ITEM
1. BUSINESS
BUSINESS
Overview
We
are a clinical-stage biopharmaceutical company focused on the development of GP2, an immunotherapy to prevent breast cancer recurrences
in patients who have previously undergone surgery. GP2 is a 9 amino acid transmembrane peptide of the HER2/neu protein, a cell surface
receptor protein that is expressed in a variety of common cancers, including expression in 75% of breast cancers at low (1+), intermediate
(2+), and high (3+ or over-expressor) levels. The combination of GP2 + GM-CSF is called GLSI-100. In a completed randomized, single-blinded,
placebo-controlled, multi-center Phase IIb clinical trial led by MD Anderson Cancer Center, no recurrences were observed in patients
treated with GLSI-100 in the HER2/neu 3+ adjuvant setting after median 5 years of follow-up, if the patients were treated, followed,
and remained disease free over the first 6 months, which is the time required to reach peak immunity and thus maximum efficacy and protection
(p = 0.0338). For the 146 patients who have been treated with GLSI-100 to date over 4 clinical trials, treatment was well tolerated and
no serious adverse events were observed related to the immunotherapy.
We
have commenced Flamingo-01, a Phase III clinical trial with Baylor College of Medicine as the global primary investigator site. Flamingo-01
is designed to evaluate the safety and efficacy of GLSI-100 in HER2/neu positive patients with residual disease or high-risk pathologic
complete response at surgery and who have completed both neoadjuvant and postoperative adjuvant trastuzumab based treatment.
Our
Product Candidate
GP2
is a HER2/neu transmembrane peptide that elicits a targeted immune response against HER2/neu-expressing cancers. Below
is an image of a cell surface showing therapeutically relevant cell surface proteins in cancer. Breast cancers and other solid tumors
with elevated expression of HER2/neu protein are highly aggressive with an increased disease recurrence and a worse prognosis.
GM-CSF
Immunoadjuvant
Recombinant
human granulocyte macrophage colony-stimulating factor or GM-CSF (sargramostim, Leukine®) has been shown to enhance monocyte and
neutrophil cytotoxicity against melanoma tumor cells and to enhance activity-dependent cellular cytotoxicity of monocytes and neutrophils
against targets coated with the anti-ganglioside antibodies. GP2 will be delivered in combination with GM-CSF to induce GP2 peptide specific
immunity. GP2 treatment is administered via an intradermal injection by mixing GP2 peptide and GM-CSF at the time of administration.
GM-CSF
is available in lyophilized form exclusively from one manufacturer. We will continue to be dependent on the manufacturer for our supply
of GM-CSF in our ongoing GP2 clinical trials and upon potential commercialization of GP2. Although GM-CSF is only approved for sale in
the U.S. by the FDA and is available in other countries on a named patient basis through a specialized company that focuses on making
products approved in the U.S. available globally, GM-CSF may be registered for sale in other countries by the manufacturer in the future.
Cancer
Immunotherapy
Cancer
immunotherapy is a new method of cancer treatment among more established treatment options such as surgery, chemotherapy, targeted therapy,
and radiation therapy. This method seeks to stimulate an individual’s immune system to selectively attack cancer cells while not
affecting normal cells or to deliver certain immune system components in order to inhibit the spread of cancer. Thus, cancer immunotherapy
is an important and rapidly emerging field, which has led to new clinical research studies and garnered the attention of biotechnology
and pharmaceutical companies, regulatory agencies, payors and hospital systems, cancer patients and their families, and the general public
at large.
Cancer
immunotherapy harnesses the body’s natural immune system response to fight and/or prevent tumor growth. An essential characteristic
of the immune system, which is a network of tissues, cells, and signaling molecules that work to protect the body, is its ability to
differentiate foreign threats, including cancerous growths, from normal cells. Despite the fact that tumor cells originate from normal
cells, tumor cells can be recognized as foreign threats because of their ability to elicit the production of tumor antigens. These antigens
may be released in the interstitial tissues, and eventually in the bloodstream or may remain on the surface of cognate cancer cells.
The HER2/neu protein is one of the most widely expressed tumor antigens in multiple malignances.
Several
cell types play an important role in the development and maintenance of immune responses against cancer. The most important cell types
with regard to immune response are antigen-presenting cells (“APCs”) and lymphocytes. APCs include various subtypes, such
as dendritic cells, monocytes and macrophages. Once a patient is exposed to a tumor antigen (either by the presence of cancer itself
or through active immunization through a vaccine type immunotherapeutic), the tumor 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 lymphocyte
called a T-cell. Inactive T-cells search for tumor antigens by transiently binding to antigens presented by major histocompatibility
complexes (“MHCs”) on the APCs. There is great variability in the expression of different subtypes of MHCs in the human population.
The MHC system expresses human leukocyte antigens (“HLAs”) and these HLA subtypes determine the vigor and duration of any
given T-cell response to a cancer among different patients.
As
shown below, following GP2 immunotherapy, CD8+ cytotoxic T lymphocytes recognize and destroy HER2/neu-expressing cancer cells.
GP2 is administered in combination with an FDA-approved immunoadjuvant GM-CSF, which stimulates the proliferation of antigen presenting
cells. Preclinical studies have shown that T cells sensitized against the GP2 peptide demonstrate significant recognition of HER2/neu-expressing
tumors. Both ovarian and breast cancer-specific CTLs recognize GP2, which is widely expressed in HER2/neu-expressing tumors and
is capable of inducing tumor-specific CTL populations in vitro.
Breast
Cancer Treatment Approach — Adjuvant & Neoadjuvant Treatments
As
shown below, in the adjuvant setting, a HER2/neu 3+ patient typically receives Herceptin in the first year following breast cancer
surgery, with the hope that their breast cancer will not recur, and with the odds of recurrence slowly decreasing over the first 5 years
following surgery. Herceptin has been shown to reduce recurrence rates by approximately 50%, from 25% to 12%, in the adjuvant setting.
In the neoadjuvant setting, a HER2/neu 3+ patient receives treatment before surgery and based on the results of a biopsy at surgery,
will receive Herceptin or Kadcyla, a more potent form of Herceptin, following surgery. Kadcyla has been shown to reduce recurrence rates
by 50%, from 22% to 11%, in the neoadjuvant setting. Accordingly, we believe that GP2 may be effective in safely addressing the 50% of
recurring patients who do not respond to either Herceptin or Kadcyla.
GP2
is administered in combination with the immunoadjuvant GM-CSF in years 2-4, following the first year of treatment with Herceptin, in
a series of 11 intradermal injections comprising 6 primary injections over 6 months (1 injection per month) followed by 5 booster injections
every 6 months thereafter.
The
adverse events observed to date have been well-tolerated with no SAEs reported in the Phase IIb clinical trial considered related to
GLSI-100 treatment. Therefore, GLSI-100 is well-positioned to serve this population at this stage of treatment. We believe that clinicians
and patients are seeking a de-escalation and a return to normal life free of toxic treatments, especially if the chance of recurrence
is reduced substantially. GLSI-100 may significantly reduce the incidence of recurrence/metastatic disease and need for additional therapy.
Lastly, we believe that GP2 may be the treatment that will synergistically overlap with or follow trastuzumab based treatments, such
as Herceptin, Kadcyla, Enhertu or any of the other Herceptin derivatives or antibody drug conjugates being developed.
GP2
Clinical Data & Phase III Clinical Trial (Flamingo-01)
In
the Phase IIb and 3 Phase I clinical trials where 146 patients received GP2 immunotherapy, there were no serious adverse events observed
related to the immunotherapy or any other GP2 combination treatments.
Clinical
Trial Description |
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Status |
GP2
Phase III Clinical Trial – Flamingo-01 |
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Enrolling in US |
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A
Randomized, Multicenter, Placebo-controlled, Phase 3 Study to Evaluate the Efficacy and Safety of HER2/neu Peptide GLSI-100
(GP2 + GM-CSF) in HER2/neu Positive Subjects with Residual Disease or High-Risk PCR after both Neoadjuvant and Postoperative
Trastuzumab-based Therapy |
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GP2
Phase IIb Clinical Trial |
|
Trial
Completed |
● |
Prospective,
Randomized, Single-Blinded, Multi-Center Phase II Trial of the HER2/neu Peptide GP2 + GM-CSF Vaccine versus GM-CSF Alone in
HLA-A*02+ Node-Positive and High-Risk Node-Negative Breast Cancer Patients to Prevent Recurrence |
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89
patients treated with GP2 + GM-CSF, 91 placebo patients treated with GM-CSF |
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GP2
Phase I Clinical Trial — Combination with AE37 |
|
Trial
Completed |
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Phase
I Safety Trial of the GP2 + GM-CSF Vaccine in Combination with the Helper Peptide AE37 + GM-CSF Vaccine |
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22
patients treated with GP2 + AE37 + GM-CSF |
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GP2
Phase I Clinical Trial — Combination with Trastuzumab |
|
Trial
Completed |
● |
Phase
Ib Trial of Combination Immunotherapy with HER2/neu Peptide GP2 + GM-CSF Vaccine and Trastuzumab in Breast Cancer Patients |
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17
patients treated with GP2 + GM-CSF + trastuzumab |
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First
GP2 Phase I Clinical Trial |
|
Trial
Completed |
● |
Phase
Ib Trial of HER2/neu Peptide (GP2) Vaccine in Breast Cancer Patients |
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18
patients treated with GP2 + GM-CSF |
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Phase
I Clinical Trials
First
GP2 Phase I Clinical Trial
As
shown in the table above, the first GP2 Phase I clinical trial was conducted at Walter Reed Army Medical Center. The clinical trial was
conducted in patients over the age of 18 years with a diagnosis of HER2/neu 1-3+, node negative breast cancer who had undergone
primary surgical and medical therapies and who were without evidence of disease at the time of enrollment into the clinical trial. Patients
were HLA typed and HLA-A*02 patients were skin tested for recall antigens. HLA-A*02 patients found to be immunologically intact received
the vaccine. There were no grade 3-5 toxicities observed among the 18 patients that received a total of 108 doses of GP2 + GM-CSF. Among
all patients that participated in the clinical trial, the maximum observed local toxicity that occurred was grade 1 in 38.9% and grade
2 in 61.1% of the patients. The maximum systemic toxicity observed during the clinical trial was grade 0 in 5.6%, grade 1 in 61.1%, and
grade 2 in 33.3% of the patients. The most common local reactions included erythema and induration (100% of patients), pruritis (25%),
and inflammation (23%). The most common systemic reactions were grade 1 fatigue (40%) and grade 1 arthralgia/myalgia (15%). There were
no recurrences and no deaths reported among the patients that participated in the clinical trial. Additional data analysis reported by
the investigators, included topics such as pre-existing immunity, effects of dosing, and epitope spreading.
GP2
Phase I Clinical Trial — Combination with Trastuzumab
Preclinical
research previously demonstrated that a synergy may exist between trastuzumab and GP2 peptide-stimulated CTLs ex vivo. Pretreatment of
breast cancer cells with trastuzumab followed by incubation with GP2 peptide-induced CTLs resulted in enhanced cytotoxicity in 3 tumor
cell lines compared to treatment with trastuzumab or GP2-specific CTLs alone. These results suggest that concurrent GP2 vaccination during
trastuzumab therapy may be a possible combination immunotherapy.
As
shown in the table above, a Phase I trial evaluating the combination therapy of GP2 + GM-CSF administered simultaneously with trastuzumab
was conducted. The combination therapy was found to be well tolerated when given concurrently in 17 clinically disease-free, HER2/neu
over-expressing breast cancer patients.
GP2
Phase I Clinical Trial — Combination with AE37
As
shown in the table above, a Phase I trial evaluating the combination therapy of GP2 + GM-CSF administered simultaneously with HER2/neu
peptide AE37 in 22 clinically disease-free, HER2/neu breast cancer and ovarian cancer patients was conducted. While 28 patients
enrolled, 22 were treated and 14 patients completed the 6 vaccination series. Final results suggest that the combination of GP2 and AE37
peptides is well tolerated at each of the tested dosing levels. Additionally, we believe that the combination is capable of stimulating
strong peptide-specific in vivo immune responses.
During
the primary vaccination series, an AE37/GP2+GM-CSF dual peptide vaccine resulted in robust T-cell proliferation. However, significant
immune responses became more variable at 6 and 12 months post vaccination suggesting the need for boosters in some individuals.
Phase
II Clinical Trial
GP2
Phase IIb Clinical Trial Overview
In
a prospective, randomized, single-blinded, placebo-controlled, multi-center (16 sites led by MD Anderson Cancer Center) Phase IIb clinical
trial of HLA-A*02 breast cancer patients, GLSI-100 treatment resulted in no recurrences in 46 HER2/neu 3+ over-expressor patients
versus 50 placebo patients who were treated with GM-CSF. After 5 years of follow-up, there were 0% cancer recurrences in the HER2/neu
3+ patients treated with GLSI-100 versus an 11% cancer recurrence rate in the placebo arm treated with GM-CSF (p = 0.0338) in the
population that was treated, followed, and remained disease free over the first 6 months, which we believe is the time required to reach
peak immunity and thus maximum efficacy and protection. Based on this data, we believe that treatment with GLSI-100 starting approximately
in the second year following surgery may dramatically lower breast cancer recurrences in this patient population.
The
design of the Phase IIb trial was as follows:
|
● |
Prospective,
randomized, single-blinded, placebo-controlled phase IIb clinical trial of GP2 + GM-CSF or GM-CSF alone in HER2/neu 1-3+,
HLA-A*02 patients. |
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High-risk
breast cancer patients (Node Positive, High Risk Node Negative) who were disease-free and immunocompetent after having completed
standard of care therapy. |
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The
primary endpoint was to determine if GP2 + GM-CSF reduces breast cancer recurrence rates versus GM-CSF alone. A recurrence is defined
as either a pathologically confirmed recurrence or a new radiographic finding of recurrence during standard of care follow-up. |
The
Phase IIb clinical trial closed in December 2018. The final median 5 year follow-up data is presented below. A total 180 intent-to-treat
patients enrolled in the clinical trial. HER2/neu status was determined based on the expression levels of the HER2/neu
protein in each patient using standard of care HER2/neu diagnostic technology. The trial was prospectively designed to analyze
these fully treated patients by 2 distinct patient populations, namely HER2/neu 3+ (positive or over expressors) and HER2/neu
1-2+ (low to intermediate expressors):
|
● |
HER2/neu
3+ Positive Over Expressors: In the 96 HER2/neu 3+, HLA-A*02 patients, no recurrences were observed in the efficacy population
(p = 0.0338). A patient was in the efficacy population if they were treated, followed, and remained disease free over the
first 6 months, which is the time we believe is required to reach peak immunity and thus maximum efficacy and protection. This patient
population was treated with GLSI-100 following the first year of trastuzumab treatment, which followed surgery. |
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HER2/neu
1-2+ Low to Intermediate Expressors: In the 72 HER2/neu 1-2+, HLA-A*02 patients, no reduction in recurrence rates were
observed, but trastuzumab was not administered to these patients. Thus, we may pursue a future trial with GP2 in combination with
trastzumab based therapy and other synergistic agents. |
5
Year Data Set of GP2 Phase IIb Trial: HER2 3+ (Positive or Over Expressors) Patients Who are in the Efficacy Population
The
figure below shows a time series of the GLSI-100 immunotherapy injections, adverse events (“AE”), immune response, and 100%
disease-free survival (0% recurrence rate) in HER2 positive breast cancer patients over median 5 years. This time series highlights that
the 10 GLSI-100 immunotherapy injections over the first 2.5 years (as depicted by the 10 arrows on the x-axis) demonstrated a potent
immune response that typically peaked at 6 months. The immune response also included injection site and systemic reactions that peaked
at approximately 6 months. We believe that these AEs are a positive sign that the immune system responded to GLSI-100 immunotherapy and
contributed to the decline in metastatic breast cancer recurrence. The observed AEs associated with GLSI-100 injections were temporary
and declined after GLSI-100 injections ended.
Safety
& Immune Response Data of GP2 Phase II Trial
In
both the HER2/neu 3+ and the HER2/neu 1-2+ patient populations, GP2 was shown to be well tolerated. The observed AEs primarily
consisted of injection site reactions which could be mitigated by reducing the GM-CSF dose (and then the GP2 dose, if necessary). No
SAEs reported in the GP2 treated patients were considered attributable to GLSI-100.
GLSI-100
immunotherapy demonstrated GP2-specific immune responses. We believe that this data and the absence of observed metastatic breast cancer
recurrence in the HER2/neu 3+ population in the Phase IIb clinical trial, support GP2’s mechanism of action. Statistically
significant peak immunity was typically observed after 6 months of GLSI-100 treatment, as measured in both the Dimer Binding Assay and
the Delayed Type Hypersensitivity (DTH) skin test. The HER2/neu 3+ population’s immune response was similar to the HER2/neu
1-2+ population’s immune response, suggesting the potential to treat the HER2/neu 1-2+ population (including triple
negative breast cancer) with GP2 immunotherapy in combination with trastuzumab (Herceptin) based products and other synergistic clinically
active agents. The broad based immune response suggests the potential for GP2 to treat other HER2/neu 1-3+ expressing cancers.
Further, booster injections given every 6 months after the PIS were observed to elicit a prolonged immune response, which may provide
longer term protection.
Phase
III Trial, Flamingo-01
We
have commenced Flamingo-01, a Phase III clinical trial with Baylor College of Medicine as the global primary investigator site. Flamingo-01includes
an interim analysis and uses a similar treatment regime
as the Phase IIb clinical trial.
The
primary objective of Flamingo-01 is to assess the safety and efficacy of GLSI-100 compared to placebo in HLA-A*02 positive and HER2/neu
positive breast cancer patients who have a high risk of disease recurrence (stage I, II, or III at presentation with residual disease
at surgery or stage III at presentation with pathologic complete response (“pCR”) at surgery) and have completed both neoadjuvant
and postoperative adjuvant trastuzumab-based standard of care therapy.
An
overview of the anticipated Phase III clinical trial design is shown below:
U.S.
Breast Cancer Market
We
believe that the market for GP2 is large. The American Cancer Society estimates that approximately 1 in 8 U.S. women (12.8%) will develop
invasive breast cancer over her lifetime, with approximately 282,000 new breast cancer patients per year and 3.8 million current breast
cancer survivors in the U.S. in 2021. An estimated 43,600 female breast cancer deaths will occur in the U.S. in 2021. HER2/neu 3+
breast cancer patients comprise approximately 25% of all breast cancer patients. Approximately 40% to 50% of the U.S. population contains
the HLA-A*02 allele, while node positive and high risk node negative patients comprise approximately 50% of the market. Therefore, we
believe that the U.S. market for the first indication for GP2, if approved, could be the combination of the three populations above which
together comprises approximately 6% of breast cancer patients who undergo surgery.
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 types of companies with
currently approved products for various indications, such as manufacturers 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, Amgen, Novartis, Juno Therapeutics,
Inc. (a subsidiary of Celgene), Kite Pharma, Inc., a wholly-owned subsidiary of Gilead Sciences, Inc. and Pfizer, Inc./EMD Serono, Inc.
Most of these companies, either alone or together with their collaborative partners, have substantially greater financial resources than
we do.
Companies
developing novel products with similar indications to those we are pursuing are expected to influence our ability to penetrate and maintain
market share, if GLSI-100 is approved. For patients with early stage breast cancer, adjuvant or neoadjuvant therapy is often given to
prevent recurrence and increase the chance of long-term disease free survival. Adjuvant or neoadjuvant therapy for breast cancer can
include chemotherapy, hormonal therapy, radiation therapy, or combinations thereof. In addition, the HER2 targeted drug Herceptin (trastuzumab
or biosimilar) alone or in combination with Perjeta (pertuzumab), both manufactured and marketed by Roche/Genentech, may currently only
be given to patients with tumors with high expression of HER2/neu. Following adjuvant treatment in the first year following surgery,
only Nerlynx is approved for extended andjuvant treatment and would potentially compete with GLSI-100 if not used synergistically. We
believe that GP2 will act synergistically with Herceptin, Perjeta, Nerlynx, and the newest entrants Kadcyla and Enhertu.
There
are a number of approved HER2/neu targeted therapies, some of which include the following: Genentech’s Herceptin, Perjeta
(pertuzumab) and Kadcyla (TDM-1, ado-trastuzumab emtansine); Puma’s Nerlynx (neratinib); Daichi Sanko’s Enhertu (DS-8201,
fam-trastuzumab deruxtecan-nxki), and Seattle Genetics’ Tukysa (tucatanib). In addition, the following biosimilars to trastuzumab
have been approved: Biocon/Mylan’s (Ogivri — trastuzumab-dkst; Celltrion/Teva’s (Herzuma — trastuzumab-pkrb);
Samsung/Biogen/Merck’s (Ontruzant — trastuzumab-dttb); Pfizer’s (Trazimera — trastuzumab-qyyp); and Allergan/Amgen’s
(Kanjinti; trastuzumab-anns). Furthermore, the following immune checkpoint inhibitors have also been approved or are under review by
the FDA to treat breast cancer patients: Merck’s Keytruda (pembrolizumab) and Genentech’s Tecentriq (atezolumab). Moreover
we believe that drug candidates from Sellas (formerly Galena), Marker (formerly TapImmune), Epithany, Antigen Express (Generex subsidiary),
and various companies pursuing neoantigen technologies are in clinical development and are being pursued for different sub-populations
or are behind GP2 in clinic development.
Many
of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources
than we do, and more experience in obtaining FDA and other regulatory approvals of treatments and in 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 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 the recruiting and retaining of qualified scientific and management personnel, the ability to work
with specific clinical contract organizations due to conflict of interest, and the conduct of trials in the ability to recruit clinical
trial sites and patients for our clinical trials.
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 coverage and 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 candidate 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.
Manufacturing
We
do not own or operate manufacturing facilities for the production of our product candidate 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 (“APIs”), and finished product candidate for our clinical trials and potential commercial
supply.
Exclusive
License
The
Henry M. Jackson Foundation out-licenses technology of the U.S. military and it conducts research and manages clinical trials. HJF managed
the GP2 Phase IIb clinical which was led by MD Anderson Cancer Center, oversaw all regulatory filings with the FDA for all 4 GP2 clinical
trials (including the 3 Phase I and the Phase IIb clinical trials), and possesses all patient and manufacturing data from such trials.
In
April 2009, we entered into an exclusive license agreement, as amended, with HJF pursuant to which HJF granted us exclusive worldwide
rights to several U.S. and foreign patents and patent applications covering methods of using GP2 as an immunotherapy that elicits a targeted
immune response against HER2/neu-expressing cancers. In consideration for such licensed rights, we issued HJF 202,619 shares of
our common stock. In addition, we are required to pay an annual maintenance fee and milestone payments of up to an aggregate of $5.7
million. We are also required to make 2.5-5% royalty payments based on the sales of GP2 and to reimburse HJF for patent expenses. To
date we have not been required to make any milestone or royalty payments to HJF. The term of the exclusive license shall terminate at
such time that the last licensed patent or patent application expires or is abandoned, unless terminated earlier pursuant to the terms
of the exclusive license agreement. We may terminate the license by giving 90 days notice. HJF may terminate the license if we do not
make required payments, if we default in our performance obligations, if we do not sufficiently develop and advance GP2 towards commercialization,
and for various other reasons.
In
connection with the exclusive license agreement with HJF, we were the financial and corporate sponsors of the GP2 Phase IIb clinical
trial. HJF has provided us with all FDA correspondences and GP2 patient and manufacturing data for the history of the drug’s development
for all 4 clinical trials, and we have incorporated this data into our corporate investigational new drug application (“IND”)
with the FDA.
Intellectual
Property Portfolio
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 our ability to prevent others from infringing our proprietary
rights. We intend 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 U.S. legislative framework, and filing U.S. 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. We intend to protect our intellectual
property rights through available means including filing and prosecuting patent applications in the U.S. and other countries, protecting
trade secrets, and utilizing regulatory protections such as data exclusivity. In addition, we 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 (“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 U.S., the patent term is generally 20 years from the earliest date of filing a non-provisional patent application in the applicable
country. In the U.S., a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee
for administrative delays by the U.S. 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.
HJF
License
Pursuant
to our exclusive license agreement with HJF, we were granted exclusive worldwide rights to several U.S. and foreign patents and patent
applications covering methods of using GP2. The GP2 issued patents provide protection ranging from 2026 through 2032 in major markets
such as the U.S., Europe, Japan, Australia, and Canada, with ongoing prosecution of pending patent applications in other markets. We
plan to register GP2 as a biologic, which may be subject to 10-12 years market exclusivity in the U.S. upon receiving marketing approval.
The
following summarizes the two patent families subject to our exclusive license agreement with HJF. We have licensed rights to issued patents
and pending patent applications in certain countries with respect to the two patent families below and do not own or have rights to any
other patents or patent applications for GP2 or any other products:
|
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GP2
+ GM-CSF Patent Family — A patent application has been filed and licensed describing methods and compositions for the induction
of a cytotoxic T-cell response to the GP2 peptide with the effect of inducing and maintaining a protective or therapeutic immunity
against breast cancer. Patent claims describe the use of the GP2 technology including dosing, formulation, identification of patients,
and use in combination with GM-CSF. Patents issued in the U.S. will expire in 2032 and 2029 and international patents will expire
in 2029. |
|
● |
GP2
+ Herceptin Patent Family — A patent application has been filed and licensed describing methods and compositions of GP2 peptide
in combination with a HER2/neu targeting antibody such as Herceptin. U.S. and certain foreign patent claims describe the method
and timing of administration. Patents issued in the U.S. will expire in 2028 and 2026 and international patents will expire in 2026. |
Corporate
Strategy
We
do not have a sales, marketing, or product distribution strategy for our GP2 immunotherapy or any future product candidates because GP2
is still in clinical development. Our future commercial strategy, if our GP2 immunotherapy or any future product candidates are approved,
may include the use of strategic partners, distributors, a contract sales force, or the establishment of our own commercial and specialty
sales force for the U.S. market, as well as similar strategies for regions and territories outside the U.S. We plan to further evaluate
these options as we approach submission of a new drug application or biologics license application for one our product candidates for
one or more indications.
The
GP2 issued patents provide protection ranging from 2026 through 2032 in various markets, and we plan to register GP2 as a biologic, which
may be subject to 10-12 years market exclusivity in the U.S. upon receiving marketing approval. During this period of exclusivity, we
intend to advance GP2 into a Phase III clinical trial in the U.S. and pursue a European and global clinical trial strategy to support
GP2 registration outside of the U.S. We are considering various options to fund the Phase III clinical trial including financing and/or
strategic transactions. Our strategy during such time also includes building a commercialization team, pursuing additional funding, and
pursuing strategic collaborations to support the future global marketing and sales of GP2, if approved. A long term global and regional
licensing process has been initiated and will continue as the Phase III trial commences.
Pipeline
Strategy — Including GP2 In Other HER2/neu-Expressing Cancers
We
are developing follow-on indications for GP2 by designing and planning additional clinical trials to expand the breast cancer patient
population and to pursue additional HER2/neu-expressing cancers. Pending the receipt of sufficient capital, the Phase
III clinical trial can be supplemented with additional clinical trials designed to evaluate the safety and efficacy of GLSI-100 in (1)
patients immediately upon diagnosis in parallel to neoadjuvant treatment and surgery to provide maximum protection against breast cancer
recurrence as soon as possible, (2) other HLA patients in the same HER2/neu 3+ breast cancer patient population, (3) breast cancer
patients who are low to intermediate expressors of HER2/neu (1-2+) or (4) other HER2/neu-expressing cancers including,
but not limited to, ovarian, gastrointestinal, and colon cancers.
Government
Regulations
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 clinical
trials or seek approval or licensure of our current product candidate or any 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. 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
process required by the FDA before biologic product candidates may be marketed in the U.S. generally involves the following:
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completion
of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices,
or GLP, regulations; |
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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; |
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approval
by an independent IRB or ethics committee at each clinical site before the trial is begun; |
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performance
of adequate and well-controlled human clinical trials to establish the safety and efficacy of product; |
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manufacture
of product with adequate controls so that the product has the purity and potency of the proposed biologic product candidate for its
intended purpose; |
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preparation
of and submission to the FDA of a BLA, after completion of all pivotal clinical trials; |
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satisfactory
completion of an FDA Advisory Committee review, if applicable; |
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a
determination by the FDA within 60 days of its receipt of a BLA to file the application for review; |
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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 cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s
continued safety, purity and potency, and of selected clinical investigations to assess compliance with GCP; and |
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FDA
review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the U.S., which
must be updated annually when significant changes are made. |
The
testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for
our current product candidate or any future product candidates will be granted on a timely basis, if at all. Prior to beginning the first
clinical trial with a product candidate, a sponsor 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 investigational
plan and the protocol(s) for clinical trials. 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 patients under the supervision of qualified investigators in
accordance with GCP, which include the requirement that all research patients 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 patients
are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some clinical trials also
include oversight by a Data and Safety Monitoring Board, or DSMB, organized by the clinical trial sponsor, 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 patients or other grounds, such as no
demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical trials 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.
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Phase
1 — The investigational product is initially introduced into healthy human patients or patients with the target disease
or condition. These clinical trials 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
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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
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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
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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 clinical trials may be made a condition to approval
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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.
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 studies and clinical trials, including
negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to
test the safety and effectiveness of a use of the product, or from a number of alternative sources, including clinical trials 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 FDA’s 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 product’s 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. 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 our product. 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 clinical trials and surveillance to further assess and monitor the product’s safety
and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing
clinical trials. In addition, new government requirements, including those resulting from new legislation, may be established, or the
FDA’s policies may change, which could delay or prevent regulatory approval of our product under development.
A
sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s 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.
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 clinical trials or completion of
ongoing clinical trials after marketing approval are generally required to verify the biologic’s 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.
Fast
Track, Priority Review and Breakthrough Therapy designations do not change the standards for approval but may expedite the development
or approval process.
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 U.S. 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.
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. 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 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 HIPAA’s 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 attorney’s 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 candidate, 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 trials
to demonstrate the comparative cost-effectiveness of our product candidate. Seeking coverage and reimbursement from third-party payors
can be time consuming and expensive. Moreover, a payor’s 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 product on a competitive
and profitable basis.
Foreign
Regulation
In
addition to regulations in the U.S., we are and will be subject, either directly or through our distribution partners, to a variety of
regulations in other jurisdictions governing, among other things, clinical trials and commercial sales and distribution of our product,
if approved.
Whether
or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries
prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the U.S. have
processes that require the submission of a clinical trial application much like an IND prior to the commencement of human clinical trials.
In Europe, for example, a clinical trial application, or CTA, must be submitted to the competent national health authority and to independent
ethics committees in each country in which a company plans to conduct clinical trials. Once the CTA is approved in accordance with a
country’s requirements, clinical trials may proceed in that country.
The
requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to
country, even though there is already some degree of legal harmonization in the European Union member states resulting from the national
implementation of underlying E.U. legislation. In all cases, the clinical trials are conducted in accordance with GCP and other applicable
regulatory requirements.
To
obtain regulatory approval of a new drug or medicinal product in the European Union, a sponsor must obtain approval of a marketing authorization
application. The way in which a medicinal product can be approved in the European Union depends on the nature of the medicinal product.
The
centralized procedure results in a single marketing authorization granted by the European Commission that is valid across the European
Union, as well as in Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human drugs that are: (i) derived
from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated for the treatment of certain
diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions and viral diseases,
(iii) officially designated as “orphan drugs” and (iv) advanced-therapy medicines, such as gene-therapy, somatic cell-therapy
or tissue-engineered medicines. The centralized procedure may, at the request of the applicant, also be used for human drugs which do
not fall within the above mentioned categories if the human drug (a) contains a new active substance which was not authorized in the
European Community; or (b) the applicant shows that the medicinal product constitutes a significant therapeutic, scientific or technical
innovation or that the granting of authorization in the centralized procedure is in the interests of patients or animal health at the
European Community level.
Under
the centralized procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application by
the EMA is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response
to questions asked by the Committee for Medicinal Products for Human Use, or CHMP), with adoption of the actual marketing authorization
by the European Commission thereafter. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product
is expected to be of a major public health interest from the point of view of therapeutic innovation, defined by three cumulative criteria:
the seriousness of the disease to be treated; the absence of an appropriate alternative therapeutic approach, and anticipation of exceptional
high therapeutic benefit. In this circumstance, EMA ensures that the evaluation for the opinion of the CHMP is completed within 150 days
and the opinion issued thereafter.
The
mutual recognition procedure, or MRP, for the approval of human drugs is an alternative approach to facilitate individual national marketing
authorizations within the European Union. The MRP may be applied for all human drugs for which the centralized procedure is not obligatory.
The MRP is applicable to the majority of conventional medicinal products, and is based on the principle of recognition of an already
existing national marketing authorization by one or more member states.
The
characteristic of the MRP is that the procedure builds on an already existing marketing authorization in a member state of the E.U. that
is used as reference in order to obtain marketing authorizations in other E.U. member states. In the MRP, a marketing authorization for
a drug already exists in one or more member states of the E.U. and subsequently marketing authorization applications are made in other
European Union member states by referring to the initial marketing authorization. The member state in which the marketing authorization
was first granted will then act as the reference member state. The member states where the marketing authorization is subsequently applied
for act as concerned member states.
The
MRP is based on the principle of the mutual recognition by European Union member states of their respective national marketing authorizations.
Based on a marketing authorization in the reference member state, the applicant may apply for marketing authorizations in other member
states. In such case, the reference member state shall update its existing assessment report about the drug in 90 days. After the assessment
is completed, copies of the report are sent to all member states, together with the approved summary of product characteristics, labeling
and package leaflet. The concerned member states then have 90 days to recognize the decision of the reference member state and the summary
of product characteristics, labeling and package leaflet. National marketing authorizations shall be granted within 30 days after acknowledgement
of the agreement.
Should
any Member State refuse to recognize the marketing authorization by the reference member state, on the grounds of potential serious risk
to public health, the issue will be referred to a coordination group. Within a timeframe of 60 days, member states shall, within the
coordination group, make all efforts to reach a consensus. If this fails, the procedure is submitted to an EMA scientific committee for
arbitration. The opinion of this EMA Committee is then forwarded to the Commission, for the start of the decision-making process. As
in the centralized procedure, this process entails consulting various European Commission Directorates General and the Standing Committee
on Human Medicinal Products or Veterinary Medicinal Products, as appropriate.
For
other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical
trials are conducted in accordance with GCP and the other applicable regulatory requirements.
If
we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical
trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Human
Capital Management
As
of March 15, 2023 we had 3 full-time employees and 3 part-time employees. We are not a party to any collective bargaining agreements.
We believe that we maintain good relations with our employees. We do not have any employees that
are represented by a labor union or covered under a collective bargaining agreement. Our future success depends on our ability to attract,
develop and retain key personnel, maintain our culture, and ensure diversity and inclusion in our board, management and broader workforce.
Our human resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing
and additional employees.
ITEM
1A. RISK FACTORS
An
investment in our securities involves a high degree of risk. An investor should carefully consider the risks described below as well
as other information contained in this Annual Report on Form 10-K and our other reports filed with the U.S. Securities and Exchange Commission
(“SEC”). The risks and uncertainties described below are not the only ones we face. 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 securities
could decline, and investors in our company may lose all or part of their investment.
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 the development of our novel cancer immunotherapy GP2, for breast cancer and
potentially for a broad range of other HER2/neu-expressing cancers. 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 since our inception. For the years ended December 31, 2022 and 2021,
we reported a net loss of $7.8 million and $4.6 million, respectively. As of December 31, 2022, we had an accumulated deficit of $41.5
million.
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 candidate and any additional product candidates we may acquire, and potentially begin to commercialize product candidates
that may achieve regulatory approval. We may also 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. Our expenses will further increase as we:
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conduct
clinical trials of our lead product candidate, GP2; |
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in-license
or acquire the rights to, and pursue development of, other products, product candidates or technologies; |
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hire
additional clinical, manufacturing, quality control, quality assurance and scientific personnel; |
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seek
marketing approval for any product candidates that successfully complete clinical trials; |
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develop
our outsourced manufacturing and commercial activities and establish sales, marketing and distribution capabilities, if we receive,
or expect to receive, marketing approval for any product candidates; |
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maintain,
expand and protect our intellectual property portfolio; and |
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add
operational, financial and management information systems and personnel. |
We
need significant additional financing to fund our operations and complete the development and, if approved, the commercialization of
our product candidate. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development
programs or commercialization efforts.
We
expect our existing cash as of December 31, 2022 will enable us to fund our operating expenses through and capital expenditure requirements
for at least twelve months from the date of this Annual Report on Form 10-K; however, our existing cash will not be sufficient to complete
development and obtain regulatory approval for our product candidate, and we will need to raise significant additional capital to help
us do so. In addition, our operating plan may change as a result of many factors currently unknown to us, and we may need additional
funds sooner than planned.
We
expect to expend substantial resources for the foreseeable future to continue the clinical development and manufacturing of our product
candidate 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.
The
total cost to complete an interim analysis and file a BLA application for drug approval in the U.S. could exceed $30 million; however,
we believe that we have budget flexibility with respect to the design of the Phase III clinical trial. We believe that we may be able
to alter the cost of our Phase III clinical trial by adjusting the enrollment rate, the number of patients, and/or the number of immunological
assays. While our budget for such Phase III trial may be flexible, our ability to reduce or modify costs may be adversely effected by,
among other things, unexpected or higher costs associated with the trial, time required to complete the trial and other factors that
may be beyond our control. Our budgets and future capital requirements depend on many factors, including:
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the
scope, progress, results and costs of our ongoing and planned development programs for our product candidate, as well as any additional
clinical trials we undertake to obtain data sufficient to seek marketing approval for our product candidate; |
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the
timing of, and the costs involved in, obtaining regulatory approvals for our product candidate if our clinical trials are successful; |
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the
cost of commercialization activities for our product candidate, if our product candidate is approved for sale, including marketing,
sales and distribution costs; |
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the
cost of manufacturing our product candidate for clinical trials in preparation for regulatory approval, including the cost and timing
of process development, manufacturing scale-up and validation activities; |
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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 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 future derivative and securities class action litigation; |
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our
operating expenses; and |
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the
emergence of competing technologies or other adverse market developments. |
Additional
funds may not be available when we need them on terms that are acceptable to us, or at all. We have no committed source of additional
capital. If adequate funds are not available to us on a timely basis, we may not be able to continue as a going concern or we may be
required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for our product candidate
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 candidate.
We
may consider strategic alternatives in order to maximize stockholder value, including financings, strategic alliances, acquisitions or
the possible sale of the Company. We may not be able to identify or consummate any suitable strategic alternatives.
We
may consider all strategic alternatives that may be available to us to maximize stockholder value, including financings, strategic alliances,
acquisitions or the possible sale of the Company. We currently have no agreements or commitments to engage in any specific strategic
transactions, and our exploration of various strategic alternatives may not result in any specific action or transaction. To the extent
that this engagement results in a transaction, our business objectives may change depending upon the nature of the transaction. There
can be no assurance that we will enter into any transaction as a result of the engagement. Furthermore, if we determine to engage in
a strategic transaction, we cannot predict the impact that such strategic transaction might have on our operations or stock price. We
also cannot predict the impact on our stock price if we fail to enter into a transaction.
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our
product candidate 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, collaborations,
strategic alliances and marketing, distribution or licensing arrangements. 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
the exercise or conversion of outstanding derivative securities, the ownership interests of our stockholders will be diluted, and the
terms of such financings may include liquidation or other preferences, anti-dilution rights, conversion and exercise price adjustments
and other provisions that adversely affect the rights of our stockholders, including rights, preferences and privileges that are senior
to those of our holders of common stock in the event of a liquidation. In addition, debt financing, if available, 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 and may require us to grant security interests in our assets, including our intellectual
property. If we raise additional funds through collaborations, strategic alliances, or marketing, distribution or licensing arrangements
with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, product or product candidate
or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings
when needed, we may need to curtail or cease our operations.
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 candidate, 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, GP2, 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 Biologics License Applications, or BLAs, or New Drug Applications, or NDAs, to the FDA and obtain U.S. regulatory
approval for indications for which there is a commercial market; |
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complete
and submit applications to foreign regulatory authorities; |
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obtain
regulatory approval in territories with viable market sizes; |
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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 product, 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
distribution processes for our product candidate; |
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develop
commercial quantities of our product candidate, once approved, at acceptable cost levels; obtain additional funding, if required
to develop and commercialize our product candidate; |
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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; |
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achieve
market acceptance of our product; |
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attract,
hire and retain qualified personnel; and |
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protect
our rights in our intellectual property portfolio. |
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.
The
Tax Cuts and Jobs Act could adversely affect our business and financial condition.
H.R.
1, “An Act to provide for reconciliation pursuant to title II and V of the concurrent resolution on the budget for fiscal year
2018,” informally entitled the Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017, 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 single rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income (except for certain small
businesses), limitation of the deduction for net operating losses carried forward from taxable years beginning after December 31, 2017
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),
providing 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 Tax Act 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 Tax Act.
Our
ability to use net operating losses to offset future taxable income may be subject to limitations.
As
of December 31, 2022, we had federal net operating loss, or NOLs, carryforwards of approximately $14.9 million. Our NOLs generated in
tax years ending on or prior to December 31, 2017 are only permitted to be carried forward for 20 years under applicable U.S. tax laws,
and 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 Tax Act, federal NOLs incurred in tax years ending after December 31, 2017 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 Tax Act, or whether any further regulatory changes may be adopted in the future that could minimize its applicability. In addition,
under Section 382 of the Internal Revenue Code of 1986, as amended, and certain 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 the ownership of its
equity over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes
to offset its post-change income may be limited.
Risks
Related to the Development and Regulatory Approval of Our Product Candidate
Clinical-stage
biopharmaceutical companies with product candidates in clinical development face a wide range of challenging activities which may entail
substantial risk.
We
are a clinical-stage biopharmaceutical company with a product candidate in clinical development. The success of our product candidate
will depend on several factors, including the following:
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designing,
conducting and successfully completing preclinical development activities, including preclinical efficacy and IND-enabling studies,
for our product candidate or product candidates we may, in the future, in-license or acquire; |
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designing,
conducting and completing clinical trials for our product candidate 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 candidate; |
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making
arrangements with third-party manufacturers, receiving regulatory approval of our manufacturing processes and our third-party manufacturers’
facilities from applicable regulatory authorities and ensuring adequate supply of drug product; |
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manufacturing
our product candidate at an acceptable cost; |
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effectively
launching commercial sales of our product candidate, if approved, whether alone or in collaboration with others; |
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achieving
acceptance of our product candidate, if approved, by patients, the medical community and third-party payors; |
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effectively
competing with other therapies; |
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if
our product candidate is approved, obtaining and maintaining coverage and adequate reimbursement by third-party payors, including
government payors, for our product candidate; |
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complying
with all applicable regulatory requirements, including FDA current Good Clinical Practices (“GCP”), current Good Manufacturing
Practices (“cGMP”), and standards, rules and regulations governing promotional and other marketing activities; |
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maintaining
a continued acceptable safety profile of the product during development and following approval; and |
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maintaining
and growing an organization of scientists and business people who can develop and commercialize our product and technology. |
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 candidate, which could materially harm our business.
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 candidate is being studied which could delay or prevent the start of clinical trials for our product candidate.
Identifying
and qualifying patients to participate in clinical trials of our product candidate 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 candidate, and we
may experience delays in our clinical trials if we encounter difficulties in enrollment. If we experience delays in our clinical trials,
the timeline for obtaining regulatory approval of our product candidate will most likely be delayed.
Many
factors may affect our ability to identify, enroll and maintain qualified patients, including the following:
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eligibility
criteria of our ongoing and planned clinical trials with specific characteristics appropriate for inclusion in our clinical trials; |
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design
of the clinical trial; |
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size
and nature of the patient population; |
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patients’
perceptions as to risks and benefits of the product candidate under study and the participation in a clinical trial generally in
relation to other available therapies, including any new drugs that may be approved for the indications we are investigating; |
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the
availability and efficacy of competing therapies and clinical trials; |
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pendency
of other trials underway in the same patient population; |
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ability
of clinical sites to staff sufficiently for the start-up and conduct of our clinical trial; |
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willingness
of physicians to participate in our planned clinical trials; |
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severity
of the disease under investigation; |
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proximity
of patients to clinical sites; |
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patients
who do not complete the trials for personal reasons; and |
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issues
with CROs and/or with other vendors that handle our clinical trials. |
We
may not be able to initiate or continue to support clinical trials of our product candidate 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 candidate may increase and the completion of our trials
may be delayed or our trials could become too expensive to complete.
If
we experience delays in the completion of, or termination of, any clinical trials of our product candidate, the commercial prospects
of our product candidate could be harmed, and our ability to generate product revenue from any of our product candidate 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.
The
results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our existing product candidate
in clinical trials, and any other product candidates that 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.
Despite
the results reported in earlier preclinical studies or clinical trials for our product candidate, we do not know whether the clinical
trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidate
for a particular indication, in any particular jurisdiction. 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 our product candidate may be adversely impacted. Even if we believe that we have adequate data to
support an application for regulatory approval to market our current product candidate or any future product candidates, the FDA or other
regulatory authorities may not agree and may require that we conduct additional clinical trials.
Clinical
drug development involves a lengthy and expensive process with an uncertain outcome, including the risk of a clinical trial being placed
on clinical hold.
Clinical
testing is expensive and can take many years to complete, with the outcome inherently uncertain. Failure can occur at any time during
the clinical trial process. Before obtaining approval from regulatory authorities for the sale of our product candidate, we must conduct
extensive clinical trials to demonstrate the safety and efficacy of our product candidate in humans. Prior to initiating clinical trials,
a sponsor must complete extensive preclinical testing of a product candidate, including, in most cases, preclinical efficacy experiments
as well as IND-enabling toxicology studies. These experiments and studies may be time-consuming and expensive to complete. The necessary
preclinical testing may not be completed successfully for a preclinical product candidate and a potentially promising product candidate
may therefore never be tested in humans. Once it commences, clinical testing is expensive, difficult to design and implement, can take
many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The
outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results
of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying
interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical
studies and clinical trials have nonetheless failed to obtain marketing approval of their products. We may experience numerous unforeseen
events during drug development that could delay or prevent our ability to receive marketing approval or commercialize our product candidate.
In particular, clinical trials of our product candidate may produce inconclusive or negative results. We have limited data regarding
the safety, tolerability and efficacy of GP2 administered in combination with GM-CSF. Clinical trials also require the review and oversight
of an institutional review board (“IRB”). An inability or delay in obtaining IRB 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 IRB review and approval.
As
previously disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2022, the FDA placed our evaluation of
GLSI-100 in certain HER2/neu positive patients and Flamingo-01 on clinical hold prohibiting us from commencing Flamingo-01 until
we provided such manufacturing information. On July 11, 2022, we received a letter from the FDA stating that we have satisfactorily addressed
all clinical hold issues identified and that the clinical hold has been removed and we may proceed with the clinical trial. There can
be no assurance that the FDA will not place future clinical trials of our product candidate on additional clinical holds 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 clinical trial; |
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delay
or failure in reaching agreement on acceptable terms with prospective 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 IRB 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 patients to participate in a clinical trial; |
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delay
or failure in patients completing a clinical trial or returning for post-treatment follow-up; |
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clinical
sites and investigators deviating from clinical trial protocol, failing to conduct the clinical trial in accordance with regulatory
requirements, or dropping out of a clinical trial; |
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inability
to identify and maintain a sufficient number of clinical 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 clinical 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 clinical trial design necessitated by re-evaluation of design assumptions based upon observed data; |
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feedback
from the FDA, the IRB 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 clinical trial; |
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a
decision by the FDA, the IRB, a comparable foreign regulatory authority, or us 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 clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements
to conduct additional clinical trials 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. |
If
we experience delays in the completion or termination of any clinical trial of our product candidate, the approval and commercial prospects
of our product candidate will be harmed, delaying our ability to generate product revenues from such product candidate and our costs
will most likely increase. The required regulatory approvals may also be delayed, thereby jeopardizing our ability to commence product
sales and generate revenues and the period of commercial exclusivity for our product may be decreased. Regulatory approval of our product
candidate may be denied for the same reasons that caused the delay.
Risks
associated with operating in foreign countries could materially adversely affect our product development.
We
may conduct future clinical trials in countries outside of the U.S. 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; more stringent privacy requirements
for data to be supplied to our operations in the U.S., 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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differing
payor reimbursement regimes, governmental payors or patient self-pay systems and price controls; |
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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 U.S.; |
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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. |
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 or termination of clinical trials by the FDA or other comparable foreign regulatory authorities; or an IRB, that approves and,
monitors biomedical research to protect the rights and welfare of human patients. As a result of safety or toxicity issues that we may
experience in our clinical trials, or negative or inconclusive results from the clinical trials of others for drug candidates similar
to our own, we may not receive approval to market our current product candidate or any product candidates we may pursue, 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 current or any future product candidates for any or
all targeted indications. The drug-related side effects could also affect patient recruitment or the ability of enrolled patients 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 our product candidate 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 product; |
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we
may be required to conduct post-marketing clinical trials; |
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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 patients; and |
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our
reputation may suffer. |
Any
of these events could prevent us from achieving or maintaining market acceptance of our product candidate, if approved.
Our
product development program may not uncover all possible adverse events that patients who take our product candidate may experience.
The number of patients exposed to our product candidate 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 patients and limited duration
of exposure, we cannot be fully assured that rare and severe side effects of our product candidate will be uncovered. Such rare and severe
side effects may only be uncovered with a significantly larger number of patients exposed to our product candidate. If such safety problems
occur or are identified after our product candidate 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.
Failure
to successfully validate and develop a companion diagnostic for our product candidate could harm our drug development strategy and operational
results.
Our
product development program is dependent on the validation and development of an in vitro companion diagnostic by us or by third-party
collaborators. Companion diagnostics are developed in conjunction with clinical programs for the associated product and are subject to
regulation as medical devices. The approval of a companion diagnostic as part of the product labeling may limit the use of the product
candidate to only those patients who express the specific genetic alteration it was developed to detect.
Companion
diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as medical devices and require separate
clearance or approval prior to their commercialization. To date, the FDA has required premarket approval of all companion diagnostics
for cancer therapies, either at the time of initial drug approval, or as a post-marketing commitment. We, and our third-party collaborators,
may encounter difficulties in developing and obtaining approval for these companion diagnostics. Our third-party collaborators may de-prioritize,
abandon or fail to execute against our development projects. Any delay or failure by us or third-party collaborators to develop or obtain
regulatory approval of a companion diagnostic could delay or prevent approval of our related product candidates.
Our
future success is dependent on the regulatory approval of our product candidate.
Our
business is dependent on our ability to obtain regulatory approval for our product candidate in a timely manner. We cannot commercialize
our product candidate in the U.S. without first obtaining regulatory approval for the product from the FDA. Similarly, we cannot commercialize
our product candidate outside of the U.S. without obtaining regulatory approval from comparable foreign regulatory authorities. Before
obtaining regulatory approvals for the commercial sale of our product candidate for a target indication, we must demonstrate with substantial
evidence gathered in preclinical studies and clinical 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 candidate’s clinical development and may vary among jurisdictions.
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 clinical trial or risk management requirements. Also, any regulatory approval of our current
product candidate or any future product candidates we may pursue, once obtained, may be withdrawn.
Our
current product candidate and future product candidates could fail to receive regulatory approval from the FDA.
We
have not obtained regulatory approval for our product candidate and it is possible that our existing product candidate or any future
product candidates will not obtain regulatory approval, for many reasons, including:
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disagreement
with the regulatory authorities regarding the scope, 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 candidate’s clinical and other benefits outweigh its 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 candidate 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. |
The
FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support
approval or additional clinical trials, 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 our current product candidate and any future
product candidates we may pursue for fewer or more limited indications than we request (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.
If
we are unable to obtain regulatory approval for our product candidate 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.
Failure
to obtain regulatory approval in international jurisdictions would prevent our product candidate from being marketed abroad.
In
addition to regulations in the U.S., to market and sell our product candidate in the European Union, United Kingdom, many Asian countries
and other jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval
by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority
outside the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. The regulatory
approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval as well as risks attributable
to the satisfaction of local regulations in foreign jurisdictions. 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. We may not be able
to obtain approvals from regulatory authorities outside the U.S. on a timely basis, if at all. Clinical trials accepted in one country
may not be accepted by regulatory authorities in other countries. In addition, many countries outside the U.S. 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 file for regulatory approvals and may not receive necessary approvals to commercialize our product in any market.
If we are unable to obtain approval of any of our current product candidate or any future product candidates we may pursue by regulatory
authorities in the European Union, United Kingdom, 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 candidate receives regulatory approval, it may still face future development and regulatory difficulties.
Even
if we obtain regulatory approval for our product candidate, that approval 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 CMOs and CROs for any post-approval clinical trials that we may conduct. 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 our product candidate,
they may require labeling changes or establishment of a risk evaluation and mitigation strategy, impose significant restrictions on such
product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval clinical trials 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, GCP, 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 candidate or the manufacturing facilities
for our product candidate 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. |
The
occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our product and generate revenues.
Advertising
and promotion of any product candidate that obtains approval in the U.S. is heavily scrutinized by the FDA, the Department of Justice,
the Office of Inspector General of Health and Human Services, state attorneys general, members of Congress and the public. 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. Additionally, advertising and promotion of any product candidate that obtains approval outside of the
U.S. is heavily scrutinized by comparable foreign regulatory authorities. Violations, including actual or alleged promotion of our product
for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions
by the FDA, as well as prosecution under the federal False Claims Act. Any actual or alleged failure to comply with labeling and promotion
requirements may have a negative impact on our business.
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 purchase orders with various third-party manufacturing facilities for production of our product candidate 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 candidate, and our preclinical and
clinical testing programs may not be able to move forward and our entire business plan could fail.
The
active pharmaceutical ingredient for our product candidate is currently sourced from Polypeptide Laboratories located in San Diego, California.
We believe this single source is currently capable of supplying all anticipated needs of our proposed clinical trials, as well as initial
commercial introduction. We will be developing a source or sources for drug product manufacturing. If we are able to commercialize our
product 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 candidate, but we cannot assure that such secondary suppliers will be found on terms acceptable to us, or
at all.
We
are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our product
candidate.
We
and our CMOs will need to conduct significant development work for our product candidate for each target indication for studies, clinical
trials and commercial launch readiness. Developing commercially viable manufacturing processes is a difficult, expensive 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 candidate will be made could be adversely affected by
earthquakes and other natural disasters, medical pandemics, equipment failures, labor shortages, power failures, and numerous other factors.
Additionally,
the process of manufacturing our product candidate is complex, highly regulated and subject to several risks, including but not limited
to:
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product
loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error; |
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reduced
production yields, product defects, and other supply disruptions due to deviations, even minor, from normal manufacturing and distribution
processes; |
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unexpected
product defects; and |
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microbial,
viral, or other contaminations in our product candidate or in the manufacturing facilities in which our product candidate is made,
which may result in the closure of such manufacturing facilities for an extended period of time to allow for the investigation and
remediation of the contamination. |
Any
adverse developments affecting manufacturing operations for our product candidate 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 candidate. 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 candidate could damage our reputation and the reputation of our product 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 GP2, GM-CSF is also administered and its availability is dependent upon a third-party manufacturer, which may
or may not reliably provide GM-CSF, thus jeopardizing the completion of the trials.
GP2
is administered in combination with GM-CSF which is available in both liquid and lyophilized forms exclusively from one manufacturer.
We will continue to be dependent on such manufacturer for our supply of GM-CSF in combination with GP2 in the ongoing GP2 trials and
upon the potential commercialization of GP2. 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 could
have a material adverse effect on our operations.
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.
Although
we do not currently maintain insurance coverage against damage to our property and to cover business interruption and research and development
restoration expenses, any insurance coverage we obtain in the future 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 candidate if there were a catastrophic
event or failure of our current manufacturing facility or processes.
Risks
Related to Our Dependence on Third Parties and Our License Agreements
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.
Our
internal capacity for clinical trial execution and management is limited and therefore we rely heavily on third parties. 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 along with their clinical and clinical operations teams may manage
the conduct of any future clinical trials for GP2 as well as perform the analysis, publication and presentation of data and results related
to this program.
We
plan to rely on CROs and other third-party vendors for all currently contemplated clinical trials. We rely on these parties for the execution
of our preclinical studies and clinical trials, including the proper and timely conduct of our clinical trials, and we control only some
aspects of their activities. 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.
While
we may have agreements governing the commitments of our third-party vendor services, we will have limited influence over their actual
performance. Nevertheless, we will be 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 will not relieve us of our regulatory responsibilities.
If
our Company, or any of our partners or CROs, fail to comply with applicable regulations and good clinical practices, 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 also would violate federal requirements in the U.S. and could result in other penalties,
which would delay the regulatory approval process and result in adverse publicity.
Our
CROs, third-party vendors and contractors are not and will not be 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.
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. 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, once engaged, we intend to
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.
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, and if we fail to meet our obligations under our license agreements,
we may lose the ability to develop our product candidate.
We
currently are dependent on a license from HJF for technologies relating to our product candidate. The license imposes, 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 which could have a material adverse effect on our business.
Our
operations or those of the third parties upon whom we depend might be affected by the occurrence of a natural disaster, pandemic, war
or other catastrophic event.
We
depend on our employees, consultants, CMOs, CROs, as well as regulatory agencies and other parties, for the continued operation of our
business. Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attacks,
pandemics, hurricanes, fires, floods and ice and snowstorms, could result in significant disruptions to our research and development,
preclinical studies, clinical trials, and, ultimately, commercialization of our products. Long-term disruptions in the infrastructure
caused by events, such as natural disasters, the outbreak of war (including expansion of the current armed conflict between Russia and
Ukraine), the escalation of hostilities and acts of terrorism or other “acts of God,” particularly involving cities in which
we have offices, manufacturing or clinical trial sites, could adversely affect our businesses. Although we carry business interruption
insurance policies and typically have provisions in our contracts that protect us in certain events, our coverage might not include or
be adequate to compensate us for all losses that may occur. Any natural disaster or catastrophic event affecting us, our CMOs, our CROs,
regulatory agencies or other parties with which we are engaged could have a material adverse effect on our operations and financial performance.
We
may not realize the benefits of our 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 or current product candidate or any future product candidates and programs because our research and development pipeline
may be insufficient, our current product candidate and future 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 such 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 current product candidate or future product candidates could also delay
the development and commercialization of such product candidates and reduce their competitiveness even if they reach the market.
Our
business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental,
health and safety 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 any future property and casualty, and general liability insurance policies may exclude coverage
for damages and fines arising from biological or hazardous waste exposure or contamination.
We
may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize our
product candidate.
We
expect to depend on collaborators, partners, licensees, CROs and other third parties to formulate our product candidate, to manufacture
our product candidate, and to conduct clinical trials for our product candidate. 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 candidate. 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 candidate. We cannot necessarily control the amount or timing of resources that our contract partners will devote to our
product candidate, 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
their obligations to us.
In
addition, we may receive notices from third parties from time to time alleging that our technology or product candidate infringes upon
the intellectual property rights of those third parties. Any assertion by third parties that our activities or product candidate infringes
upon the intellectual property rights of third parties may adversely affect our ability to secure strategic partners or licensees for
our technology or product candidate or our ability to secure or maintain manufacturers for our compounds.
Risks
Related to Our Intellectual Property
We
rely on an exclusive license granted to us by HJF with respect to GP2, and if HJF does not adequately defend such license, our business
may be harmed.
We
have been granted an exclusive license to GP2, our product candidate, from HJF. The GP2 patent rights were assigned to HJF by certain
third parties including the Uniformed Services University of the Health Sciences. We rely on HJF to maintain the patents already issued
with respect to GP2, to continue to pursue patent applications pending in certain countries with respect to GP2, and otherwise protect
the intellectual property covered by our exclusive license agreement. We have limited control over the activities of HJF or over any
other intellectual property that may be related to GP2. For example, we cannot be certain that activities by HJF have been or will be
conducted in compliance with applicable laws and regulations and/or any agreements between HJF and the third party assignors. We have
no control or input over whether, and in what manner, HJF may enforce or defend the patents against a third-party. HJF may enforce or
defend the patent less vigorously than if we had enforced or defended the patents ourselves. Further, HJF may not necessarily seek enforcement
in scenarios in which we would feel that enforcement was in our best interests. For example, HJF may not enforce the patents against
a competitor of ours who is not a direct competitor of HJF. If our in-licensed intellectual property is found to be invalid or unenforceable,
then HJF may not be able to enforce the patents against a competitor of ours. If we fail to meet our obligations under our exclusive
license agreement with HJF, then HJF may terminate such agreement. Although we may choose to terminate our license agreement with HJF,
doing so would allow a third party to seek and obtain an exclusive license to GP2. If a third party obtains an exclusive license to intellectual
property with respect to GP2, then the third party may seek to enforce the intellectual property against us which may have a material
adverse effect on our business.
It
is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If our patent position
does not adequately protect our product candidate, others could compete against us more directly, which would harm our business, possibly
materially.
Our
commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current product
candidate and future product candidates, the processes used to manufacture them and the methods for using them, as well as successfully
defending these patents against third-party challenges. As of the date of this Annual Report on Form 10-K, we only have licensed rights
from HJF to certain issued patents as well as patent applications which are currently pending in certain countries with respect to GP2.
Our ability to stop third parties from making, using, selling, offering to sell or importing our product candidate is dependent upon
the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.
The
patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical
patents has emerged to date in the U.S. or in foreign jurisdictions outside of the U.S. Changes in either the patent laws or interpretations
of patent laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the
breadth of claims that may be enforced in the patents that may be issued from the applications we currently or may in the future own
or license from third parties. Further, if any patents we obtain or license are deemed invalid and unenforceable, our ability to commercialize
or license our technology could be adversely affected.
Others
have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical
or competitive to ours or important to our business. We cannot be certain that any patent application owned by a third party will not
have priority over patent applications filed or in-licensed by us, or that we or our licensors will not be involved in interference,
opposition, reexamination, review, reissue, post grant review or invalidity proceedings before U.S. or non-U.S. patent offices.
The
degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep our competitive advantage. For example:
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others
may be able to make compounds that are similar to our product candidate, but that are not covered by the claims of our licensed patents; |
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HJF
might not have been the first to make the inventions covered by its pending patent applications; |
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we
or HJF might not have been the first to file patent applications for these inventions; |
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HJF’s
pending patent applications may not result in issued patents; |
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the
claims of HJF’s issued patents or patent applications when issued may not cover our product or product candidate; |
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any
patents that we obtain from licensing or otherwise may not provide us with any competitive advantages; |
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any
granted patents that we rely upon may be held invalid or unenforceable as a result of legal challenges by third parties; and |
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the
patents of others may have an adverse effect on our business. |
If
we fail to comply with our obligations in the agreements under which we may license intellectual property rights from third parties or
otherwise experience disruptions to our business relationships with our licensors, we could lose rights that are important to our business.
We
may be required to enter into intellectual property license agreements that are important to our business. These license agreements may
impose various diligence, milestone payment, royalty and other obligations on us. For example, we may enter into exclusive license agreements
with various universities and research institutions, we may be required to use commercially reasonable efforts to engage in various development
and commercialization activities with respect to licensed products, and may need to satisfy specified milestone and royalty payment obligations.
If we fail to comply with any obligations under our agreements with any of these licensors, we may be subject to termination of the license
agreement in whole or in part; increased financial obligations to our licensors or loss of exclusivity in a particular field or territory,
in which case our ability to develop or commercialize products covered by the license agreement will be impaired.
In
addition, disputes may arise regarding intellectual property subject to a license agreement, including:
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the
scope of rights granted under the license agreement and other interpretation-related issues; |
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the
extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing
agreement; |
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our
diligence obligations under the license agreement and what activities satisfy those obligations; |
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if
a third-party expresses interest in an area under a license that we are not pursuing, under the terms of certain of our license agreements,
we may be required to sublicense rights in that area to a third party, and that sublicense could harm our business; and |
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the
ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us. |
If
disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize our product candidate.
We
may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidate. We may fail
to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further
develop and commercialize our product candidate, which could harm our business significantly.
We
may incur substantial costs as a result of litigation or other proceedings relating to patents and other intellectual property rights.
If
we choose to commence a proceeding or litigation to prevent another party from infringing HJF’s patents, that party will have the
right to ask the examiner or court to rule that such patents are invalid or should not be enforced against them. There is a risk that
the examiner or court will decide that HJF’s patents are not valid and that HJF does not have the right to stop the other party
from using the related inventions. There is also the risk that, even if the validity of such patents is upheld, the examiner or court
will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents.
In addition, the U.S. Supreme Court has recently modified some tests used by the U.S. Patent and Trademark Office (the “USPTO”)
in granting patents over the past 20 years, which may decrease the likelihood that we or HJF will be able to obtain patents and increase
the likelihood of challenge to any patents we obtain or license. Any proceedings or litigation to enforce our intellectual property rights
or defend ourselves against claims of infringement of third-party intellectual property rights could be costly and divert the attention
of managerial and scientific personnel, regardless of whether such litigation is ultimately resolved in our favor. We may not have sufficient
resources to bring these actions to a successful conclusion. Moreover, if we are unable to successfully defend against claims that we
have infringed the intellectual property rights of others, we may be prevented from using certain intellectual property and may be liable
for damages, which in turn could materially adversely affect our business, financial condition or results of operations.
We
may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from
commercializing or increase the costs of commercializing our product candidate.
Our
success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee
that our product candidate, or manufacture or use of our product candidate, will not infringe third-party patents. Furthermore, a third
party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging
in our normal operations and activities, including making or selling our product candidate. These lawsuits are costly and could affect
our results of operations and divert the attention of managerial and scientific personnel. Some of these third parties may be better
capitalized and have more resources than us. There is a risk that a court would decide that we are infringing the third party’s
patents and would order us to stop the activities covered by the patents. In that event, we may not have a viable way around the patent
and may need to halt commercialization of our product candidate. In addition, there is a risk that a court will order us to pay the other
party damages for having violated the other party’s patents. In addition, we may be obligated to indemnify our licensors and collaborators
against certain intellectual property infringement claims brought by third parties, which could require us to expend additional resources.
The pharmaceutical and biotechnology industries have produced a proliferation of patents, and it is not always 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.
If
we are sued for patent infringement, we would need to demonstrate that our product candidate or 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 invalidity is difficult.
For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity
enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and divert management’s
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, which may not be available, 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 invalid, we may incur substantial monetary damages, encounter
significant delays in bringing our product candidate to market and be precluded from manufacturing or selling our product candidate.
We
cannot be certain that others have not filed patent applications for technology covered by HJF’s pending applications, or that
HJF the first to invent the technology, because:
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some
patent applications in the U.S. may be maintained in secrecy until the patents are issued; |
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patent
applications in the U.S. are typically not published until 18 months after the priority date; and |
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publications
in the scientific literature often lag behind actual discoveries. |
Our
competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application
may have priority over HJF’s patent applications, which could require us to obtain rights to issued patents covering such technologies.
If another party has filed U.S. patent applications on inventions similar to HJF that claims priority to any applications filed prior
to the priority dates of HJF’s applications, HJF may have to participate in an interference proceeding declared by the USPTO to
determine priority of invention in the U.S. It is possible that such efforts would be unsuccessful if, unbeknownst to HJF, the other
party had independently arrived at the same or similar inventions prior to HFJ’s inventions, resulting in a loss of HFJ’s
U.S. patent position with respect to such inventions which could in turn have a material adverse effect on our operations. Other countries
have similar laws that permit secrecy of patent applications, and may be entitled to priority over our applications in such jurisdictions.
Some
of our competitors may be able to sustain the costs of complex patent litigation more effectively than us or the third parties from whom
we license intellectual property because they have substantially greater resources. In addition, any uncertainties resulting from the
initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue
our operations.
If
we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and
product could be significantly diminished.
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. Furthermore, any license agreements we enter into in the future may require us
to notify, and in some cases license back to the licensor, certain additional proprietary information or intellectual property that we
developed using the rights licensed to us under these agreements. Any such licenses back to the licensor could allow our licensors to
use that proprietary information or intellectual property in a manner that could harm our business. In addition, others may independently
discover our trade secrets and proprietary information. For example, the FDA, as part of its transparency initiative, is currently considering
whether to make additional information publicly available on a routine basis, including information that we may consider to be trade
secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change
in the future, if at all. 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
may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged trade secrets.
As
is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants
and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims
that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending
any such claims, in addition to paying monetary damages, we could lose valuable intellectual property rights or personnel, which could
adversely impact our business. Even if we are successful in defending against these claims, litigation could result in substantial costs
and be a distraction to management.
Our
intellectual property may not be sufficient to protect our product candidate from competition, which may negatively affect our business
as well as limit our partnership or acquisition appeal.
We
may be subject to competition despite the existence of intellectual property we license or own. We can give no assurances that our intellectual
property claims will be sufficient to prevent third parties from designing around patents we own or license and developing and commercializing
competitive products. The existence of competitive products that avoid our intellectual property could materially adversely affect our
operating results and financial condition. Furthermore, limitations, or perceived limitations, in our intellectual property may limit
the interest of third parties to partner, collaborate or otherwise transact with us, if third parties perceive a higher than acceptable
risk to commercialization of our product candidate or future product candidates.
We
may elect to sue a third party, or otherwise make a claim, alleging infringement or other violation of patents, trademarks, trade dress,
copyrights, trade secrets, domain names or other intellectual property rights that we either own or license from a third party. If we
do not prevail in enforcing our intellectual property rights in this type of litigation, we may be subject to:
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paying
monetary damages related to the legal expenses of the third party; |
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facing
additional competition that may have a significant adverse effect on our product pricing, market share, business operations, financial
condition, and the commercial viability of our product; and |
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restructuring
our company or delaying or terminating select business opportunities, including, but not limited to, research and development, clinical
trial, and commercialization activities, due to a potential deterioration of our financial condition or market competitiveness. |
A
third party may also challenge the validity, enforceability or scope of the intellectual property rights that we license or own; and,
the result of these challenges may narrow the scope or claims of or invalidate patents that are integral to our product candidate in
the future. There can be no assurance that we will be able to successfully defend patents we own or license in an action against third
parties due to the unpredictability of litigation and the high costs associated with intellectual property litigation, amongst other
factors.
Intellectual
property rights and enforcement may be less extensive in jurisdictions outside of the U.S.; thus, we may not be able to protect our intellectual
property and third parties may be able to market competitive products that may use some or all of our intellectual property.
Changes
to patent law, including the Leahy-Smith America Invests Act, AIA or Leahy-Smith Act, of 2011 and the Patent Reform Act of 2009 and other
future article of legislation, may substantially change the regulations and procedures surrounding patent applications, issuance of patents,
and prosecution of patents. We can give no assurances that the patents of our licensor can be defended or will protect us against future
intellectual property challenges, particularly as they pertain to changes in patent law and future patent law interpretations.
In
addition, enforcing and maintaining our intellectual property protection depends on compliance with various procedural, document submission,
fee payment and other requirements imposed by the USPTO, courts and foreign government patent agencies, and HJF’s patent protection
could be reduced or eliminated for non-compliance with these requirements which may have a material adverse effect on our business.
Risks
Related to Commercialization of Our Current Product Candidate and Future Product Candidates
Our
commercial success depends upon attaining significant market acceptance of our current product candidate and future product candidates,
if approved, among physicians, patients, healthcare payors and cancer treatment centers.
Even
if we obtain regulatory approval for our current product candidate or any future product candidates, the products 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 product as well as competitive products; |
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the
development of manufacturing and distribution processes for commercial scale manufacturing for our current product candidate and
any future product candidates; |
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the
cost of treatment in relation to alternative treatments; |
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the
availability of coverage and adequate reimbursement from 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. |
If
our current product and any 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 product candidate or any future product candidates, the products may not receive coverage
and adequate reimbursement from third-party payors in the U.S. 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
such product and related treatments will be available from third-party payors, including government health administration authorities,
private health insurers and other organizations.
Third-party
payors determine which medications they will cover and establish reimbursement levels. A primary trend in the healthcare industry is
cost containment. 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 and value in specific patient populations before covering
our product for those patients. We cannot be sure that coverage and adequate reimbursement will be available for any product that we
commercialize and, if coverage 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 third-party 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 U.S. No uniform policy
for coverage and reimbursement exists in the U.S., and coverage and reimbursement can differ significantly from payor to payor. Third-party
payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their
own methods and approval process apart from Medicare determinations. Our inability to promptly obtain coverage and profitable reimbursement
rates from both government-funded and private payors for any approved product that we develop could have a material adverse effect on
our operating results, ability to raise capital needed to commercialize our product and overall financial condition.
Healthcare
legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.
Third-party
payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling
healthcare costs. In both the U.S. and certain international jurisdictions, there have been a number of legislative and regulatory changes
to the health care system that could impact our ability to sell our product profitably. In particular, in 2010, the Affordable Care Act
(“ACA”) was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars,
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that
are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid
Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed
care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives
to programs that increase the federal government’s comparative effectiveness research. Since its enactment, there have been judicial
and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the current U.S. administration to repeal or
repeal and replace certain aspects of the ACA. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or
the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because
it was repealed as a part of the Tax Act, the remaining provisions of the ACA are invalid as well. While the Texas District Court Judge,
as well as the Trump Administration and CMS, have stated that the ruling will have no immediate effect, it is unclear how this decision,
subsequent appeals and other efforts to repeal and replace the ACA will impact the ACA. Until there is more certainty concerning the
future of the ACA, it will be difficult to predict its full impact and influence on our business.
In
addition, other legislative changes have been proposed and adopted in the U.S. since the ACA was enacted. In August 2011, the Budget
Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction,
tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach
required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate
reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and will remain in effect through
2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several
providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years.
There
have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at
containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts
of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs
of healthcare and/or impose price controls may adversely affect:
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the
demand for our product candidate, if we obtain regulatory approval; |
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our
ability to receive or set a price that we believe is fair for our product; |
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our
ability to generate revenue and achieve or maintain profitability; |
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the
level of taxes that we are required to pay; and |
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the
availability of capital. |
We
expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement and new payment methodologies. This could
lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from Medicare or other
government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being
able to generate sufficient revenue, attain profitability or commercialize our product candidate, if approved.
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 candidate 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 product is unavailable or limited in scope or amount, or if pricing is set
at unsatisfactory levels, our business could be adversely affected.
Coverage
and reimbursement may be limited or unavailable in certain market segments for our product candidate, which could make it difficult for
us to sell our product candidates, if licensed, profitably.
Successful
commercialization of our product candidate will depend in part on the extent to which reimbursement for those drug products 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, decide which drug products they will pay for and establish
reimbursement levels. The availability and extent of reimbursement by governmental and private payors is essential for most patients
to be able to afford a drug product. Sales of drug products depend substantially, both domestically and abroad, on the extent to which
the costs of drugs products are paid for by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations,
or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. Significant
uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. Any
product candidate for which we seek regulatory approval and reimbursement will need to meet or surpass our target product profile to
be deemed a viable alternative to currently approved therapies.
Third-party
payors decide which drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend
upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:
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covered benefit under its health plan; |
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safe,
effective and medically necessary; |
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appropriate
for the specific patient; |
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cost-effective;
and |
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neither
experimental nor investigational. |
Obtaining
coverage and reimbursement of a product from a government or other third-party payor is a time-consuming and costly process that could
require us to provide the payor with supporting scientific, clinical and cost-effectiveness data for the use of our products, if licensed.
In the U.S., the principal decisions about reimbursement for new drug products are typically made by the Centers for Medicare and Medicaid
Services, or CMS, an agency within the U.S. Department of Health and Human Services, or HHS. CMS decides whether and to what extent a
new drug product will be covered and reimbursed under Medicare, and private payors tend to follow CMS to a substantial degree. However,
no uniform policy of coverage and reimbursement for drug products exists among third-party payors and coverage and reimbursement levels
for drug products can differ significantly from payor to payor. Further, one payor’s determination to provide coverage for a product
does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available
to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
Even
if we obtain coverage for a given product, if the resulting reimbursement rates are insufficient, hospitals may not approve our product
for use in their facility or third-party payors may require co-payments that patients find unacceptably high. Patients are unlikely to
use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our
product candidates. Separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering
physician may be reimbursed only for providing the treatment or procedure in which our product is used. Further, from time to time, CMS
revises the reimbursement systems used to reimburse health care providers, including the Medicare Physician Fee Schedule and Outpatient
Prospective Payment System, which may result in reduced Medicare payments. In some cases, private third-party payors rely on all or portions
of Medicare payment systems to determine payment rates. Changes to government healthcare programs that reduce payments under these programs
may negatively impact payments from private third-party payors, and reduce the willingness of physicians to use our product candidates.
The
marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if government and other
third-party payors fail to provide coverage and adequate reimbursement. We expect downward pressure on pharmaceutical pricing to continue.
Further, coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status
is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates
may be implemented in the future.
We
expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to
competition.
The
Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of the Patient Protection and Affordable Care Act,
as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, to establish an abbreviated pathway for the
approval of biosimilar and interchangeable biological products. The 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 its similarity
to a licensed biologic. Under the BPCIA, an application for a biosimilar product cannot be licensed by the FDA until 12 years after the
reference product was licensed under a BLA. The law is complex and is still being interpreted and implemented by the FDA.
We
believe that any of the product candidates we develop that is licensed in the U.S. as a biological product under a BLA should qualify
for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action
or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially
creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once licensed,
will be substituted for any one of the reference products 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.
Risks
Related to Healthcare Compliance Regulations
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. If we or they are unable to comply with these provisions, 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.
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 current and future arrangements with healthcare providers, healthcare entities, 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 research, develop and will market, sell and distribute our
product. 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 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 which prohibits, among other things, individuals and entities 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, including the federal False Claims Act that can be enforced through civil whistleblower or
qui tam actions, and civil monetary penalty laws, prohibit individuals or entities from 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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the
federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which 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, as amended by the Health Information Technology for Economic and
Clinical Health Act of 2009 (“HITECH”) which imposes obligations, including mandatory contractual terms, with respect
to safeguarding the privacy, security and transmission of individually identifiable health information on entities subject to the
law, such as certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, and their respective
business associates that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable
health information; |
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the
federal physician sunshine requirements under the ACA which requires certain manufacturers of drugs, devices, biologics and medical
supplies, with certain exceptions, 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, which 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 which require pharmaceutical companies to comply with the pharmaceutical industry’s 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, marketing expenditures
or pricing information; and certain state and local laws which require the registration of pharmaceutical sales representatives;
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. |
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, disgorgement, exclusion from government funded healthcare
programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, 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 civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion
from government funded healthcare programs, such as Medicare and Medicaid, and integrity oversight and reporting obligations.
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 product candidate 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 patients enrolled in our clinical trials, patients, healthcare providers or others using, administering
or selling our product. If we cannot successfully defend ourselves against claims that our product candidate or product 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 clinical 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 clinical trial patients; |
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loss
of revenue; |
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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. |
Prior
to engaging in future clinical trials, we intend to obtain 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; however, we may be unable
to obtain such coverage at a reasonable cost, if at all. If we are able to obtain product liability insurance, 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 and such insurance
may not be adequate to cover all liabilities that we may incur. Furthermore, we intend to expand our insurance coverage for products
to include the sale of commercial products if we obtain regulatory approval for our product candidate 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.
Laws
and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling
certain products outside of the U.S. and require us to develop and implement costly compliance programs.
If
we expand our operations outside of the U.S., we must dedicate additional resources to comply with numerous laws and regulations in each
jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from
paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party
or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in
obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting
provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Compliance
with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA
presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government,
and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical
trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
Various
laws, regulations and Executive Orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S.
nationals, of information classified for national security purposes, as well as certain products and technical data relating to those
products. If we expand our presence outside of the U.S., it will require us to dedicate additional resources to comply with these laws,
and these laws may preclude us from developing, manufacturing, marketing or selling certain products and product candidates outside of
the U.S., which could limit our growth potential and increase our development costs.
The
failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension
or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations
of the FCPA’s accounting provisions.
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 candidate. 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 product candidate, 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 candidate could allow our competitors to bring products to market before
we do and impair our ability to commercialize our product candidate. 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 U.S. 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 or may introduce products to market earlier than our product or
on a more cost-effective basis. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel
as well as in acquiring technologies complementary to our technology. We 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 our product candidate could result in our having
limited prospects for establishing market share or generating revenue.
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 we do, and as a result may have a competitive advantage over us. 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
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 potentially 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 product candidate. 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 candidate obsolete or noncompetitive
before we can recover the expenses of development and commercialization.
Our
business may be adversely affected by the ongoing coronavirus pandemic.
The
outbreak of the novel coronavirus (COVID-19) has evolved into a global pandemic. The coronavirus has spread to many regions of the world.
The extent to which the coronavirus impacts our business and operating results will depend on future developments that are highly uncertain
and cannot be accurately predicted, including new information that may emerge concerning the coronavirus and the actions to contain the
coronavirus or treat its impact, among others.
As
a result of the continuing spread of the coronavirus, our business operations could be delayed or interrupted. For instance, our clinical
trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of
clinical trial materials, clinical trial monitoring and data analysis may be paused or delayed due to changes in hospital or university
policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related
to the pandemic. If the coronavirus continues to spread, some participants and clinical investigators may not be able to comply with
clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant
movement, affect sponsor access to clinical trial sites, or interrupt healthcare services, and we may be unable to conduct our clinical
trials. Further, if the spread of the coronavirus pandemic continues and our operations are adversely impacted, we risk a delay, default
and/or nonperformance under existing agreements which may increase our costs. These cost increases may not be fully recoverable or adequately
covered by insurance.
Infections
and deaths related to the pandemic may disrupt the healthcare and healthcare regulatory systems in the U.S.. Such disruptions could divert
healthcare resources away from, or materially delay FDA review and/or approval with respect to, our clinical trials. It is unknown how
long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory
review resulting from such disruptions could materially affect the development and study of our product candidates.
We
currently utilize third parties to, among other things, manufacture raw materials. If any third-party parties in the supply chain for
materials used in the production of our product candidates are adversely impacted by restrictions resulting from the coronavirus outbreak,
our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials and research and
development operations.
As
a result of the shelter-in-place order and other mandated local travel restrictions, our employees conducting research and development
or manufacturing activities may not be able to access their laboratory or manufacturing space which may result in our core activities
being significantly limited or curtailed, possibly for an extended period of time.
The
spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into
place by businesses and governments, may have a material economic effect on our business. While the potential economic impact brought
by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further,
significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms.
In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially
and adversely affect our business and the value of our common stock.
The
ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know
the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the
global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the
situation closely.
Data
collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.
We
are subject to stringent privacy and data protection requirements and these requirements may become more complex as we grow our business
and begin to operate in other jurisdictions. For example, the collection, use, storage, disclosure, transfer, or other processing of
personal data, including health-related information, regarding individuals in the European Economic Area, or EEA, is governed by the
European General Data Protection Regulation, or the GDPR, which became effective on May 25, 2018. The GDPR applies to any business, regardless
of its location, that provides goods or services to residents in the EU or monitors the behavior of individuals within the European Union.
The GDPR is wide ranging in scope and imposes stringent operational requirements for processors and controllers of personal data, including,
for example, special protections for “sensitive information” which includes health and genetic information, expanded disclosures
to individuals about how their personal data is to be used, limitations on retention of information, increased requirements pertaining
to health data and pseudonymized (i.e., key-coded) data, implementing safeguards to protect the security and confidentiality of
personal data, mandatory data breach notification requirements and higher standards for controllers to demonstrate that they have obtained
valid consent for certain data processing activities. The GDPR grants individuals the opportunity to object to the processing of their
personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with
an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, the GDPR
imposes strict rules on the transfer of personal data out of the European Union to the U.S. and other jurisdictions that have not been
deemed to offer “adequate” privacy protections.
In
addition to the requirement of the GDPR, European Union Member States may make their own further laws and regulations in relation to
the processing of genetic, biometric or health data, which could result in differences between Member States, limit our ability to use
and share personal data or could cause our costs to increase, and harm our business and financial condition. Should we commence clinical
trial activity within the member states of the European Union, such activity will be regulated by the GDPR as well as applicable member
state laws. In addition, we are subject to evolving and strict rules on the transfer of personal data out of the European Union to the
U.S.. For example, evolution of laws governing the cross-border transfer of data, such as the invalidation of the EU–U.S. Privacy
Shield, creates additional uncertainty around the legality and mechanics of such transfers. Compliance with the GDPR will be a rigorous
and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those
efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with any future
European activities. We could be adversely affected if we fail to comply fully with all of these requirements. Failure to comply with
European Union data protection laws may result in fines (for example, of up to €20,000,000 or up to 4% of the total worldwide annual
turnover of the preceding financial year (whichever is higher) under the GDPR) and other administrative penalties, which may be onerous
and adversely affect our business, financial condition, results of operations and prospects.
In
addition, further to the United Kingdom’s (UK) exit from the EU on January 31, 2020, the GDPR ceased to apply in the UK at the
end of the transition period on December 31, 2020. However, as of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018
incorporated the GDPR (as it existed on December 31, 2020 but subject to certain UK specific amendments) into UK law (referred to as
the ‘UK GDPR’). The UK GDPR and the UK Data Protection Act 2018 set out the UK’s data protection regime, which is independent
from but aligned to the EU’s data protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to
£17.5 million or 4% of worldwide revenue, whichever is higher. Although the UK is regarded as a third country under the EU’s
GDPR, the European Commission has now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore,
transfers of personal data originating in the EU to the UK remain unrestricted. Like the EU GDPR, the UK GDPR restricts personal data
transfers outside the UK to countries not regarded by the UK as providing adequate protection. The UK government has confirmed that personal
data transfers from the UK to the EEA remain free flowing.
This
lack of clarity on future UK laws and regulations and their interaction with EU laws and regulations could add legal risk, uncertainty,
complexity and cost to our handling of EU personal information and our privacy and data security compliance programs. It is possible
that over time the UK Data Protection Act could become less aligned with the EU General Data Protection Regulation, or GDPR, which could
require us to implement different compliance measures for the UK and the European Union and result in potentially enhanced compliance
obligations for EU personal data.
In
the U.S., there has been a flurry of activity at the state level. In California, the California Consumer Privacy Act, or CCPA, was enacted
in June 2018, became effective on January 1, 2020, and became subject to enforcement by the California Attorney General’s office
on July 1, 2020. The CCPA broadly defines personal information, and creates new individual privacy rights and protections for California
consumers (as defined in the law), places increased privacy and security obligations on entities handling personal data of consumers
or households, and provides for civil penalties for violations and a private right of action for data breaches. The CCPA requires covered
companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California
residents with ways to opt-out of certain sales or transfers of personal information. While there is an exception for protected health
information that is subject to HIPAA and clinical trial regulations, the CCPA may impact our business activities if we become a “Business”
regulated by the scope of the CCPA.
In
addition to the CCPA, new privacy and data security laws have been proposed in more than half of the states in the U.S. and in the U.S.
Congress, reflecting a trend toward more stringent privacy legislation in the U.S., which trend may accelerate depending on the new U.S.
presidential administration. The effects of the CCPA, and other similar state or federal laws, are potentially significant and may require
us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply
with such legislation.
Further,
various jurisdictions around the world continue to propose new laws that regulate the privacy and/or security of certain types of personal
data. Complying with these laws, if enacted, would require significant resources and leave us vulnerable to possible fines and penalties
if we are unable to comply. The regulatory framework governing the collection, processing, storage, use and sharing of certain information
is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. It is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services
and platform capabilities. Any failure or perceived failure by us, or any third parties with which we do business, to comply with our
posted privacy policies, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third
parties are or may become subject, may result in actions or other claims against
Significant
disruptions of information technology systems, computer system failures 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). The size and complexity of our information technology and information security systems, and those of our third-party vendors
with whom we may contract, 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 intend to invest in the protection of data and information technology, there can be
no assurance that our efforts will prevent service interruptions or security breaches.
Our
internal computer systems, and those of our CROs, our CMOs, and other business vendors on which we may 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.
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. For example, the loss of clinical trial
data from completed or ongoing 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.
We
will need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.
As
of March 15, 2023, we had 3 full-time employees and 3 part-time employees. We will need to grow the size of our organization in
order to support our continued development and potential commercialization of our product candidate. As our development and
commercialization plans and strategies continue to develop, our need for additional managerial, operational, manufacturing, sales,
marketing, financial and other resources may 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. |
If
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 candidate and to compete effectively will depend,
in part, on our ability to manage any future growth effectively, as well as our ability to develop a sales and marketing force when appropriate
for our company. 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.
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 Snehal Patel, our Chief Executive Officer and member of our board of directors. The
loss of Mr. Patel’s 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. 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.
Inadequate
funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel,
prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from
performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The
ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding
levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.
Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other
government agencies on which our operations may rely, including those that fund research and development activities is subject to the
political process, which is inherently fluid and unpredictable.
Disruptions
at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies,
which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA,
SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact
the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and
obtain necessary capital in order to properly capitalize and continue our operations.
Risks
Related to Owning our Common Stock
The
price of our common stock may fluctuate substantially.
You
should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a
significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common
stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this Annual
Report on Form 10-K, are:
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sale
of our common stock by our stockholders, executives and directors; |
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volatility
and limitations in trading volumes of our shares of common stock; |
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our
ability to obtain financings to conduct and complete research and development activities including, but not limited to, our clinical
trials, and other business activities; |
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possible
delays in the expected recognition of revenue due to lengthy and sometimes unpredictable sales timelines; |
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the
timing and success of introductions of new products by us or our competitors or any other change in the competitive dynamics of our
industry, including consolidation among competitors, customers or strategic partners; |
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network
outages or security breaches; |
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our
ability to attract new customers; |
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our
ability to secure resources and the necessary personnel to conduct clinical trials on our desired schedule; |
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commencement,
enrollment or results of our clinical trials for our product candidate or any future clinical trials we may conduct; |
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changes
in the development status of our product candidate; |
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any
delays or adverse developments or perceived adverse developments with respect to the FDA’s review of our planned preclinical
and clinical trials; |
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any
delay in our submission for studies or product approvals or adverse regulatory decisions, including failure to receive regulatory
approval for our product candidate; |
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unanticipated
safety concerns related to the use of our product candidate; |
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failures
to meet external expectations or management guidance; |
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changes
in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our stockholders; |
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our
cash position; |
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announcements
and events surrounding financing efforts, including debt and equity securities; |
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our
inability to enter into new markets or develop new products; |
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reputational
issues; |
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competition
from existing technologies and products or new technologies and products that may emerge; |
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announcements
of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors; |
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changes
in general economic, political and market conditions in or any of the regions in which we conduct our business; |
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changes
in industry conditions or perceptions; |
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changes
in valuations of similar companies or groups of companies; |
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analyst
research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage; |
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departures
and additions of key personnel; |
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disputes
and litigations related to intellectual properties, proprietary rights, and contractual obligations; |
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changes
in applicable laws, rules, regulations, or accounting practices and other dynamics; and |
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other
events or factors, many of which may be out of our control. |
In
addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences
a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition
and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that,
even if unsuccessful, could be costly to defend and a distraction to management.
Market
and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over medical epidemics, energy costs, geopolitical issues, the U.S. mortgage market and a deteriorating real estate market, unstable
global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished
liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global
economy and expectations of slower global economic growth, increased unemployment rates, and increased credit defaults in recent years.
Our general business strategy may be adversely affected by any such economic downturns (including the downturn related to the current
COVID-19 pandemic), volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions
continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly,
and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse
effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization
plans.
If
securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business, our
stock price and trading volume may decline.
The
trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us,
our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock,
the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts
who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price
would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose
visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline
and may also impair our ability to expand our business with existing customers and attract new customers.
Because
certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions
requiring stockholder approval.
As
of March 15, 2023, our directors, executive officers and principal stockholders, and their respective affiliates, beneficially own
approximately 52% of our outstanding shares of common stock. As a result, these stockholders, acting together, have the ability to
control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger,
consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, have the ability
to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of
our common stock by:
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delaying,
deferring or preventing a change in corporate control; |
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impeding
a merger, consolidation, takeover or other business combination involving us; or |
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discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
Future
sales and issuances of our common stock could result in additional dilution of the percentage ownership of our stockholders and could
cause our share price to fall.
We
expect that significant additional capital will be needed in the future to continue our planned operations, including increased marketing,
hiring new personnel, commercializing our product, and continuing activities as an operating public company. To the extent we raise additional
capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities
or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock,
convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales.
Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing
stockholders.
We
do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.
We
currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate
declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase,
if any, of our share price.
We
are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging
growth companies, which could make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act and we intend to take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not
being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition,
pursuant to Section 107 of the JOBS Act, as an “emerging growth company” we intend to take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words,
an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and
our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth
company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in
which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary
of the date of the completion of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the
SEC.
We
may be at risk of securities class action litigation.
We
may be at risk of securities class action litigation. In the past, biotechnology and pharmaceutical companies have experienced significant
stock price volatility, particularly when associated with binary events such as clinical trials and product approvals. If we face such
litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our
business and results in a decline in the market price of our common stock.
Our
common stock is currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any
stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could
be impaired and it may be more difficult for our stockholders to sell their securities.
Although
our common stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the exchange’s minimum
listing requirements or those of any other national exchange. If we are unable to maintain listing on Nasdaq or if a liquid market for
our common stock does not develop or is sustained, our common stock may remain thinly traded.
The
listing rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any
reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its
exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may
occur, each of which could have a material adverse effect on our stockholders:
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the
liquidity of our common stock; |
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market price of our common stock; |
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our
ability to obtain financing for the continuation of our operations; |
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the
number of institutional and general investors that will consider investing in our common stock; |
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the
number of market makers in our common stock; |
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the
availability of information concerning the trading prices and volume of our common stock; and |
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the
number of broker-dealers willing to execute trades in shares of our common stock. |
Our
second amended and restated certificate of incorporation (“Amended and Restated Certificate of Incorporation”) and our second
amended and restated bylaws (the “Amended and Restated Bylaws”) and Delaware law may have anti-takeover effects that could
discourage, delay or prevent a change in control, which may cause our stock price to decline.
Our
Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws and Delaware law could make it more difficult for
a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized to issue up
to 10 million 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 stockholders. 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 Amended and Restated Certificate of Incorporation and our Amended and Restated 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 stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove
our management. In particular, the certificate of incorporation and bylaws and Delaware law, as applicable, among other things:
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the board of directors with the ability to alter the Amended and Restated Bylaws without stockholder approval; |
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place
limitations on the removal of directors; |
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establish
advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon
at stockholder meetings; and |
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provide
that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum. |
Financial
reporting obligations of being a public company in the U.S. are expensive and time-consuming, and our management is required to devote
substantial time to compliance matters.
As
a publicly traded company we incur significant additional legal, accounting and other expenses. The obligations of being a public company
in the U.S. require significant expenditures and place significant demands on our management and other personnel, including costs resulting
from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices,
including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements
of The Nasdaq Capital Market. These rules require the establishment and maintenance of effective disclosure and financial controls and
procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that
are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act,
the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are
no longer an “emerging growth company.” Our management and other personnel will need to devote a substantial amount of time
to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance
and risk becoming subject to litigation or being delisted, among other potential problems.
Our
Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially
all disputes between the Company and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum
for disputes with the Company or its directors, officers or employees.
Our
Amended and Restated Bylaws provides that unless we consent in writing to the selection of an alternative forum, the State of Delaware
is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim
of breach of a fiduciary duty owed by any director, officer or other employee of our Company to us or our stockholders, (iii) any action
asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the Delaware General Corporation
Law (the “DGCL”) or our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws, or (iv) any
action asserting a claim against us, our directors, officers, employees or agents governed by the internal affairs doctrine, except for,
as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not
subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the
Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other
than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. This exclusive forum provision
would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim
for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section
27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the
Exchange Act or the rules and regulations thereunder.
Section
22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder. However, our Amended and Restated Bylaws contain a federal forum
provision which provides that unless we consent in writing to the selection of an alternative forum, the U.S. federal district courts
will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person
or entity purchasing or otherwise acquiring any interest in shares of our capital stock are deemed to have notice of and consented to
this provision.
These
choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and
other employees. Alternatively, if a court were to find our choice of forum provisions contained in either our Amended and Restated Bylaws
to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions,
which could harm our business, results of operations, and financial condition.
If
we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately
report our financial condition, results of operations or cash flows.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure
controls and procedures. We are required to furnish a report by management on, among other things, the effectiveness of internal
control over financial reporting. This assessment will include disclosure of any material weaknesses identified by management in our
internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim
financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally
requires an attestation from an issuer’s independent registered public accounting firm on the effectiveness of its internal
control over financial reporting. However, for as long as we remain an emerging growth company under the JOBS Act, we may take
advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation
requirement.
Our
compliance with Section 404 of the Sarbanes-Oxley Act may require that we incur substantial accounting expense and expend significant
management efforts. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the
evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we may
be unable to assert that our internal control over financial reporting is effective. In connection with management’s assessment
of internal controls over financial reporting for the quarter ended September 30, 2020, we identified a material weakness due to inadequate
segregation of duties within our accounting processes due to limited personnel and insufficient written policies and procedures for accounting,
IT and financial reporting and record keeping. Although we are developing a plan to remediate the material weaknesses, we cannot assure
you that we will be able to remediate such weaknesses or that there will not be new material weaknesses or significant deficiencies in
our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could
severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude
that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of
our financial reports, the value of our common stock could decline, and we could be subject to sanctions or investigations by regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other
effective control systems required of public companies, could also restrict our future access to the capital markets.