laboratories of Dr. Yvonne Paterson and Dr. Fred Frankel, at the University of Pennsylvania.
We
own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents and foreign
counterparts. Our success depends in part on our ability to obtain patent protection both in the United States and in other countries
for our product candidates, as well as the methods for treating patients in the product indications using these product candidates.
Such patent protection is costly to obtain and maintain, and we cannot guarantee that sufficient funds will be available. Our
ability to protect our product candidates from unauthorized or infringing use by third parties depends in substantial part on
our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability,
validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our
ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if our product
candidates, as well as methods for treating patients for prescribed indications using these product candidates are covered by
valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents
will provide protection only for a limited amount of time. Accordingly, rights under any issued patents may not provide us with
sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against
competitive products or processes.
In
addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed
to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or
enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable
to us. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United
States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.
Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries offer
different degrees of protection against use of the patented invention by others. If we encounter such difficulties in protecting
or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business
prospects could be substantially harmed.
The
patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual
questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable,
invalidated, or circumvented as a result of laws, rules and guidelines that are changed due to legislative, judicial or administrative
actions, or review, which render our patents unenforceable or invalid. Our patents can be challenged by our competitors who can
argue that our patents are invalid, unenforceable, lack utility, sufficient written description or enablement, or that the claims
of the issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors
devise ways of making or using these product candidates without infringing our patents.
We
will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our technologies,
methods of treatment, product candidates, and any future products are covered by valid and enforceable patents or are effectively
maintained as trade secrets and we have the funds to enforce our rights, if necessary.
The
expiration of our owned or licensed patents before completing the research and development of our product candidates and receiving
all required approvals in order to sell and distribute the products on a commercial scale can adversely affect our business and
results of operations.
Litigation
regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in
such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our
success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The pharmaceutical
industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may
obtain patents in the future and allege that the products or use of our technologies infringe these patent claims or that we are
employing their proprietary technology without authorization.
In
addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent
applications or those of others could result in adverse decisions regarding:
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the
patentability of our inventions relating to our product candidates; and/or
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the
enforceability, validity or scope of protection offered by our patents relating to our product candidates.
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Even
if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing
these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of
others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court.
Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action
successfully or have infringed patents declared valid, we may:
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incur
substantial monetary damages;
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encounter
significant delays in bringing our product candidates to market; and/or
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be
precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.
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We
may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We
also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently
discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and
determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect
our competitive business position.
We
are dependent upon our license agreement with Penn; if we breach the license agreement and/or fail to make payments due and owing
to Penn under our license agreement, our business will be materially and adversely affected.
Pursuant
to the terms of our license agreement with Penn, which has been amended from time to time, we have acquired exclusive worldwide
licenses for patents and patent applications related to our proprietary Listeria vaccine technology. The license provides us with
the exclusive commercial rights to the patent portfolio developed at Penn as of the effective date of the license, in connection
with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to commercialize the technology.
As of July 31, 2018, we had no outstanding payments to Penn. We can provide no assurance that we will be able to make all future
payments due and owing thereunder, that such licenses will not be terminated or expire during critical periods, that we will be
able to obtain licenses from Penn for other rights that may be important to us, or, if obtained, that such licenses will be obtained
on commercially reasonable terms. The loss of any current or future licenses from Penn or the exclusivity rights provided therein
could materially harm our business, financial condition and operating results.
If
we are unable to obtain licenses needed for the development of our product candidates, or if we breach any of the agreements under
which we license rights to patents or other intellectual property from third parties, we could lose license rights that are important
to our business.
If
we are unable to maintain and/or obtain licenses needed for the development of our product candidates in the future, we may have
to develop alternatives to avoid infringing on the patents of others, potentially causing increased costs and delays in drug development
and introduction or precluding the development, manufacture, or sale of planned products. Some of our licenses provide for limited
periods of exclusivity that require minimum license fees and payments and/or may be extended only with the consent of the licensor.
We can provide no assurance that we will be able to meet these minimum license fees in the future or that these third parties
will grant extensions on any or all such licenses. This same restriction may be contained in licenses obtained in the future.
Additionally,
we can provide no assurance that the patents underlying any licenses will be valid and enforceable. To the extent any products
developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross profit from such product
sales and may render the sales of such products uneconomical. In addition, the loss of any current or future licenses or the exclusivity
rights provided therein could materially harm our business financial condition and our operations.
We
have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We
currently have agreements with various third party manufacturing facilities for production of many of our immunotherapies for
research and development and testing purposes. While we have built our own manufacturing facility onsite in Princeton to manufacture
clinical materials for some of our products, included ADXS-NEO, we depend on third-party manufacturers to supply most of our preclinical
and clinical materials and will be reliant on a third-party manufacturer to produce axalimogene filolisbac on a commercial scale,
should that product receive regulatory approval. Third-party manufacturers must be able to meet our deadlines as well as adhere
to quality standards and specifications. Our predominant reliance on third parties for the manufacture of our drug substance,
investigational new drugs 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 our own manufacturing operation or any contracted manufacturing operation is unreliable or unavailable,
we may not be able to manufacture clinical drug supplies of our immunotherapies, and our preclinical and clinical testing programs
may not be able to move forward and our entire business plan could fail. If we are able to commercialize our products in the future,
there is no assurance that our own manufacturing operation or any third-party manufacturers will be able to meet commercialized
scale production requirements in a timely manner or in accordance with applicable standards or current GMP.
We
may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.
We
face an inherent risk of product liability exposure related to the testing of our immunotherapies in human clinical trials, and
will face an even greater risk if the approved products are sold commercially. An individual may bring a liability claim against
us if one of the immunotherapies causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased
demand for our immunotherapies;
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damage
to our reputation;
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withdrawal
of clinical trial participants;
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costs
of related litigation;
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substantial
monetary awards to patients or other claimants;
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loss
of revenues;
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the
inability to commercialize immunotherapies; and
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increased
difficulty in raising required additional funds in the private and public capital markets.
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We
have Product Liability and Clinical Trial Liability insurance coverage for each clinical trial. We do not have product liability
insurance for sold commercial products because we do not have products on the market. We currently are in the process of obtaining
insurance coverage and plan to expand such coverage to include the sale of commercial products if marketing approval is obtained
for any of our immunotherapies. However, insurance coverage is increasingly expensive and we may not be able to maintain insurance
coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability
that may arise.
We
may incur significant costs complying with environmental laws and regulations.
We
and our contracted third parties use hazardous materials, including chemicals and biological agents and compounds that could be
dangerous to human health and safety or the environment. As appropriate, we store these materials and wastes resulting from their
use at our or our outsourced laboratory facility pending their ultimate use or disposal. We contract with a third party to properly
dispose of these materials and wastes. We are subject to a variety of federal, state and local laws and regulations governing
the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with such laws and
regulations may be costly.
If
we use biological materials in a manner that causes injury, we may be liable for damages.
Our
research and development activities involve the use of biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials complies with federal, state and local laws and regulations, we cannot entirely
eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We do
not carry specific biological waste or pollution liability or remediation insurance coverage, nor do our workers’ compensation,
general liability, and property and casualty insurance policies provide coverage for damages and fines/penalties arising from
biological exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages
or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended
or terminated.
We
need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
As
of December 15, 2017, we had 108 employees, all of which were full time employees. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition for these types of personnel from other technology
companies and more established organizations, many of which have significantly larger operations and greater financial, technical,
human and other resources than we have. We may not be successful in attracting and retaining qualified personnel on a timely basis,
on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, or integrating them into
our operations, our business, prospects, financial condition and results of operations will be materially adversely affected.
In such circumstances we may be unable to conduct certain research and development programs, unable to adequately manage our clinical
trials and other products, unable to commercialize any products, and unable to adequately address our management needs.
We
depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.
We
depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants. The loss or
unavailability of the services of any of these individuals for any significant period of time could have a material adverse effect
on our business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the beneficiary
of, key-person life insurance.
The
biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of competition.
We may be unable to compete with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.
As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related research
and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific
and technological factors. These factors include the availability of patent and other protection for technology and products,
the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing
and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing
number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies
have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have
developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies.
These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with
us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with
other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital
to us.
We
are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention,
diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical
products that have the potential to directly compete with our immunotherapies even though their approach to may be different.
The biotechnology and biopharmaceutical industries are highly competitive, and this competition comes from both biotechnology
firms and from major pharmaceutical companies, including companies like: Aduro Biotech, Agenus Inc., Celldex Therapeutics, Inovio
Pharmaceutical Inc., ISA Pharmaceuticals, MedImmune LLC, Neon Therapeutics, Oncolytics Biotech Inc. and Oncothyreon Inc., each
of which is pursuing cancer vaccines and/or immunotherapies. Many of these companies have substantially greater financial, marketing,
and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing,
and marketing of pharmaceutical products). We also experience competition in the development of our immunotherapies from universities
and other research institutions and compete with others in acquiring technology from such universities and institutions.
In
addition, certain of our immunotherapies may be subject to competition from investigational new drugs and/or products developed
using other technologies, some of which have completed numerous clinical trials.
We
may not obtain or maintain the benefits associated with breakthrough therapy designation.
If
we apply for Breakthrough Therapy Designation (“BTD”), we may not be granted BTD, or even if granted, we may not receive
the benefits associated with BTD. This may result from a failure to maintain breakthrough therapy status if it is no longer considered
to be a breakthrough therapy. For example, a drug’s development program may be granted BTD using early clinical testing
that shows a much higher response rate than available therapies. However, subsequent interim data derived from a larger study
may show a response that is substantially smaller than the response seen in early clinical testing. Another example is where BTD
is granted to two drugs that are being developed for the same use. If one of the two drugs gains traditional approval, the other
would not retain its designation unless its sponsor provided evidence that the drug may demonstrate substantial improvement over
the recently approved drug. When BTD is no longer supported by emerging data or the designated drug development program is no
longer being pursued, the FDA may choose to send a letter notifying the sponsor that the program is no longer designated as a
breakthrough therapy development program.
We
believe that our immunotherapies under development and in clinical trials will address unmet medical needs in the treatment of
cancer. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’
products may be an important competitive factor. Accordingly, the relative speed with which we can develop immunotherapies, complete
preclinical testing, clinical trials and approval processes and supply commercial quantities to market is expected to be important
competitive factors. We expect that competition among products approved for sale will be based on various factors, including product
efficacy, safety, reliability, availability, price and patent position.
Approval
of our product candidates does not ensure successful commercialization and reimbursement.
We
are not currently marketing our product candidates, however we are seeking commercial opportunities for axalimogene filolisbac.
We cannot assure you that we will be able to commercialize it or any other candidate ourselves or find a commercialization partner
or that we will be able to agree to acceptable terms with any partner to launch and commercialize our products.
The
commercial success of our product candidates is subject to risks in both the United States and European countries. In addition,
in European countries, pricing and payment of prescription pharmaceuticals is subject to more extensive governmental control than
in the United States. Pricing negotiations with European governmental authorities can take six to 12 months or longer after the
receipt of regulatory approval and product launch. If reimbursement is unavailable in any country in which reimbursement is sought,
limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our ability or any potential partner’s
ability to successfully commercialize in such a country would be impacted negatively. Furthermore, if these measures prevent us
or any potential partner from selling on a profitable basis in a particular country, they could prevent the commercial launch
or continued sale in that country and could adversely impact the commercialization market opportunity in other countries.
Moreover,
as a condition of approval, the regulatory authorities may require that we conduct post-approval studies. Those studies may reveal
new safety or efficacy findings regarding our drug that could adversely impact the continued commercialization or future market
opportunity in other countries.
In
addition, Advaxis predominantly relies on a network of suppliers and vendors to manufacture its products. Should a regulatory
authority make any significant findings on an inspection of Advaxis’ own operations or the operations of those companies,
the ability of Advaxis to continue producing its products could be adversely impacted and further production could cease. Regulatory
GMP requirements are extensive and can present a risk of injury or recall, among other risks, if not manufactured or labeled properly
under GMPs.
Our
potential revenues from the commercialization of our product candidates are subject to these and other factors, and therefore
we may never reach or maintain profitability.
Risks
Related to our Securities
The
price of our Common Stock and warrants may be volatile.
The
trading price of our Common Stock and warrants may fluctuate substantially. The price of our Common Stock and warrants that will
prevail in the market may be higher or lower than the price you have paid, depending on many factors, some of which are beyond
our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your
investment in our Common Stock and warrants. Those factors that could cause fluctuations include, but are not limited to, the
following:
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price
and volume fluctuations in the overall stock market from time to time;
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fluctuations
in stock market prices and trading volumes of similar companies;
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actual
or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities analysts;
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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general
economic conditions and trends;
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positive
and negative events relating to healthcare and the overall pharmaceutical and biotech sector;
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major
catastrophic events;
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sales
of large blocks of our stock;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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departures
of key personnel;
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changes
in the regulatory status of our immunotherapies, including results of our clinical trials;
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events
affecting Penn or any current or future collaborators;
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announcements
of new products or technologies, commercial relationships or other events by us or our competitors;
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regulatory
developments in the United States and other countries;
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failure
of our Common Stock or warrants to be listed or quoted on The NASDAQ Stock Market, NYSE Amex Equities or other national market
system;
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changes
in accounting principles; and
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discussion
of us or our stock price by the financial and scientific press and in online investor communities.
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In
the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target
of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s
attention and resources from our business.
A
limited public trading market may cause volatility in the price of our Common Stock.
The
quotation of our Common Stock on the NASDAQ does not assure that a meaningful, consistent and liquid trading market currently
exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected
the market prices of many smaller companies like us. Our Common Stock is thus subject to this volatility. Sales of substantial
amounts of Common Stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our
Common Stock and our stock price may decline substantially in a short time and our shareholders could suffer losses or be unable
to liquidate their holdings.
The
market prices for our Common Stock may be adversely impacted by future events.
Our
Common Stock began trading on the over-the-counter-markets on July 28, 2005 and is currently quoted on the NASDAQ Stock Market
under the symbol ADXS. Market prices for our Common Stock and warrants will be influenced by a number of factors, including:
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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changes
in interest rates;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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competitive
developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
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variations
in quarterly operating results;
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change
in financial estimates by securities analysts;
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the
depth and liquidity of the market for our Common Stock and warrants;
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investor
perceptions of our company and the pharmaceutical and biotech industries generally; and
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general
economic and other national conditions.
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If
we fail to remain current with our listing requirements, we could be removed from the NASDAQ Capital Market, which would limit
the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary
market.
Companies
trading on the NASDAQ Marketplace, such as our Company, must be reporting issuers under Section 12 of the Exchange Act, as amended,
and must meet the listing requirements in order to maintain the listing of our Common Stock on the NASDAQ Capital Market. If we
do not meet these requirements, the market liquidity for our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Sales
of additional equity securities may adversely affect the market price of our Common Stock and your rights may be reduced.
We
expect to continue to incur drug development and selling, general and administrative costs, and to satisfy our funding requirements,
we will need to sell additional equity securities, which may be subject to registration rights and warrants with anti-dilutive
protective provisions. The sale or the proposed sale of substantial amounts of our Common Stock or other equity securities in
the public markets may adversely affect the market price of our Common Stock and our stock price may decline substantially. Our
shareholders may experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their
shares. Also, new equity securities issued may have greater rights, preferences or privileges than our existing Common Stock.
Additional
authorized shares of Common Stock available for issuance may adversely affect the market price of our securities.
We
are currently authorized to issue 65,000,000 shares of our Common Stock. As of December 15, 2017, we had 41,303,988 shares of
our Common Stock issued and outstanding, excluding shares issuable upon exercise of our outstanding warrants, options, convertible
promissory notes and shares of Common Stock earned but not yet issued under our director compensation program. Under our 2011
Employee Stock Purchase Plan, or ESPP, our employees can buy our Common Stock at a discounted price. To the extent the shares
of Common Stock are issued, options and warrants are exercised or convertible promissory notes are converted, holders of our Common
Stock will experience dilution. In the event of any future financing of equity securities or securities convertible into or exchangeable
for, Common Stock, holders of our Common Stock may experience dilution. In addition, as of December 15, 2017, we had outstanding
options to purchase 4,380,557 shares of our Common Stock at a weighted average exercise price of approximately $11.47 per share
and outstanding warrants to purchase 3,092,395 shares of our Common Stock (including the above warrants subject to weighted-average
anti-dilution protection); and zero shares of our Common Stock are available for grant under the ESPP.
We
do not intend to pay cash dividends.
We
have not declared or paid any cash dividends on our Common Stock, and we do not anticipate declaring or paying cash dividends
for the foreseeable future. Any future determination as to the payment of cash dividends on our Common Stock will be at our Board
of Directors’ discretion and will depend on our financial condition, operating results, capital requirements and other factors
that our Board of Directors considers to be relevant.
Our
certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent a
change in control, which may cause our stock price to decline.
Our
certificate of incorporation, Bylaws and Delaware law contain provisions which could make it more difficult for a third party
to acquire us, even if closing such a transaction would be beneficial to our shareholders. To date, we have not issued shares
of preferred stock, however, we are authorized to issue up to 5,000,000 shares of preferred stock. This preferred stock may be
issued in one or more series, the terms of which may be determined at the time of issuance by our Board of Directors without further
action by shareholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions.
The issuance of any preferred stock could materially adversely affect the rights of the holders of our Common Stock, and therefore,
reduce the value of our Common Stock. In particular, specific rights granted to future holders of preferred stock could be used
to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions
of our certificate of incorporation, Bylaws and Delaware law also could have the effect of discouraging potential acquisition
proposals or making a tender offer or delaying or preventing a change in control, including changes a shareholder might consider
favorable. Such provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. In
particular, the certificate of incorporation, Bylaws and Delaware law, as applicable, among other things; provide the Board of
Directors with the ability to alter the Bylaws without shareholder approval, and provide that vacancies on the Board of Directors
may be filled by a majority of directors in office, although less than a quorum.
We
are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation and an “interested shareholder,” which is generally
defined as a shareholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year
period following the date that such shareholder became an interested shareholder.
These
provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first negotiate with its board. These provisions may delay or prevent someone
from acquiring or merging with us, which may cause the market price of our Common Stock to decline.