Company Overview
We are a clinical-stage biopharmaceutical company developing a new generation of multi- functional cancer immunotherapies. All PDS products are based on the proprietary
Versamune® platform. Versamune® based cancer therapies are designed to stimulate disease-specific killer and helper T-Cell response in a quantity and quality that significantly surpasses current immunotherapeutic approaches. We believe that the
Versamune® platform has the potential to rapidly become an industry-leading immuno-oncology technology and is currently being applied to the development of a robust pipeline of valuable new-generation, of advanced treatments for cancer as part of
combination therapies and to help make standard of care therapies more effective.
Versamune® has been developed to encompass the attributes of the most successful immunotherapy approaches, such as checkpoint inhibitors, CAR-T cells and live-vector based
vaccines, while also overcoming their limitations and potential negative side effects. It is well documented that the most critical attribute of an effective cancer immunotherapy is the induction of high levels of active antigen-specific CD8+
(killer) T-cells. Priming adequate levels of active CD8+ T-cells in-vivo continues to be a major obstacle facing immunotherapy. Our lead product PDS0101 (Versamune®+HPV antigens), is designed to address advanced HPV-associated cancers in its first
human clinical trial, confirmed the impressive preclinical study results and demonstrated the unique in-vivo induction of high levels of active HPV-specific CD8+ T-cells in humans.
The unique combination of high potency and excellent safety of the Versamune® platform observed in preclinical studies appears to be corroborated in a
successfully completed 12-patient Phase 1 clinical trial. In June 2019 the Versamune mechanism of action was published in one of the top peer reviewed journals in the field of immunology, (Journal of Immunology, 2019(202), 1215). The article describes the way PDS’ Versamune platform recruits and activates killer T-cells to recognize
and effectively attack cancer cells while simultaneously making cancer cells more susceptible to T-cell attack. With respect to our lead therapeutic candidate, PDS0101 (a combination of Versamune® nanoparticles plus proprietary human
papillomavirus (HPV)-16 E6 and E7 antigens), the Journal of Immunology article detailed Versamune®’s ability to overcome the critical mechanisms associated with ineffective immune responses mediated by HPV16 and cancer cells, therefore leading to a
superior anti-tumor effect.
The Phase 1 human trial immune responses mirrored the strong reported T-cell responses seen in preclinical studies, which led to superior anti-tumor regression efficacy in
pre-clinical head-to-head studies with leading clinical development-stage technologies. In a retrospective analysis not contemplated in the initial study design, it was observed that 6 out of 10 evaluable patients experienced complete regression
of their pre-cancerous lesions as early as 1-3 months after treatment, despite the fact that the HPV16 specific therapy was used on patients who were co-infected with multiple strains of the HPV virus. No lesion recurrence occurred within the 2
-year evaluation period.
We believe that the rational design of combination immunotherapies using agents that promote synergy with each other and reduce potential for compounded toxicity will
substantially improve potential for combination therapies to deliver improved clinical benefit for cancer patients. Versamune® appears to activate the appropriate combination of immunological pathways that promote strong CD8+ T-cell
induction, while also altering the tumor’s microenvironment to make the tumor more susceptible to T-cell attack, which PDS believes makes it an ideal complement to the checkpoint inhibitors by enhancing their potency. In addition, the differences
in mechanism of action between Versamune® and checkpoint inhibitors, as well as the initial demonstrated safety profile of Versamune®, suggests that these combinations may be much better tolerated by patients than many or most
other combination therapies involving checkpoint inhibitors.
We expect substantial value accretion as our development-stage products successfully progress through upcoming human Phase 2 clinical studies. Initially, PDS intends to
demonstrate the application of the Versamune® platform’s attributes by progression in areas of high unmet medical need supported by leaders in the field. Our current clinical development plan for PDS0101 is summarized in the table below. All
studies are expected to be initiated in the first half of 2020.
Our pipeline of Versamune® based products is summarized below. With additional financing, we plan to initiate clinical studies with PDS0102 (TARP-expressing cancers, e.g.
prostate and breast cancers), PDS0103 (MUC-1 expressing cancers, e.g. colon, breast, lung and ovarian cancers) and PDS0104 (TRP2 expressing cancers, e.g. melanoma).
Corporate Information
We currently operate the existing business of Private PDS (as defined below) as a publicly traded company under the name PDS Biotechnology Corporation (PDSB). We were
incorporated as Edge Therapeutics, Inc., or Edge, on January 22, 2009. Upon closing of the Merger (as defined below), we suspended Edge’s prior business and prioritized the business of PDS Biotechnology Corporation, a privately held Delaware
corporation, which we refer to as Private PDS, which is a clinical-stage biopharmaceutical company developing multi-functional cancer immunotherapies that are designed to overcome the limitations of the current approaches.
On March 15, 2019, we completed our previously disclosed reverse merger with privately-held Private PDS, which we refer to as the Merger, pursuant to and in accordance with the
terms of the Agreement and Plan of Merger, dated as of November 23, 2018, as amended on January 24, 2019, by and among Edge, Echos Merger Sub, a wholly-owned subsidiary of Edge, which we refer to as Merger Sub, and Private PDS, whereby Private PDS
merged with and into Merger Sub, with Private PDS surviving as our wholly-owned subsidiary. In connection with and immediately following completion of the Merger, we effected a 1-for-20 reverse stock split, or the Reverse Stock Split, and changed
our corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation. All of the outstanding stock of Private PDS was converted into shares of our common stock or canceled
upon closing of the Merger. Unless otherwise stated, all share and per share numbers in this Annual Report on Form 10-K give retroactive effect to both the Merger and the Reverse Stock Split.
Since our inception in 2005, we have devoted substantially all of our resources to developing our Versamune® platform, advancing preclinical programs, conducting clinical
studies, manufacturing PDS0101 for clinical studies, and providing general and administrative support. We have funded our operations primarily from the issuance of common stock. We have not generated any product revenue.
We acquired an in-process research and development asset relating to Edge’s NEWTON 2 trials. Following the discontinuation of the NEWTON 2 trial for EG-1962, Edge
had ceased all research and development efforts related to EG-1962 and suspended efforts on other legacy Edge product candidates. As of December 31, 2019, we are no longer seeking partners to
continue the development of these product candidates and pursue them to commercialization.
Our principal executive offices are located 303A College Road East, Princeton, NJ 08540, and our telephone number is (800) 208-3343.
Commercial Strategy
Our mission is to apply the Versamune® platform, our proprietary and versatile immunotherapy technology, to develop a new generation of immuno-oncology products that
are effective and safe across a broad range of cancer types. Our current development pipeline of cancer immunotherapy products is based on the Versamune® platform, and can potentially be used as a component of combination products with
other leading technologies to provide effective treatments across a range of cancer types, including Human Papillomavirus (HPV)-based cancers, melanoma, colorectal, lung, breast and prostate cancers or as monotherapies in early-stage disease.
Key elements of PDS’s clinical and commercial execution strategy are as follows:
Commercialization of Product Candidates
PDS retains worldwide rights to all of our product candidates. If our product candidates are approved, we intend to establish targeted commercialization and marketing
capabilities for our products in the United States, Canada and Europe by developing a sales force that would focus on academic medical centers and large oncology clinics. For commercialization outside of the United States, Canada and Europe, we
generally expect to enter into collaborations with strategic partners
Cancer Immunotherapy
In the field of cancer immunotherapy, a well-documented and significant unmet need is the ability of therapies to safely induce in vivo an adequate number of highly
active/polyfunctional CD8+ T-cells, coupled with the altering of the tumor microenvironment in order to limit its immune tolerance, in order to facilitate efficient tumor cell killing. Our data to date suggests that the Versamune®
platform effectively promotes both critical immunotherapeutic characteristics, leading to strong antigen-specific CD8+ T-cell induction and regression of lesions in a human clinical trial.
One of the most active areas of clinical testing in the field of cancer immunotherapy today is combining checkpoint inhibitors with other anti-cancer agents, with the goal of
synergistic and thus superior and thus superior clinical efficacy compared with that of the individual products. We believe that next generation of combination immunotherapy agents, especially those including both checkpoint inhibitors and a second
therapeutic agent, will need to have at least the following characteristics to achieve clinical and commercial success:
We believe based upon our research that Versamune®-based products fulfill each of these criteria.
Most immunotherapies work by training or priming our T-cells to recognize specific disease-related proteins (cancer, bacterial or viral) displayed or expressed by diseased
cells. The ultimate goal of immunotherapy treatment is to harness the power of the immune system to target and kill specific diseased cells, and thereby cure the underlying disease.
Immunotherapies have recently been recognized as having significant potential to treat a broad range of cancers and infectious diseases. Several cancer immunotherapies have now
been approved by the FDA, and other promising immunotherapy technologies and products are in various stages of advanced clinical development.
Despite the promise demonstrated by current immunotherapy technologies, these products still face significant hurdles to achieving optimal therapeutic value. Some key obstacles
faced by the current technologies are the following:
Antigen Uptake by Dendritic Cells: Antigens are particular proteins recognizable by the immune system that are uniquely or highly
expressed/present in tumor cells but not present in normal healthy cells. The first critical step in generating an effective antigen-specific or antigen-targeting T-cell response is efficient uptake of the particular antigens by dendritic cells,
which are the key antigen presenting cells of the immune system. Proteins and peptides are not naturally highly taken up by dendritic cells, creating obstacles to effective T-cell response in existing immunotherapies. Versamune® has
demonstrated the ability to promote antigen uptake by dendritic cells in-vivo.
Antigen Cross-Presentation and Killer (CD8+) T-Cell Priming: Suboptimal ability of the dendritic cells to internalize, process/break-down
and present tumor antigens to the T-cells leads to ineffective activation or “priming” of killer T-cells. Dendritic cells are required to take up and process tumor antigens. These processed antigens must then enter into an internal compartment of
the cell, called the cytoplasm. The peptide’s presence in the cytoplasm is necessary to allow smaller processed proteins (peptides) to be presented to killer T-cells via what is known as the Major Histocompatibility Complex (“MHC”) Class I pathway
or to helper T-cells via the MHC Class II pathway. This is the process of T-cell priming. Current technologies have presented limited ability to adequately facilitate antigen presentation via the MHC Class I process in vivo, therefore leading sub-optimal killer T-cell priming and then weaker-than-optimal anti-tumor potency. Versamune® has demonstrated the ability to promote antigen processing and presentation via MHC Class I and
Class II leading to effective CD8+ and CD4+ T-cell priming respectively (Ghandapudhi et al, J. Immunology, June 15, 2019, 202 (12) 3524-3536). T-cell priming trains the killer T-cells to effectively identify
the tumor cells.
Immune Activation: Once T-cell priming has successfully occurred, a subsequent critical step is induction-specific immunological signals,
including induction of certain chemokines and cytokines necessary for activation and proliferation of various classes of T-cells. Chemokines and cytokines are each a broad category of immunological proteins that are crucial for fighting off
infections and other immune responses. Versamune® has demonstrated the ability to specifically activate the important type I interferon signaling pathway, leading to induction of the right phenotype of active CD8+ T-cells with potent
killing function (Ghandapudhi et al, J. Immunology, June 15, 2019, 202 (12) 3524-3536).
Overcoming Immune Suppression: A number of immune-suppressive mechanisms and cells naturally exist in humans that can increase in number
within tumors. This may result in an inhibition of the ability of killer and helper T-cells to identify and kill the tumor cells. This state of immune tolerance must generally be overcome for T-cells to be effective in killing antigen-expressing
cancer cells. In preclinical studies, Versamune® was demonstrated to alter the tumor micro-environment, making the tumors more susceptible to attack by T-cells (Ghandapudhi et al, J. Immunology, June 15,
2019, 202 (12) 3524-3536).
Complexity and Costs: The relatively high formulation and manufacturing complexities, as well as related high costs, associated with most
commercially available immunotherapies is well documented. For example, live vector-based cancer vaccines and dendritic cell vaccines require complex and expensive processes to enable manufacturing of live agent (virus or bacteria)-based products.
Versamune® is based on synthetic positively charged lipids, and traditional lipid nanoparticle manufacturing methods which results in a much simpler and less expensive manufacturing process than most other immunotherapy technologies.
Versamune® - A Next Generation Immunotherapy and Cancer Immunotherapy
Based on the limitations of current therapies described above, we believe that next generation biologics that can overcome those limitations are likely to address significant
unmet needs. Versamune®, a T-cell activating platform technology, has demonstrated potential to overcome the challenges of immune therapy as illustrated below:
Versamune® Platform
Versamune® has been rationally designed and is based on synthetic positively charged (cationic) lipids. The structure of these lipids leads to spontaneous formation
of nanoparticles in an aqueous medium. The nanoparticles are sized to promote efficient uptake by the antigen presenting cells of the immune system, the dendritic cells. The nanoparticles are combined with tumor antigens (proteins, peptides, DNA or
RNA) and administered by subcutaneous injection.
Figure 1: Versamune nanoparticles
The initial concept for Versamune® was first discovered and developed in 2005 by Professor Leaf Huang, at the University of Pittsburgh, School of Medicine. The
Versamune® technology is based on the use of immune activating cationic (positively charged) lipids that spontaneously form spherical nanoparticles in aqueous media. Huang, a world-renowned expert in liposome drug delivery and non-viral
gene therapy, was familiar with the ability of cationic lipids to effectively deliver DNA into the cytoplasm of cells. PDS’s targeted research and development efforts identified critical structural characteristics of bio-active lipids, and then
refined and built upon that initial concept.
The resulting Versamune® technology is believed to induce active and potent disease-specific helper and killer T-cells, while simultaneously suppressing the tumor’s
defenses, are due to the following:
Delivery into the right compartments of the cell leads to effective processing of the antigen and cross presentation of the processed antigen to CD8+ T-cells, therefore
overcoming a key limitation of vaccine technologies.
PDS0101
We believe PDS0101, our lead product candidate, can, if ultimately approved, fundamentally improve patient outcomes and transform the management of HPV-related cancers. PDS0101
combines the utility of PDS’ Versamune®, versatile multi-functional platform technology, with a proprietary mix of HPV 16 antigens, the most virulent high-risk type and by far the most prevalent in patients with advanced HPV- associated
cancer.
Approximately 43,000 patients are diagnosed with HPV- associated cancers in the US each year, a number unlikely to be impacted by increased use of HPV preventative vaccines in
the next decade. HPV associated cancers include oropharyngeal (head and neck) cervical, vulvar, anal and penile cancers. Cervical cancer is the most common HPV-associated cancer in women and there are about ~12,000 new cases diagnosed annually.
The incidence of cervical cancer remains steady.
Head and neck cancers have been reported to be increasing in recent years and have been described as a silent epidemic attributed to HPV infection. A recent study showed the
overall prevalence of oral HPV infection to be 11.5% in men and 3.2% in women, or 11 million men and 3.2 million women in the United States. High-risk oral HPV-16 was over three times more common in men. Over 70% of oropharyngeal cancers are
estimated to be HPV-associated in developed Western countries. It has been reported that about 90% of the oral squamous cell carcinoma (OSCC) tumors were positive for HPV-16. The US National Cancer Institute (NCI) estimated that in 2013 about
36,000 people in the US would be diagnosed with OSCC. For 2017 the projections were increased to 49,670 new cases with an estimated 9,700 deaths. The current treatment options are surgery, radiation, chemotherapy or a targeted therapy, including
checkpoint inhibitors.
PDS0101 Phase 1 Clinical Data
PDS completed a Phase 1 trial of PDS0101, which was conducted at three sites in the United States. The study was an Open-label Escalating Dose Study to Evaluate the Safety,
Tolerability, and Pharmacodynamics of PDS0101 in subjects with Cervical Intraepithelial Neoplasia (CIN) and high-risk Human Papillomavirus (HPV) infections. The study included 3 cohorts of 3 to 6 subjects each, based on a modified “3 + 3”
dose-escalation study design.
The study enrolled Cohort 1 and progressed through Cohort 3, with each subsequent cohort receiving a higher dose of PDS0101. Successive cohorts all received a constant dose of
the HPV-16 E6 and E7 antigens. Subjects were given three subcutaneous injections of PDS0101, three weeks apart, and blood was drawn 14 days after each injection, as well as 90 days after the last injection. HPV-specific CD8+ T-cells were quantified
using both the Interferon- ELISPOT assay (quantifies all HPV-specific T-cells) granzyme-b ELISPOT assay (specifically quantifies active HPV-specific CD8+ T-cells). Dosing and dose escalation were based on safety evaluation for determination of
potential dose-limiting toxicity (DLT).
A total of 12 subjects were enrolled. We believe the data show a strong induction of active HPV-specific killer T-cells (CD8+) observed with quantifiable amounts of the CD8+
T-cells retrieved from patient blood 14 days after treatment.
Figure 2: CD8+ T-cell data generated by Granzyme-b ELISPOT in the phase 1 clinical trial
The CD8+ T-cells results seen in the Phase 1 study confirmed preclinical projections of high levels of active granzyme-b inducing, HPV-specific CD8+ T-cells. The results
obtained 90 days after the last injection also confirmed preclinical projections of memory T-cell induction. Of note, T-cell responses were independent of patient genetic/HLA sub types.
No dose-limiting toxicities were observed, even at the highest tested dose of 10mg. A dose of approximately 3mg has been selected to move forward into the upcoming PDS0101
Phase 2 clinical studies.
During the third quarter of 2019, PDS received Institutional Review Board, or IRB approval to perform a retrospective analysis of the clinical benefit achieved by the patients
who participate in the phase 1 clinical trial. Despite most of the patients being infected with multiple HPV strains other than HPV16, rapid and complete regression of pre-cancerous lesions was documented in at least 6 out of 10 patients within 1-3
months of treatment, strongly suggesting that the T-cells induced by PDS0101 were clinically active. This information strongly suggests the unique ability of PDS0101 to generate potent and biologically active CD8+ T-cells in-vivo. Two patients who
had regression by cytology were not considered clinical responders despite the seemingly positive outcome. One patient regressed to atypical cells of undetermined significance at the first post- treatment evaluation at 3 months, but residual HPV
was still detected. Another patient had complete regression by cytology at every post-treatment evaluation but had residual CIN by colposcopy. All responders remained disease-free though the 2-year evaluation period, suggesting a durable immune
response.
PDS focused its clinical strategy on areas of more severe unmet medical need in which PDS0101 will be combined with other treatment modalities such as checkpoint inhibitors,
immune-cytokines and chemoradiation to provide improved clinical benefit to patients. PDS feels that due to the ability of PDS0101 to generate potent HPV specific killer T-cell response in-vivo, that the quickest path to demonstrating proof of
concept in a larger trial with the least risk would be to perform these studies in combination with synergistic agents in indications where a more effective therapy is needed. The three planned trial described below are designed to focus on
efficiency and risk mitigation to proof of concept.
PDS0101 + Keytruda® in HPV-positive recurrent or metastatic head and neck cancer
We have a collaboration agreement with a subsidiary of Merck & Co. (known as MSD International GmbH outside the United States and Canada) to combine PDS0101 with Merck’s
anti-PD-1 checkpoint inhibitor, Keytruda®, in a Phase 2 human clinical trial for treatment of HPV-positive recurrent or metastatic head and neck cancer. On October 28, 2019, we entered into an amendment to the existing clinical trial collaboration
agreement to evaluate the combination of PDS’s lead Versamune®-based immunotherapy, PDS0101, with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in a Phase II clinical trial. The planned clinical trial will now evaluate the efficacy and
safety of the combination as a first-line treatment (rather than second or third line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection. The modification to the clinical
trial design to evaluate PDS0101 in combination with KEYTRUDA® as first-line treatment comes as a result of Merck’s approval by the FDA on June 10, 2019 for first line treatment of patients with metastatic or unresectable recurrent head and neck
squamous cell carcinoma (HNSCC) using KEYTRUDA® in combination with platinum and fluorouracil (FU) for all patients and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test.
The trial will be sponsored and funded by PDS and is expected to begin in the first half of 2020. The trial is designed to dose 96 patients with standard of care 200 mg IV
KEYTRUDA® in 21-day cycles in combination with subcutaneous injection of PDS0101 for the first 4 cycles. PDS0101 will be administered again on the 12th treatment cycle in combination with KEYTRUDA®. A safety analysis is planned of the
first 12 patients after cycle one and this information is expected in the fourth quarter of 2020. An interim analysis is planned in the second half of 2021. This study has the potential to validate the efficacy and safety of PDS0101 in
combination with a checkpoint inhibitor and this study could lead the way for novel combination therapies in immuno-oncology.
PDS0101 + Checkpoint Inhibitors M7824 and NHS-IL12
We previously announced that we entered into a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) for the development of the
PDS0101 HPV cancer immunotherapy in combination with other immune-modulating agents as a potential treatment for all types of advanced HPV-related cancers. Under the agreement, we will collaborate with the NCI’s Genitourinary Malignancies Branch
(GMB) and Laboratory of Tumor Immunology and Biology (LTIB) with plans to conduct a Phase 2 clinical study evaluating PDS0101 with two promising novel immune-modulating agents M7824 and NHS-IL12 being studied at NCI as part of a CRADA with EMD
Serono (Merck KGaA). This study is anticipated to start in the first half of 2020. The CRADA also involves preclinical evaluation of PDS0101 in combination with other therapeutic modalities upon the mutual agreement of both parties.
All three agents have demonstrated efficacy as monotherapies in early studies. The phase 2 clinical study has been approved by the IRB and published is expected
to enroll 30 subjects. M7824 is a novel first-in-class bifunctional fusion protein, a TGF-β “trap” fused with a human antibody against PD-L1. NHS-IL12 is a novel immunocytokine conjugate consisting of two IL12 heterodimers fused to the NHS76 antibody. Both agents have been shown to be well tolerated in on-going clinical trials. This trial will
evaluate the objective response rate of this novel combination in patients with advanced HPV associated cancers.
PDS0101 + Chemoradiotherapy (CRT)
PDS Biotech anticipates a Phase 2 clinical study with a major cancer research center to begin in the first half of 2020. If initiated, the clinical study would likely investigate the safety and
anti-tumor efficacy of the PDS0101-CRT combination, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. T-cell inducing power of Versamune®
has the strong potential to enhance efficacy of the current standard of care chemo-radiotherapy. PDS Biotech is currently in negotiations regarding a definitive agreement concerning the investigator initiated Phase 2 study and the scope and
nature of such study will be subject to the terms of the definitive agreement, once agreed to by the parties.
Other Development Programs
PDS0102 (TARP-expressing cancers) for the treatment of prostate and breast cancers
Prostate cancer: Based on a promising clinical study run by the NCI using TARP antigens, PDS and the NCI are collaborating to develop a
Versamune® platform-based immunotherapy for prostate cancer. PDS0102 has been successfully formulated. A decision will be made as to when PDS0102 clinical studies will be initiated.
Prostate cancer is the most common non-skin cancer in the United States. Over 30,000 men die from the cancer every year according to the Prostate Cancer Foundation, and over
two million Americans currently have prostate cancer. A recent report projects that the prostate cancer market will grow at a compound annual growth rate of 9.5%, from $7.6 billion in 2014 to $13.6 billion by 2021.
PDS0103 (MUC-1 expressing cancers) for the treatment of colorectal, breast, ovarian and lung cancers
PDS0103 is based on novel agonist antigens of the mucin-1 (MUC-1) oncogenic C-terminal region developed by the laboratory of Dr. Jeff Schlom,
head of Tumor Biology at the NCI. MUC1 is highly expressed in multiple tumor types and has been shown to be associated with drug resistance and poor prognosis for a range of human tumors. The novel agonist peptides, compared to the native peptides,
more efficiently enhance production of IFN-γ by peptide activated human T cells, and also more efficiently lyse human tumor cell targets in an MHC-restricted manner. It is also known that high avidity T-cells can lyse targets with 1,000-fold lower
peptide-MHC complexes. The enhancer agonist epitopes developed induce higher avidity T-cells than the native antigens and has been demonstrated to be a successful strategy to enhance number and avidity of T-cells for MUC-1 directed immunotherapy.
These MUC-1 antigens have been licensed from the NCI for use with Versamune® in ovarian, breast, colorectal and lung cancers.
We believe that an effective and safe immunotherapy targeting solid tumors expressing MUC-1 will gain rapid acceptance as a monotherapy in early-stage disease and initially as
a combination therapy in later stage disease.
Colorectal cancer (CRC): Colorectal or colon cancer, includes cancerous growths in the colon, rectum and appendix. It is the third most
common form of cancer and the second leading cause of cancer-related death in the Western world. Global Markets estimates the colorectal cancer market to grow at 3% annually from $8.15 billion in 2015 to $11 billion in 2025 in the eight major
markets, US, UK, England, France, Italy, Japan, China and Germany. We believe that there is significant market opportunity for immunotherapy, especially in early stage CRC disease where there is a lack of novel treatments outside chemotherapy.
Breast cancer: Breast cancer is a leading cause of cancer-related mortality among women worldwide. IMS Health reports that sales of breast
cancer treatments will increase by an average of 5.8% a year in nine major markets, increasing from a value of $9.8 billion in 2013 to $18.2 billion by 2023.
Ovarian cancer: Ovarian cancer is the most common cause of death from gynecological tumors. Nearly 60,000 cases of ovarian cancer are
diagnosed in the following seven major markets (the United States, Japan, Germany, France, Italy, the United Kingdom and Spain) each year. The five-year survival rate of ovarian cancer patients remains below 20%. The American Cancer Society reports
that in the US about 22,240 women will receive a new diagnosis of ovarian cancer, and about 14,000 women will die from ovarian cancer in 2018. We believe that there is a significant market opportunity for immunotherapy especially in early stage
disease where there is a lack of novel treatments outside chemotherapy.
Non-Small Cell Lung Cancer (NSCLC): NSCLC is the leading cause of cancer-related mortality in the major pharmaceutical markets. There is
still a clear unmet need in the treatment of NSCLC despite products such as Alimta®, Avastin®, Iressa® and Tarceva®. The NSCLC treatment market is expected to reach $12.2 billion by 2025. Growth is
expected to be driven by novel therapies entering the squamous cell carcinoma market segment, which is currently lacking effective treatment, unlike the non-squamous market segment.
PDS 0104 (TRP2 expressing cancers) for the treatment of melanoma
PDS has performed substantial preclinical work in advanced melanoma tumor models where we have observed the ability of PDS0104 to overcome immune suppression and inhibit growth
of B16 melanoma tumors (Vasievich et al, Molecular Pharmaceutics, 2012, 9, 2, 261-268). Preclinical studies have also demonstrated a strong synergy between PDS0104 and checkpoint inhibitors, resulting in
dramatically improved antitumor response and prolonged survival.
Melanoma is a malignant tumor of the melanocytes. Melanoma is primarily a skin tumor, although it may also occur less frequently in the melanocytes of the eye. It is currently
the seventh most common cancer in the US. Melanoma comprises 5% of all skin cancers. The most common causes are exposure to ultra violet radiation from the sun, leading to damage to the DNA of the melanocytes of the skin, family history, an
impaired immune system and atypical moles on the body. The American Cancer Society estimated that there will be about 91,270 new cases of melanoma in 2018, and over 9,000 deaths. No effective therapies existed for advanced cancer until the
immunotherapy Yervoy® was approved by the FDA in March of 2011.
A Summary of the Current State-of-the-art
Two approaches, dendritic cell vaccines and CAR T-cell immunotherapies, are the two commercial/FDA approved technologies that have presented the best promise to date in
addressing other technologies’ inability to effectively present antigens to the dendritic cells inside the body:
Dendritic Cell Vaccines: Dendritic cell vaccines eliminate the need to target and deliver antigens to dendritic cells in-vivo. In these products, immature dendritic cells or monocyte precursors of the patient’s dendritic cells are removed from the patient’s blood and cultured outside the body. The dendritic cells are then
treated with tumor antigens, and matured dendritic cells are re-infused into the patient to present the processed antigen material to the patient’s T-cells.
Recent data reported with Provenge®, a prostate cancer vaccine, suggests that its induced immune responses are long-lived, with strong T-cell responses still
observed in most surviving patients at two years after treatment. Nevertheless, this approach does not appear to address the immuno-suppressive environment in tumors, or provide immune activation/stimulation necessary to enhance activity of primed
T-cells. Importantly, recent studies have demonstrated that antigen uptake and processing is still suboptimal when dendritic cells are treated ex-vivo.
CAR T-Cell Immunotherapy: CAR T-cell immunotherapy is based on manipulating T-cells collected from patients’ own blood. After collection,
T-cells are genetically engineered to produce special receptors on their surface called chimeric antigen receptors (“CARs”). CARs are proteins that allow T-cells to recognize a specific protein (antigen) on tumor cells. These engineered CAR T-cells
are then grown in the laboratory until they number in the billions. This expanded population of CAR T-cells is then intravenously infused into the patient. After the infusion, the T-cells are expected to multiply in the patient’s body and, with
guidance from their engineered receptor, recognize and kill cancer cells that display the antigen on their surfaces. Two CAR-T therapies have been approved to treat large B-cell lymphoma, Kymriah® and Yescarta®, and others are
being tested in clinical studies.
CAR T-cell immunotherapy overcomes the need to perform in-vivo antigen processing and uptake by dendritic cells. Recent data in blood
cancers have shown promising results with a high rate of complete remissions. These results confirm the ability or importance of killer T-cells in targeting and killing cancerous cells. Nevertheless, this approach does not appear to address the
immuno-suppressive environment in solid tumors, and can cause significant side effects. Perhaps the most troublesome side effect is cytokine-release syndrome. The infused T-cells release cytokines, leading to a rapid and large presence in the
bloodstream. This can cause dangerously high fevers and precipitous drops in blood pressure. Relatively high cost and complex manufacturing processes for CAR-T therapies may also limit the broader applicability of CAR T-cell immunotherapies in the
long run. High numbers of infused T-cells can result in extremely high and debilitating systemic inflammation. In some recent clinical studies, patient deaths were reported as a result of high numbers of infused T-cells. These clinical studies
were then suspended by the FDA.
Other promising approaches under evaluation in clinical studies are:
Live Vectors: This approach uses live vectors, predominantly live viruses or live bacteria, with added copies of a plasmid that encodes the
protein antigen DNA sequence. The protein is then secreted by the virus or bacteria once the DNA is successfully transfected into the dendritic cells. Studies have shown this approach can result in successful stimulation of T-cells and antibodies.
Systemic toxicities have been reported with some live virus and bacteria technologies administered by intravenous infusion. Certain clinical studies have been suspended due to patient deaths suspected, but not confirmed, to have resulted from
treatment-related toxicities.
Antibodies: This approach uses dendritic cell targeting antibodies linked to tumor antigens in order to facilitate dendritic cell uptake of
those antigens.
Electroporation: This approach involves generation of electrical pulses through the skin. This technology delivers antigenic DNA into the
dendritic cells residing beneath the skin. The protein then has to be secreted by the dendritic cells once the DNA has been successfully delivered and transfected into the dendritic cells. Studies have shown this approach can result in successful
stimulation of T-cells and antibodies. Several of the technologies summarized above have not demonstrated the ability to effectively activate the necessary immunological mechanisms required to induce optimal killer T-cell responses. Additionally,
many of these approaches do not activate mechanisms to combat or reduce immuno-suppressive cell populations within tumors. These drawbacks may lead to suboptimal responses, and the need to combine them with other technologies in the long run to
improve their clinical responses.
Some efforts to address the immuno-suppressive environment have focused on developing antibodies focused on blocking immune checkpoints. These are known as the
checkpoint inhibitors. Checkpoint inhibitors have had the most developmental attention and commercial success to date in the field of cancer immunotherapy. The function of checkpoint inhibitors is to block normal proteins on cancer cells, or the
proteins on T-cells that respond to them. The result is to make cancer cells more visible to T-cells. This then helps generate a T-cell assault on the cancer. The use of checkpoint inhibitor antibodies to overcome tumor immune suppression is
known to present the potential for triggering autoimmune disease. To date, more than six checkpoint inhibitors have received rapid approval from the U.S. Food and Drug Administration, or FDA. These
include ipilimumab (Yervoy®), pembrolizumab (Keytruda®), and nivolumab (Opdivo®).
Adjuvant-Based Cancer Vaccines: Adjuvant-based cancer vaccines appear to be quite well tolerated, with the most commonly reported adverse
events being injection site reactions and systemic toxicities. These systemic inflammatory immune responses are sometimes caused by the use of the immune activators, known as adjuvants. Such adjuvants may have the potential to induce high cytokine
levels in the blood, which can sometimes lead to severe side effects as a result of cytokine storms.
Combination Immunotherapy
One common clinical goal of administration of immunotherapies to cancer patients is to spark a self-sustaining attack against cancer cells by the T cells, thereby producing
long-term clinical benefit. Currently, there are approximately 2,000 immunotherapeutic agents in development. Some cancer patients respond better to the immunotherapies than others, due in part to the factors described above.
The limitations of current immunotherapy technologies as cancer monotherapies are now resulting in increasing testing of multiple cancer drugs in combination. As a result,
combination immunotherapy is now generally believed to be the latest frontier in cancer research, and over a thousand such combination therapy clinical studies are currently ongoing. Due to the ability of the checkpoint inhibitors to alter the
tumor’s immune suppressive environment by blocking the immune checkpoints, the vast majority of the combination studies involve checkpoint inhibitors. However, due to the known need for CD8+ T-cell induction, checkpoint inhibitors have only
generally been proven to be optimally clinically successful in a minority of treated patients to date.
Thus far, nivolumab with ipilimumab, which targets PD-1 and CTLA-4 respectively, is the only checkpoint-inhibitor combination approved for clinical use. It was approved to
treat metastatic melanoma by the FDA in 2015. In a published study report, this combination was shown to delay tumor progression in melanoma by a median of 11.5 months, almost twice as long as in those on nivolumab alone, and almost four times as
long as in people treated with only ipilimumab (Larkin, J.). Then, in October 2017, in a published study report, researchers demonstrated that this combination extended survival times: people with melanoma lived longer on the combined treatments,
with 58% still alive after three years compared with 52% of those treated with nivolumab alone.
However, these improved survival rates were paired with reports of increased toxicity. Almost 60% of people taking the combination experienced severe side effects such as
colitis or diarrhea - three times as many as those treated with nivolumab, and twice as many as those treated with ipilimumab.
PDS believes that rational design of combination immunotherapies using agents that promote synergy with each other and reduced potential for compounded toxicity would
substantially improve potential for combination therapies to deliver improved clinical benefit for cancer patients. PDS believes that the fact that Versamune® appears to activate the appropriate combination of immunological pathways that
promote strong CD8+ T-cell induction, while also altering the tumor’s microenvironment to make the tumor more susceptible to T-cell attack, makes it an ideal complement to the checkpoint inhibitors to enhance their potency. In addition, the
differences in mechanism of action between Versamune® and checkpoint inhibitors, as well as the initial demonstrated safety profile of Versamune®, suggests that these combinations may be much better tolerated by patients than
many or most other combination therapies involving checkpoint inhibitors.
Example 1: Studies to understand the effect of Versamune®-based immunotherapy combined with a checkpoint inhibitor in a difficult-to treat preclinical tumor model:
To determine if checkpoint inhibitors enhanced the anti-tumor response of Versamune®, preclinical studies were performed employing the B16F10 melanoma model. B16F10
is a notoriously difficult tumor to successfully treat with antigen-specific immunotherapy, and monotherapy. One reason is that many of the antigens targeted are self-antigens to which there is some degree of immune tolerance. A previous study
performed by PDS demonstrated that TRP2 antigen dose was important in the ability of R-DOTAP to break the tumor’s immune tolerance, and a 75µmol dose was demonstrated to inhibit tumor growth but did not induce regression.
The Versamune® plus Trp2 formulation was shown to induce a strong CD8 T cell response. Trp2 is a 9aa tyrosinase related peptide presented by the H-2Kb molecule
(Trp2180-188: SVYDFFVWL). Subcutaneous injection with Versamune® and Trp2 resulted in strong CD8+ T-cell ELISPOT responses whereas Trp2 alone did not elicit any T-cell response (Figure 3). To determine whether anti-PD1
treatment synergized with Versamune® and Trp2 treatment in slowing the growth of B16 melanoma, mice were implanted with B16F10 melanoma and injected with Versamune® and Trp2 when tumors reached a size of 3mm. In addition, some
groups received 5 injections of anti-PD1 antibody.
Treatment with Versamune® plus Trp2 (PDS0104 prototype) resulted in significant slowing of tumor growth compared to naïve or anti-PD1 only groups, which demonstrated
no impact on tumor growth.
When Versamune® plus Trp2 vaccination was combined with anti-PD1 treatment a synergistic effect was apparent resulting in a more dramatic inhibition of tumor growth
and an extension of survival (Figure 16 B-C). Tumor growth rate was observed to increase upon halting the anti-PD1 treatment.
These results strongly suggest an effective immunotherapeutic synergy between the Versamune® T-cell activating platform and the checkpoint inhibitors. Versamune®
may therefore potentially be successfully combined with a checkpoint inhibitor in human combination immunotherapy strategies.
Figure 3: Versamune® (R-DOTAP) synergizes with anti-mouse PD1 checkpoint inhibitor
treatment to significantly alter B16 melanoma tumor growth in vivo. Groups of C57BL/6J mice (n=5) were treated with the Versamune® plus TRP2 nanoparticles or TRP2
mixed in sucrose buffer on day 0 and boosted on day 7. A) Antigen specific CD8+ T cell responses in spleen were assessed 7 days after the second vaccination by ELISPOT assay. B-C) Mice were implanted subcutaneously with 1 X 105 B16.F10
tumor cells and were subcutaneously injected with two doses of Versamune® plus TRP2 nanoparticles on day 5 and 12 after tumor implant. For anti-mouse PD1 therapy, each mouse received five doses of 200 µg of anti-mouse PD1 antibody
delivered i.p. at 3-day intervals starting on day 5 after tumor implant. B) Mean tumor volume ± SEM (n=5) in vaccinated or naïve mice. C) Survival over the course of the study.
Versamune® Mechanisms of Action (MOA)
We believe that the Versamune® platform has a multi-functional mechanism of action, or MOA, which is responsible for its strong antigen-specific T-cell activity,
that could potentially lead to clinical confirmation of efficacy (Ghandapudhi et al, J. Immunology, June 15, 2019, 202 (12) 3524-3536). PDS continues to further study and validate some of these detailed
molecular signaling mechanisms.
The section below summarizes studies that have been performed to confirm the mechanisms by which the Versamune®-based products elicit strong anti-tumor responses
apparently without the toxicities typical of current immunotherapy.
Figure 4: Summary of the versatile and multi-functional mechanism of the Versamune® platform that leads to demonstrated anti-tumor activity
Antigen Uptake
The critical first step in the process of effectively priming T-cells is uptake of disease-related antigens in the formulation. Versamune® exploits the well-studied
function of dendritic cells to “take up” particulate matter, and no targeting mechanisms are therefore believed to be required to facilitate this uptake. The positive charge of Versamune® leads to enhanced association with negatively
charged cell surfaces, resulting in high internalization by the dendritic cells.
To confirm this effective uptake by dendritic cells, a number of in-vivo confirmatory studies were successfully completed:
Example 2: In-vitro studies performed to examine the ability of Versamune® to promote antigen uptake and processing by bone marrow-derived
dendritic cells (BMDC):
The protein ovalbumin (OVA) was used as a model antigen. Uptake of OVA into BMDC was visualized using Alexa 647-OVA. BMDC were incubated for various times with Versamune®
and Alexa 647-OVA or Alexa 647 OVA alone followed by measurement of Alexa 647-OVA fluorescence by flow cytometry. Although some Alexa 647-OVA uptake was observed in BMDC incubated with Alexa 647-OVA alone, uptake was dramatically enhanced in the
presence of Versamune®. Notably, Versamune® facilitated significant uptake within the first 10 minutes and continued throughout the hour (Figure 4).
Presumably, OVA uptake mediated by Versamune® would deliver OVA into acidic endosomes where OVA processing would be expected to occur. To evaluate processing, PDS
utilized DQ-OVA, which is a heavily fluorescent OVA that self- quenches in the intact molecule, but fluoresces when degraded. Incubation of BMDC with DQ-OVA and Versamune® resulted in a significant shift to red fluorescence indicative of
extensive processing and endosomal accumulation. Incubation of BMDC with DQ-OVA and the potent adjuvant LPS did not result in enhanced processing (Figure 5). Thus, in this study, Versamune® promoted rapid protein uptake and processing in
BMDC, presumably in the endosomal compartments.
Figure 5: Versamune® enhances protein uptake by dendritic cells
Bone marrow derived dendritic cells were incubated with Alexa-647 conjugated ovalbumin admixed with sucrose or Versamune® (R-DOTAP) nanoparticles for indicated times
and the association of ovalbumin with BMDCs was represented as mean fluorescence intensity.
Figure 6: Versamune® enhances processing of antigen by dendritic cells
Bone marrow derived dendritic cells were incubated with DQ conjugated ovalbumin admixed with sucrose or Versamune® nanoparticles or LPS (1µg/ml) for indicated times
and the association of ovalbumin with BMDCs was represented as mean fluorescence intensity.
DQ-Ovalbumin processing at 60 minutes was measured by assessing the fluorescence in the FITC channel (FL1H) and the fluorescence in the PE-channel (FL2H) which represents the
ovalbumin processing.
To further examine the ability of Versamune® to influence cross presentation of antigens to killer T-cells (CD8+) by dendritic cells, studies were performed
utilizing the B3Z T cell hybridoma, which expresses a T-cell receptor specific for the CD8-specific SL9 peptide of ovalbumin presented by H-2Kb. B3Z cells express a reporter lacZ gene under the control of the nuclear factor of activated
T cells (NFAT) promoter providing a rapid and sensitive assay for the processing and presentation of SL9 antigen by dendritic cells. BMDCs were incubated with a long ovalbumin peptide (OVA241-270) containing the SL9 epitope formulated
with Versamune® nanoparticles or sucrose buffer for 1hr at 37oC to load the peptide on to BMDCs. Excess peptide was removed by washing and BMDCs were then co-cultured with B3Z cells overnight. The efficiency of SL9 peptide
cross presentation by BMDCs was measured using a colorimetric lacZ detection assay. While incubation of BMDC with peptide alone resulted in some cross presentation to B3Z cells, the addition of Versamune® nanoparticles resulted in
maximal stimulation with approximately 100-fold less peptide (Figure 6). These results suggested that Versamune® dramatically enhances cross presentation of antigens to CD8+ T-cells.
Figure 7: Versamune® promotes antigen cross-presentation to killer T-cells (CD8+) in-vitro
BMDCs were pulsed for 10 minutes with indicated concentrations of OVA (241-270) peptide admixed with sucrose (green) or Versamune® (red) and co-cultured with B3Z
cells overnight and lacZ production by OVA peptide-stimulated B3Z was measured using lacZ colorimetric assay.
Overall the studies summarized in Example 1 demonstrate the ability of Versamune® to potentially overcome a significant limitation of current immunotherapeutic
approaches. This critical limitation is the sub-optimal uptake, processing and cross-presentation of antigens resulting in weak induction of tumor-targeting killer T-cells.
Antigen Presentation
One of the most important characteristics of the Versamune®-based lipids is their ability to facilitate entry of antigens into the cytoplasm of dendritic cells, and
subsequent efficient presentation to T-cells leading to effective T-cell priming. This characteristic is expected to help the Versamune®-based products overcome one of the most significant obstacles facing the field of cancer
immunotherapy.
The use of cationic lipids in cancer and infectious disease immunotherapy has gained significant attention due to the work of Prof. Leaf Huang and the unique properties of
these lipid particles in delivering their content effectively into antigen presenting cells such as dendritic cells.
To confirm that Versamune® facilitates antigen presentation to CD8+ (killer) and CD4+ (helper) T-cells via MHC Class I and Class II, respectively, a number of
in-vivo and in-vitro confirmatory studies were performed.
Example 2: In-vivo studies to confirm the ability of Versamune® to perform cross presentation to CD8+ T-cells
To directly examine cross presentation in vivo following Versamune® administration with antigen, these studies utilized an
adoptive transfer model in which OT-I T-cell receptor (TCR) transgenic T cells specific for the CD8 epitope SL9 of ovalbumin (OVA) used as a model antigen and presented by H-2Kb were labeled with carboxy fluorescein succinimidyl ester (CFSE), a fluorescent cell staining dye and transferred into normal C57BL/6 mice.
Activation and proliferation of OT-1 cells in the adoptive transfer mice requires in-vivo processing of whole OVA into the SL9 epitope
and presentation on the H-2Kb MHC class I molecule, i.e. cross presentation. Mice were then injected in the footpad with 1μg of whole OVA admixed with either sucrose or Versamune®. Proliferation of the transgenic T cells in
the draining popliteal lymph node was assessed by flow cytometry measuring CFSE dilution in the transgenic T cells.
The draining lymph nodes (DLN) draining the Versamune® + OVA footpads were noticeably enlarged, and this was reflected in an increased total cell number isolated per
lymph node. There was also a significant increase in total OT-1, both divided and undivided in the Versamune® + OVA-treated mice compared to OVA alone (Figure 7).
Thus, Versamune® facilitated processing and MHC class I cross presentation of whole protein to CD8+ T cells in the draining lymph node when administered
subcutaneously. Similar results were obtained utilizing class-II OVA-specific transgenic T-cells demonstrating that Versamune® facilitated MHC class II presentation of whole protein to CD4+ T cells in the draining lymph node when
administered subcutaneously.
Figure 7: Versamune® (R-DOTAP) promotes antigen cross presentation in-vivo leading to superior proliferation of OT-1 CD8+
T-cells
Total number of antigen specific cells in the draining popliteal lymph nodes in each vaccinated mouse were enumerated using hemocytometer and antigen specific CD8 T cell
expansion was measured by CFSE dilution assay and total number of OT-1 CD8T cells.
Immune Activation
The ability of certain structurally-specific cationic lipids to act as potent immune activators was first reported by Prof. Leaf Huang. Subsequent studies have identified the
fact that the cationic lipids activate (or upregulate) the type I interferon genes. The type I interferon signaling pathway is well documented to be highly important in activation and proliferation of killer T-cells. PDS’s studies have demonstrated
that cationic lipids utilize certain pathways to upregulate type I interferons.
To better understand how the cationic lipids induce potent immune activation without the typically observed inflammatory toxic side effects, a number of further studies were
performed.
Example 3: Studies to understand the immunological effects of Versamune® and resulting T-cell responses
To examine the immunostimulatory effect of Versamune® in the draining lymph node, mice were injected with Versamune® nanoparticles in the footpad and
inflammatory gene expression was monitored in purified CD11c dendritic cells from the draining or non-draining popliteal lymph nodes after 4h or 24h by Nanostring multiplex analysis.
Among the inflammatory genes examined, the strongest genes up-regulated were those involved in the type I interferon pathway. These included IFNα, IFNβ, CXCL10, and Stat 1. No
induction of classical NFκB dependent cytokines was observed (Figure 8). This result suggested that Versamune® is capable of inducing type I IFN in dendritic cells.
To directly examine type I IFN production by dendritic cells, BMDC were incubated with Versamune® or LPS as a positive control for 18h and type I IFN was measured in
the B16-Blue bioassay. There was a significant dose dependent induction of type I IFN in BMDC by Versamune®.
Figure 8: Versamune® (R-DOTAP) administration induces in-vivo lymph node production of Type I interferons known to be critical for CD8+ T-cell activation.
Mice were injected with Versamune® or sucrose in the foot pad and draining popliteal lymph nodes were harvested from each mouse and CD11c cells from pooled lymph
nodes were sort purified. Relative gene expression from sort purified CD11c cells from Versamune® or LPS injected mice were analyzed using Nano string technology.
Cytokine/Chemokine Induction:
In preclinical studies, cytokine and chemokine induction were observed within lymph nodes within 24 hours of a single subcutaneous injection, and persisted for at least 5 days.
This is important as cytokines and chemokines are known to be important in the activation and proliferation of T-cells (Figure 9). A separate study performed to evaluate the effect of Versamune® on induction of 20 key cytokines and
chemokines demonstrated that, unlike a traditional T-cell activating immunotherapy used as a positive control, that Versamune® injection led to negligible increase in blood cytokine levels above normal baseline levels. This finding was
important for 2 reasons:
Figure 9: Single subcutaneous injection of PDS0101 leads to sustained and elevated levels of the important CD8+ T-cell activating chemokine CCL2 (MCP-1).
On day 0, mice (n=3) were injected with PDS0101formulation.
On the indicated days, the mice were sacrificed and the draining lymph nodes collected.
The draining lymph nodes were homogenized in 100 μl ELISA buffer (10% FBS in PBS) and then analyzed by ELISA assay.
Activation and Proliferation of T-Cells:
As noted above, Versamune® was demonstrated to induce production of various chemokines in lymph nodes. Chemokines play a major role in selectively recruiting
monocytes, neutrophils, and T-cells. It was demonstrated that, within a few hours of administering Versamune®, significant T-cell infiltration into the lymph nodes results.
Administration of Versamune® resulted in a visible increase in draining lymph node (DLN) size of wild type mice and this was due to a steady increase in total cell
number over a seven-day period (Figure 10). This increase in total cell number was found to be dependent on the ability of Versamune® to induce type I IFN signaling, as this effect was greatly reduced in IFNαR knock-out mice which are
devoid of type I interferons.
Type I IFN is known to inhibit lymphocyte egress from lymphoid organs through the up-regulation of CD69, which in turn, inhibits the sphingosine 1 phosphate receptor required
for lymphocyte egress. It has now been demonstrated that administration of Versamune® induces type I IFN in the lymph nodes, which in turn, up-regulates CD69 in T cells and natural killer cells resulting in their accumulation in the
lymph nodes. This effect facilitates effective interaction of T-cells with dendritic cells leading to effective priming of T-cells.
When Versamune® is administered together with an antigen, strong T-cell priming to recognize the particular antigen, activation and proliferation is facilitated.
Figure 11 shows a comparison of T-cell activation between Versamune® and the potent immune activator GM-CSF, demonstrating higher levels of CD8+ T-cell induction by Versamune®.
Quality of induced T-Cells:
A qualitative factor now known to be highly important in the ability of T-cells to lyse, or kill, infected cells is the quality or potency of T-cells. T-cell quality is
directly related to its polyfunctionality, or its ability to induce more than one cytokine. In order to better understand the strength of Versamune®-induced immune responses and their clinical relevance, head-to-head comparisons were
made with promising adjuvant-based therapeutic vaccine formulations which had shown promise in preclinical and clinical studies.
We first compared a prototype Versamune®-MUC1 formulation (PDS0103) to two emulsion-based adjuvants in clinical development. Montanide is a proprietary emulsion
adjuvant currently being used in peptide-based cancer vaccines. Another potent emulsion-based combination adjuvant formulation specifically designed to induce strong in-vivo CD8 T cell responses consists of
the 4-adjuvant combination of incomplete Freund’s adjuvant, IL-12, GM-CSF, and HBV128-140 helper epitope (IFA-Cyt). Mice receiving PDS0103 showed strong responses to both V1A and V2A CD8+ stimulatory. In contrast IFA-Cyt generated an
equivalent strong response only to V2A, and Montanide induced responses were significantly lower for both V1A and V2A peptides.
Next, the polyfunctionality (ability to produce multiple cytokines) of induced antigen specific CD8 T cells was assessed by measuring their ability to produce cytokines
interferon-gamma (IFN-γ), tumor necrosis factor-alpha (TNF-α) or interleukin-2 (IL-2) by intracellular cytokine staining. In this assay, it was observed that Versamune®-based formulations stimulated the highest percentages of
polyfunctional antigen specific CD8 T cells compared to the other two tested emulsion-based lipid formulations (Figure 13), suggesting that Versamune® may induce not only a higher number of CD8 T-cells in-vivo,
but also potentially qualitatively superior T cells (higher potency) compared to other typical immunotherapy approaches.
Figure 11: Versamune® (R-DOTAP) formulations containing multiple MUC-1 tumor associated antigens (PDS0103) induce quantitatively superior CD8 T cells responses.
Groups of AAD mice (n=6) were injected with the indicated formulations containing MUC-1 CD8 T cell epitope antigens on day 0 and boosted on day 7. MUC-1 specific CD8 T cell
responses in the spleen were assessed 7 days after the second injection by ELISPOT assay. (A) Number of V1A, V2A, C1A, and C2A specific IFN-γ producing cells in spleens from mice injected with Human MUC-1 peptides. (C) Number of V1A, and
V2A specific IFN-γ producing cells in spleen from mice vaccinated with Versamune®, IFN-Cyt or Montanide formulations containing Human MUC-1 peptides. Versamune induces approximately a 10 fold higher number of polyfunctional
(the most potent) T-Cells then other leading therapies.
Figure 12: Versamune® (R-DOTAP) formulations containing multiple MUC-1 tumor associated antigens (PDS0103) induce qualitatively superior CD8 T cells responses.
Groups of AAD mice (n=6) were injected with the indicated formulations containing MUC-1 CD8 T cell epitope antigens on day 0 and boosted on day 7. Fraction of V1A or
PMA/Ionomycin (positive control) stimulated cells in spleen producing multi-cytokine (IFN-γ, TNF-α, and IL-2) among the IFN-γ producing cells. PMA/Ionomycin is a commonly used in-vitro
stimulant used to induce cytokine production by T-cells for research purposes.
Enantiomeric Specificity of the Cationic Lipids: Cationic lipids exist as 50:50 racemic mixtures of two asymmetric molecules, each called an enantiomer. Enantiomers are
referred to as chiral, meaning they have identical physical and chemical structure and are mirror images of each other. Each of the enantiomers can be regarded as separate chemical entities if they can be demonstrated to possess different
biological activity. PDS discovered that the R-enantiomer of the cationic lipid DOTAP is the immuno-active component of the mixture, with the S-enantiomer having weaker immune activating capability. R-DOTAP is the active ingredient now used in
Versamune®. PDS’s products are the first pharmaceutical products to contain a pure cationic lipid enantiomer, and its use in cancer immunotherapy is protected by several issued patents.
Altering the Tumor Microenvironment to Overcome Immune Suppression
The demonstrated ability of Versamune® to induce effective regression of established tumors strongly suggested that cationic lipids, such as R-DOTAP, could
facilitate an altering of the tumor micro-environment sufficient to break tumor immune tolerance and induce killing of tumor cells.
Example 4: Studies to understand the effect of the Versamune®-based immunotherapy on the tumor’s microenvironment:
To better understand Versamune®-induced changes within the tumor microenvironment, TC-1 tumor bearing B6 mice were subcutaneously injected on day 0 and day 7 with a
Versamune®-based formulation containing a multi-epitope HPV peptide antigen (KF18) and assessed the effector (T-cell) and suppressor T cell (immune suppressive regulatory T-cells) recruitment to the tumor microenvironment on day 26. For
comparison, a GMCSF adjuvant-based formulation that has been shown to induce strong CD8+ T cell immune responses in vivo in a clinical setting was also evaluated for comparative purposes. ELISPOT analysis
(Figure 11) of CD8+ specific T cells (RF9) showed that tumor-bearing mice treated with the Versamune®-based formulation induced a superior sIFN-γ ELISPOT response to the RF9 CD8 T cell epitope detected in the spleens 7 days after the
second injection.
Mice treated with GMCSF + KF18 stimulated a modest antigen specific T cell ELISPOT response, while, as expected, no response was observed with KF18 antigen alone, GMCSF, or
Versamune® alone. To evaluate the tumor microenvironment during Versamune® induced tumor regression, groups of mice were treated with Versamune® + an HPV multi-peptide mixture containing KF18, with or without GMCSF.
To assess the cell types present within the tumor after various treatments, tumors were removed, enzymatically digested and cell populations analyzed by flow cytometry. CD4
helper T-cells, RF9-specific CD8 killer T-cells, FOXP3+ immune suppressive regulatory T-cells (Treg) were analyzed.
Versamune® + HPV peptide treated mice showed the highest percentage of CD8+ T cells within the tumor, and about 50% of these cells were RF9 specific. GMCSF and
antigen, or antigen alone did not induce significant CD8 or CD8-RF9 specific T cell infiltration into the tumors. The CD8/CD4 ratio was highest in the Versamune® + HPV mix group and the Treg/RF9 specific T cell ratio within the tumors
was dramatically lower in the Versamune® and HPV mix groups (Figure 14).
These data collectively suggest that Versamune®-based formulations induced a quantitatively superior antigen specific T cell response and the cells were actively
recruited to the tumors in large numbers promoting anti-tumor responses and eventually alter the tumor’s microenvironment to promote regression and elimination of established tumors.
Figure 13: Versamune® efficiently alters effector T-cell to immune suppressor T cell ratio within the tumor, therefore promoting tumor regression.
Groups of C57BL/6J mice (n=5) were injected with the indicated formulation containing a HPV peptide antigen mixed with Versamune®, Versamune® plus GM-CSF,
GMCSF, or sucrose on day 0 and injected again on day 7. Mice (n=10) were implanted subcutaneously with 1 X 105 TC-1 tumor cells and were given a single dose of each formulation when the tumors reached an average diameter of 4-5 mm on
day 11 and tumor growth was monitored. The mice (n=5) were euthanized 8 days post treatment when the mice showed initial signs of regression and the tumors were processed to assess tumor infiltrating cells. Ratio of CD4/CD8 cells and ratio of
immune suppressive Treg cells/RF9 CD8+ positive cells in the enzymatically digested tumor cell suspension were evaluated. Data represent mean ± SEM from each group (n= 5) and experiments are repeated at least 3 times with similar results.
Discussion of the effects of the studied attributes of Versamune® on tumor regression
T-cell-inducing immuno-therapeutic approaches to date have primarily focused on optimizing antigen-specific CD8 T cell induction. These approaches include designs to enhance
antigen delivery, uptake and presentation of antigen including approaches such as the use of DNA, viral or intracellular bacterial vectors, nanoparticles, targeting of the antigen to DC through conjugation or pulsing DC in vitro with antigen.
Most of these approaches also include immunostimulatory compounds, typically toll-like-receptor, or TLR, agonists designed to induce the desired cytokine production. Still
others include recombinant cytokines like IL-2, IL-12 or GMCSF. PDS’s demonstration that the Versamune® platform functions as an activator of the type I interferon pathway in addition to promoting antigen presentation via the MHC Class I
pathway, explains the apparent unique ability of Versamune® formulations to induce potent T-cell responses without inclusion in the formulation of extraneous cytokines or TLR agonists.
One of the most effective cancer vaccines reported to date consists of:
This complex multi-component immunotherapy induced strong CD8+ T-cell responses and tumor regression in the HPV-positive TC-1 mouse model. However, in the absence of anti-PD1
checkpoint blockade, this product did not induce complete regression of a TC-1 tumor using the same RF9 peptide antigen as in PDS’s studies.
In contrast, Versamune® nanoparticles, formulated with HPV peptide antigen KF18, effected complete regression of large TC-1 tumors in mice with a single subcutaneous
injection (Figure 15). PDS’s studies support the projection that Versamune® nanoparticles, combined with protein or peptide antigens, may possess the critical properties for a powerful CD8+ T-cell immunotherapy. These include:
Figure 14: Versamune® (R-DOTAP) efficiently alters effector to suppressor T cell ratio promoting effective regression of HPV-positive TC-1 tumors.
Groups of C57BL/6J mice (n=10) were implanted subcutaneously with 1 X 105 TC-1 tumor cells and were given a single dose of a formulation containing HPV CD8 T cell
epitopes mixed with Versamune®, Versamune® plus GM-CSF, GMCSF, or sucrose when the tumors reached an average diameter of 4-5 mm on day 11 and tumor growth was monitored. Tumor regression only occurred in the formulations
containing Versamune®. Addition of GMCSF to Versamune® appeared to provide no additional benefit.
Anti-Tumor Efficacy in Advanced and Immuno-Suppressive B16F10 Model:
PDS utilized the aggressive subcutaneous B16F10 animal model in order to study Versamune® anti-tumor efficacy in a well-documented and extremely highly
immuno-suppressive tumor microenvironment. This study was a follow-up to above described studies showing potent anti-tumor activity in HPV-positive TC-1 tumors with single doses.
The advanced B16F10 solid tumor model is rarely used in cancer immunotherapy development. More often, the prophylactic model is evaluated, where treatment occurs prior to
inoculation with B16F10 tumor cells with the goal of preventing establishment of tumors. This is because once the tumors become well-established, various immune-suppressive mechanisms develop in tumors that are able to suppress T-cell activity.
This suppression results in a lack of T-cell anti-tumor effect.
This study utilized an advanced tumor model, with 3 x 105 B16F10-luc cells subcutaneously inoculated into mice, to ensure that all mice had established and
measurable tumors within 6 days of tumor cell inoculation.
Examples of reported B16F10 studies using selected other immunotherapeutic technologies:
In PDS’s published study (Vasievich et al, Molecular Pharmaceutics, 2012, 9, 2, 261-268), a single dose of 300nmole Versamune®
with 75nmole Trp2 peptide led to a significant increase in the presence of active CD8+ T-cells (IFN-γ secreting) and inhibition of tumor growth.
The ability of Versamune® to facilitate intracellular delivery of the Trp2 peptide, and to break the immune tolerance developed by the B16F10 tumor model after only one dose, strongly
suggests that Versamune® may potentially provide a superior approach to currently available technologies.
Leadership
We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. Our founder and Chief Executive Officer, or CEO, Frank Bedu-Addo,
has been responsible for developing and launching products for Schering-Plough/ Merck and Liposome Company/ Elan. Our other co-founder and Chief Scientific Officer, Dr. Gregory Conn, has more than 35 years of drug-development experience,
including development of antiviral and anticancer drugs through to commercialization. Other members of our senior management team have held senior positions at the National Cancer Institute Center for Cancer Research, , National Institute of
Allergy and Infectious Diseases, Auxilium Pharmaceuticals and EndoHealth Solutions. In addition, our Chairman, Stephen Glover was President of Insmed Therapeutic Proteins and is the current CEO of ZyVersa Therapeutics.
We are supported by scientific leaders in the field of vaccine development and oncology. Among the distinguished experts on our Scientific Advisory Board are Dr. Mark Einstein and Professor Leaf
Huang. Dr. Einstein, Professor and Chair in the Department of OB/ GYN & Women’s Heath at Rutgers University Medical School is an expert in HPV-related pathogenesis, therapy and prevention of lower anogenital tract and gynecologic cancers. He
is an active leader for management guidelines and translating clinical study and translational data for the World Health Organization (WHO), American Cancer Society (ACS), Society of Gynecologic Oncology (SGO) and the American College of Obstetrics
and Gynecology (ACOG). Professor Leaf Huang, the scientific founder of PDS, is a Distinguished Professor of Pharmacoengineering and Molecular Pharmaceutics at the Eshelman School of Pharmacy, University of North Carolina at Chapel Hill pioneered
the liposome design and manufacture of cationic lipid vector nanoparticles as a delivery system for cDNA, mRNA, siRNA, proteins and peptides for tumor growth inhibition and for vaccines in treating cancer and infectious diseases. Our Principal
Investigator for the PDS0101 Head and Neck Study with KEYTRUDA for first-line treatment of recurrent/ metastasic Head and Neck Cancer is Dr. Jared Weiss, Associate Professor of Medicine, University of North Carolina Lineberger Comprehensive Cancer
Center, who is an expert in head and neck thoracic oncology with a focus on immunotherapeutic approaches for these diseases. Our board member Sir Richard Sykes was the CEO and Chairman of GSK.
Research and Development Strategy
PDS focuses on developing a relatively low-risk path to successful clinical development and proof of concept (“POC”). To accomplish this, PDS formed collaborations with a
number of experts in tumor biology, immunology and immuno-oncology. These partnerships have historically reduced PDS’ development and clinical study expenses. Partnerships also have provided and continue to provide PDS with expert clinical
collaborators, who have been intricately involved the design of PDS’ upcoming Phase 2 clinical studies.
Extensive preclinical studies were performed to understand how cationic lipids interact with the immune system to prime CD8+ T-cell responses. Upon obtaining a good
understanding of the immunology of the lipids and their interaction with tumor antigens, PDS optimized and evaluated PDS0101 for safety in extensive toxicology studies. Once safety was confirmed in preclinical models, PDS0101 was subsequently
studied in a Phase 1 human clinical study in order to confirm safety and to confirm induction of strong HPV-specific CD8+ T-cell responses in humans.
As described herein, PDS is continuing development of the PDS0102, 0103, and 0104 programs in colorectal, melanoma, breast, lung, and prostate cancers.
Based on the successful Phase 1 human clinical study, which corroborated the preceding preclinical data, PDS established clinical supply agreements and collaborations with
leaders in the field of immuno-oncology, including the NIH/NCI and Merck & Company, Inc. (“Merck”).
Facilities & Manufacturing and commercial scale up
Product candidates using our Versamune® development platform are manufactured using a readily-scalable, fill-finish process with well-defined and
reproducible operations. We do not own or operate cGMP compliant manufacturing facilities for the production of any of our product candidates and we do not have plans to develop our own manufacturing operations in the foreseeable future. We
currently rely on third-party contract manufacturing organizations (“CMOs”) to produce the amounts of our product candidates necessary for our preclinical research and clinical studies. As part of the manufacture and design process for our product
candidates, we rely on internal, scientific and manufacturing know-how and trade secrets and the know-how and trade secrets of third-party manufacturers. We currently employ internal resources to manage our manufacturing contractors.
PDS research and development activities are located at the Princeton Innovation Center BioLabs, 303A College Road East, Princeton, NJ 08540, which provides first-rate
development facilities for biotech companies. All animal toxicology and efficacy testing are done via third party contracts and collaborations in order to provide maximum flexibility and to minimize operational costs and overhead. This approach
allows for independent validation of our data, and we believe it has historically been a cost-efficient way to progress our development programs.
We do not intend to incur the costs of building, staffing and maintaining manufacturing facilities in the near term. Our management team has extensive formulation,
manufacturing and operations expertise, including past senior executive management roles in contract drug development and manufacturing. The team plans to utilize its expertise and knowledge to identify suitable contract manufacturers who will be
capable of efficiently manufacturing PDS’s products.
Regulatory Pathway
For our lead product candidate, PDS0101, the next step in the product development process will be Phase 2 clinical trials. This process is described further under “U.S.
Product Development Process.” The final protocols for the PDS0101 study for treatment of recurrent metastatic head and neck cancer and the final protocol for the PDS0101 study with the NCI have been submitted to the FDA. For PDS0101 we
plan to submit a Chemistry, Manufacturing, and Controls (CMC) amendment to our Investigational New Drug (IND) application, related to PDS’s planned Phase 2 studies with PDS0101 to the FDA in 1H 2020. This is to conform to the FDA electronic Common
Technical Document_(eCTD) format requirement and submission of the CGMP material that will be used in the Phase 2 trials.
If Phase 2 clinical trials are initiated and completed and support further development, under standard FDA processes we would then need to complete Phase 3 clinical trials and gather other
necessary application data and information for PDS0101 to seek marketing authorization.
PDS anticipates that it would seek marketing authorization from the U.S. FDA for its product candidates through the Biologics License Application (BLA) pathway, under Section 351(a) of the Public
Health Service Act (PHSA). This process and the requirements are described further under “U.S. Product Development Process.”
Intellectual Property
PATENTS
We seek to maintain high barriers to entry around our product candidates and the markets in which they are utilized by using a multiple layered approach to our patents, patent
applications, and substantial know-how and trade secrets related to the Versamune® platform. PDS strives to protect and enhance the proprietary technology, inventions and improvements that are commercially important to its business, including
seeking, maintaining, and defending patent rights. PDS also relies on trade secrets relating to its platform and on know-how, continuing technological innovation to develop, strengthen and maintain its proprietary position in the vaccine field. In
addition, PDS relies on regulatory protection afforded through data exclusivity, market exclusivity and patent term extensions where available. PDS also utilizes trademark protection for its company name, and expects to do so for products and/or
services as they are marketed.
PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune® platform. As of December 31,
2019, PDS holds four (4) U.S. patents with granted claims directed to its platform technology and six (6) pending patent applications. These issued patents will expire in 2025, 2031, 2031 and 2033. Should the more recently submitted patents
currently in prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of December 31, 2019, PDS holds twenty-two (22) issued foreign patents and thirty-three (33) pending foreign patent
application, most of which are issued in multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform technology. These issued patents will expire in 2031-2034,
or later if patent term extension applies.
The United States Patent and Trademark Office (USPTO) recently granted Patent No. 15/702,063 titled “Stimulation of an Immune Response by Enantiomers of Cationic Lipids.” This
patent provides protection for compositions of matter and specifically the immune activating compositions containing Versamune®, the immunologically active enantiomer of the cationic lipid 1,2-dieleoyl-3-trimethyl-ammonium-propane (R-DOTAP) and a
specific antigen.
Licensed Patents
Licensed Patent Families 1 and 2 cover the Versamune®-based product candidates, as they are directed to the currently utilized Versamune® ingredient,
(R)-DOTAP and its crystal forms, manufacturing methods, and pharmaceutical compositions using the compounds. PDS Biotechnology has an exclusive worldwide license from Merck & Cie to Licensed Patent Families 1 and 2, which are owned by Merck
Patent GmbH, for use in the Company’s immunotherapy compositions and immunotherapies. Merck & Cie has informed the Company that it has rights to license these patent families through an intra-company agreement with Merck Patent GmbH.
Licensed Patent Families 1-2 (which cover (R)-DOTAP compositions and crystal forms and methods of use) are also of significance to the Company’s future commercial endeavors in
using (R)-DOTAP to develop additional immunotherapies and immune modulators.
Licensed Patent Families 3 and 4 are licensed from the US government and are directed to mucin-1 (“MUC-1”) antigens to be used by the Company in future cationic lipid
immunotherapy or vaccine products. Such immunotherapies can be used for treating a range of cancers, including colon, breast, ovarian and lung cancers.
Trade Secrets and Other Proprietary Information
In contrast to patent protection or regulatory exclusivities, trade secret protection is a form of intellectual property that does not require disclosure of the subject information as part of the
process, but instead depends on maintaining the subject information as strictly confidential. Companies may in some circumstances rely on trade secrets to protect certain aspects of their proprietary know-how and technological advances, especially
where they do not believe patent protection is appropriate or obtainable. Trade secret protection depends in part on confidentiality agreements with employees, consultants, outside scientific collaborators, sponsored researchers and other advisors
that prohibit disclosure of designated proprietary information. Trade secrets can be difficult to protect. Confidentiality agreements may not succeed in preventing a person or parties from actually disclosing confidential information, and in that
event the rights of the trade secret holder are subject to the viability of an adequate remedy at law, typically under state law modeled on the Uniform Trade Secrets Protection Act, to stop, mitigate or compensate for the unauthorized disclosure of
confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the proprietary rights. Finally, there is always at least some risk that others may independently discover the trade secrets
and proprietary information.
Material License Agreements and Research and Development Agreements
Patent License Agreement with National Institutes of Health.
Effective January 5, 2015, PDS entered into a Patent License Agreement (the “Patent License Agreement”) as Amended by First Amendment to Patent License Agreement (“First
Amendment”) of August 5, 2015, with the National Institutes of Health (“NIH”) an agency within the Department of Health and Human Services (“HHS”), pursuant to which NIH granted PDS a nonexclusive license to certain patent rights for the
development of a therapeutic cancer vaccine specifically in combination with PDS’s proprietary Versamune® technology for ovarian, breast, colon and lung cancers. The Patent License Agreement expires when the last licensed patent expires,
if the Patent License Agreement is not terminated prior to that date. NIH may terminate the Patent License Agreement if PDS is in default in the performance of any material obligation under the Patent License Agreement. PDS may unilaterally
terminate the Patent License Agreement in any country or territory upon sixty (60) days written notice.
Under the Patent License Agreement and First Amendment PDS agreed to pay NIH: (a) a noncreditable, nonrefundable royalty in the amount of $30,000 upon execution of the Patent
License Agreement; (b) a noncreditable, nonrefundable royalty in the amount of $60,000 upon execution of the First Amendment to Patent License Agreement (c) a nonrefundable minimum annual royalty of $5,000; (d) earned royalties of two percent (2%)
on net sales, reducible by a half percent (0.5%) for any earned royalties PDS must pay to third parties; (e) benchmark royalties as follows: (i) $25,000 upon successful completion of each Phase 2 Clinical Studies of a licensed product for breast,
colon, lung or ovarian cancer within each licensed territory; (ii) $50,000 upon initiation of the first Phase 3 Clinical Study of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (iii) $750,000 upon the
first commercial sale in the licensed territory utilizing and/or directed to licensed product(s) and/or licensed process(es) within the licensed patent rights for breast, colon, lung or ovarian cancer; and (f) additional sublicensing royalties for
each sublicense required to be approved by NIH of four percent (4%) on the fair market value of any consideration received for granting such sublicense.
DOTAP Chloride Enantiomer License Agreement with Merck Eprova AG.
Effective November 1, 2008, PDS entered into a DOTAP Chloride Enantiomer License (the “DOTAP License Agreement”) with Merck Eprova AG (“EPRO”), pursuant to which PDS obtained
an exclusive license from EPRO technology to undertake development of products relating to the R-enantiomer and S-enantiomer of DOTAP Chloride for worldwide commercialization in a composition and method of inducing an immune response in a subject
by administering at least one cationic lipid with or without an antigen. The DOTAP License Agreement expires on a licensed product-by-licensed product and country-by-country basis until the expiration of the obligation to pay royalties applicable
to such licensed product in such country. PDS has the right to unilaterally terminate the DOTAP License Agreement (in its entirety or on a licensed product-by-licensed product or country-by-country basis) at any time for any reason upon prior
written notice. Upon the reverse merger and according the agreement under the “Compensation due to Assignability” provisions PDS paid a one-time royalty of CHF 100,00 as a result of the reverse merger between PDS and Edge Therapeutics.
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services.
Effective February 2, 2016, PDS entered into a Cooperative Research and Development Agreement (the “CRADA”) with the U.S. Department of
Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as defined by the exhibited
Research Plan. The principal goal of the CRADA is to determine whether PDS’s Versamune® immunotherapeutic technology will be effective for enhancing delivery of cancer vaccines or viral vaccines or other immunotherapies developed by the
Vaccine Branch, Center for Cancer Research, NCI, in mouse models and in human clinical studies. The CRADA provides for development, testing and studies to be conducted in conjunction with the Vaccine Branch involving Versamune® and
Multi-epitope (ME) T cell receptor gamma alternate reading frame protein peptide (TARP) to develop a treatment for prostate cancer using autologous dendritic cells and co- administered locally with ME TARP peptides co-formulated with Versamune®
immunotherapeutic technology in a non-cellular vaccine platform.
The term of the CRADA is five (5) years, starting February 2, 2016. Pursuant to Appendix A, PDS agreed to provide up to $1,000,000 but no less than $500,000 during the first
year of the CRADA and up to $1,000,000 but no less than $750,000 per year for the remaining years of the CRADA for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as
well as to pay for supplies and travel expenses and, upon consent of the parties, to acquire support for a postdoctoral research fellow to conduct additional preclinical studies. The CRADA may be terminated by either party at any time by mutual
written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If PDS terminates prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, PDS must supply
enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, PDS must pay non-cancellable obligations for personnel for a
period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is sooner. If PDS suspends development on the test article without the transfer of its active development efforts, assets, and obligations to a
third party within ninety (90) days of discontinuation, NCI may continue development. In such event, PDS must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive,
irrevocable, worldwide, paid-up license regarding same.
Cost Reimbursement Agreement with University of Kentucky Research Foundation - I.
Effective November 1, 2015, PDS entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”),
pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and
was renewed on July 1, 2019 for an anticipated cost of $333,496. The agreement terminates on June 30, 2020 unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost
Reimbursement Agreement for any reason with thirty (30) days written notice.
Cost Reimbursement and Sponsored Agreement with University of Kentucky Research Foundation - II.
Effective November 1, 2015, PDS entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”),
pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and
was renewed on July 1, 2019 for an anticipated cost of $12,963. The agreement terminates on June 30, 2020 unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost
Reimbursement Agreement for any reason with thirty (30) days written notice.
Clinical Trial Collaboration and Supply Agreement with MSD International GmbH.
Effective May 19, 2017, PDS entered into a Clinical Trial Collaboration and Supply Agreement (the “CTCSA”) with MSD International GmbH (“Merck”) pursuant to which PDS and Merck
agreed to collaborate in a Phase 2 clinical study to evaluate the safety, and preliminary efficacy of the concomitant and/or sequenced administration of the combination of a Merck compound (i.e., pembrolizumab, a humanized anti-human PD-1
monoclonal antibody) and a PDS compound (i.e., PDS0101, a cationic lipid-based therapeutic vaccine combining HPV peptides) in treatment of patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV 16)
infection. The term of the CTCSA commenced on May 19, 2017 and shall continue until the earlier of (i) delivery of the final study report and (ii) Study Completion (i.e., upon database lock of the Study results), or until terminated by either
party. In the event the CTCSA is terminated by Merck upon a material breach by PDS, PDS must reimburse Merck for its direct manufacturing costs, such as manufacturing fees, raw materials, direct labor, freight and duty, factory overhead costs and
its indirect manufacturing costs, such as allocations of indirect factory overhead and site support costs. This agreement was amended on October 28, 2019 to reflect the study will be for first in line treatment of disease.
On October 28, 2019, PDS entered into an amendment to the clinical trial collaboration agreement with Merck to evaluate the combination of PDS’s lead Versamune®-based
immunotherapy, PDS0101, with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in a Phase II clinical study. The planned clinical study will now evaluate the efficacy and safety of the combination as a first-line treatment in patients with
recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection and is expected to be initiated in the first half of 2020. The modification to the clinical study design to evaluate PDS0101 in combination with
KEYTRUDA® as first-line treatment comes as a result of Merck’s approval by the FDA on June 10, 2019 for first line treatment of patients with metastatic or unresectable recurrent head and neck squamous cell carcinoma (HNSCC) using KEYTRUDA® in
combination with platinum and fluorouracil (FU) for all patients and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test.
Other Research and Development Agreements
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services.
Effective April 22, 2019, PDS entered into a Cooperative Research and Development Agreement (the “CRADA”) with the U.S. Department of
Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as defined by the exhibited
Research Plan.. Under the agreement, PDS will collaborate with the NCI’s Genitourinary Malignancies Branch (GMB) and Laboratory of Tumor Immunology and Biology (LTIB) with plans to conduct a Phase 2 clinical study evaluating PDS0101 with novel
immune-modulating agents M7824 and NHS-IL12 being studied at NCI as part of a CRADA with EMD Serono (Merck KGaA). The phase 2 clinical study is anticipated to start in the first quarter of 2020. The CRADA also involves preclinical evaluation of
PDS0101 in combination with other therapeutic modalities upon the mutual agreement of both parties.
The term of the CRADA is five (5) years, starting April 22, 2019. Pursuant to Appendix A, PDS agreed to provide $110,000 annually, the first payment of which is to be made on
the first anniversary the of the CRADA Effective date or upon the initiation of a Phase II clinical study as the NIH Clinical Center, whichever comes first for NCI to use in connection with acquiring technical, statistical, and administrative
support for the clinical research activities, as well as to pay for supplies and travel expenses and infrastructure costs. The CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate
the CRADA at any time by providing sixty (60) days written notice. If PDS terminates prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, PDS must supply enough study test product to complete these study
protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, PDS must pay non-cancellable obligations for personnel for a period of six (6) months after the termination date
or until the expiration date of the CRADA, whichever is sooner. If PDS suspends development on the test article without the transfer of its active development efforts, assets, and obligations to a third party within ninety (90) days of
discontinuation, NCI may continue development. In such event, PDS must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license
regarding same.
Amended and Restated Material Transfer Agreement with Farmacore Biotechnology
On December 4, 2019 PDS entered into an Amended and Restated Material Transfer Agreement with Farmacore Biotechnology to develop a novel tuberculosis (TB) immunotherapy based
on Farmacore’s proprietary TB antigens and Versamune®. A prior material transfer agreement under which preliminary work commenced was Amended and Restated due to promising early pre- clinical results and to progress to the next
development phase. PDS will undertake product development and Farmacore will conduct pre-clinical studies to evaluate the efficacy of the product. The term of the agreement extends until the end of the product testing period and may be terminated
at any time by either party with 30 days’ notice.
Competition
The biotechnology and pharmaceutical industries are characterized by intense competition to develop new technologies and proprietary products. While PDS believes that the
Versamune® platform provides it with competitive advantages, PDS faces competition from many different sources, including biotechnology and pharmaceutical companies, academic institutions, government agencies, as well as public and private research
institutions. Any products that PDS may commercialize will have to compete with existing products and therapies as well as new products and immunotherapies that may become available in the future.
PDS anticipates that it will face intense and increasing competition as new immunotherapies enter the market and advanced technologies become available. PDS expects any
products that it develops and commercializes to compete on the basis of, among other things, efficacy, safety, convenience of administration and delivery, price, availability of therapeutics, the level of generic competition and the availability of
reimbursement from government and other third-party payors. PDS’s competitors may obtain FDA or other regulatory approval for their products more rapidly than it may obtain approval for its products, which could result in PDS’s competitors
establishing a strong market position before it is able to enter the market. In addition, the ability of PDS to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
There is currently no approved HPV therapeutic product available for sale globally. PDS has performed an evaluation of HPV therapeutic products in development and considers the
products utilizing effective antigen delivery systems to the dendritic cells to be its closest competitors. PDS believes its top clinical-stage competitors include Advaxis, Transgene, ISA Pharmaceuticals, and Inovio. PDS also has considered
companies developing closely related products as competitors, including Etubics, Vaccibody, Admedus, Cel-Sci, Neo-ImmuneTech, Kite Pharma, Immune Design, Dynavax, Bavarian Nordic, Seattle Genetics, and Selecta Biosciences.
Government Regulation and Product Approval
Federal, state and local government authorities in the United States and in other countries extensively regulate, among other things, the research, development, testing,
manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biological and pharmaceutical products such as
those PDS is developing. PDS’s product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries.
Generally, its activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States. The process for obtaining regulatory marketing approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
U.S. Product Development Process
In the United States, the FDA regulates biological drug products under the Federal Food, Drug and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and
implementing regulations. Products are also subject to certain other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign
statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-approval, may
subject an applicant to administrative or judicial action. FDA decisions or enforcement actions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product
recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or
judicial enforcement action could have a material adverse effect on PDS.
The process required by the FDA before a biological drug product may be marketed in the United States generally involves the following:
Before testing any product candidate in humans, the product enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory
evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements
including GLP. The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of
the IND. Some preclinical testing may continue even after the IND is submitted. The results of preclinical studies and early clinical studies of product candidates with small patient populations may not be predictive of the results of later-stage
clinical studies or the results once the applicable clinical studies are completed. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical studies and
places the study on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a biological
product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA.
Accordingly, PDS cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.
Clinical trials involve the administration of the biological product candidate to volunteers or patients under the supervision of qualified investigators, generally physicians
not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection (for example, inclusion and exclusion
criteria), and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to
the FDA as part of the IND and also require IRB approval. Clinical trials must be conducted and monitored in accordance with the FDA law including GCP requirements, including the requirement that all research subjects provide informed consent.
Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and
rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the
informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or
be combined:
Although these are the typical phases of progression, and characteristics of the phases of a clinical development program, certain expedited programs allow for variations that
could support a marketing application based on surrogate endpoints, intermediate clinical endpoints, or single-arm as opposed to comparative or placebo-controlled studies (for example, FDA could rely on well-controlled Phase 2 studies for evidence
of effectiveness under certain circumstances).
Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies are used to gain
additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up, or to gain other information about the product.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial
investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators of potential safety risks, from clinical trials
or any other source, including for serious and unexpected adverse events and serious and unexpected suspected adverse reactions, any findings from other studies suggesting a significant risk in humans exposed to the drug, tests in laboratory
animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must
submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as
possible but no later than within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA, the
sponsor or its data safety monitoring board, or DSMB, may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can
suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to subjects.
Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website,
and other jurisdictions have similar laws that may apply.
Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical characteristics of the
biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the
PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other
criteria, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to
demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must
include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes require
substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant application fee. For approved drugs, including BLA-licensed
biological products, PDUFA also imposes an annual PDUFA program fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first
application filed by a small business. No user fees are assessed on BLAs for products designated as orphan drugs, unless the application for the product also includes a non-orphan indication.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing.
The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission, and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted
application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the
proposed product is safe, potent, and/or effective for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength,
quality, potency and purity. The FDA may refer an application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, and applications for new molecular entities and original BLAs are
generally discussed at advisory committee meetings unless the FDA determines that this type of consultation is not needed under the circumstances. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product.
If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.
Before approving a BLA, the FDA will typically inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it is satisfied that the
manufacturing establishments and processes supporting the BLA meet the appropriate requirements and comply with the applicable regulations (including cGMP requirements and adequate assurance for consistent commercial production of the product
within required specifications). Additionally, before approving a BLA, the FDA will typically conduct a pre-approval inspection of regulated participants in clinical trials (for example, the sponsor, investigators responsible for specific sites,
and CROs) to assure that the clinical trials were conducted in compliance with the IND and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training,
record keeping, production, and quality control.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny
approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than PDS interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete
response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies.
Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA,
addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which
could restrict the commercial value of the product.
Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on
product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase 4 clinical
studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA for a new indication, dosage form, dosage regimen, or route of administration must contain
data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is
safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the
pediatric data requirements.
Post-Approval Requirements
Any products for which PDS receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of
adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others,
standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses or consistent with the approved labeling, known as ‘off-label’ use,
limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, if the physicians deem to
be appropriate in their professional medical judgment, manufacturers may not market or promote such off-label uses. Recent court decisions have impacted the FDA’s enforcement activity regarding off-label promotion in light of First Amendment
considerations; however, there are still significant risks in this area in part due to the potential False Claims Act exposure. Further, the FDA has not materially changed its position on off-label promotion following legal setbacks on First
Amendment grounds and the DOJ has consistently asserted in FCA briefings that “speech that serves as a conduit for violations of the law is not constitutionally protected.”
In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability of
the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP.
Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA
and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a
product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are
strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and claims, are also subject to further FDA
review and approval.
The Drug Supply Chain Security Act, or DSCSA imposes obligations on manufacturers of prescription biopharmaceutical products for commercial distribution, regulating the
distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of entities in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers,
and dispensers). The DSCSA preempts certain previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing Act, or PDMA. Trading partners within the drug supply chain must now ensure certain product tracing
requirements are met that they are doing business with other authorized trading partners; and they are required to exchange transaction information, transaction history, and transaction statements. Further, the DSCSA limits the distribution of
prescription biopharmaceutical products and imposes requirements to ensure overall accountability and security in the drug supply chain. Product identifier information (an aspect of the product tracing scheme) is also now required. The DSCSA
requirements, development of standards, and the system for product tracing have been and will continue to be phased in over a period of years through 2023, and subject companies will need to continue their implementation efforts. Many states still
have in place licensure and other requirements for manufacturers and distributors of drugs. The distribution of product samples continues to be regulated under the PDMA, and some states also impose regulations on drug sample distribution.
The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown
problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or
communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and
contraindications, and also may require the implementation of other risk management measures. Also, 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 its product candidates under development.
Regulatory Exclusivities Applicable to Biologics and Related Matters
Abbreviated Licensure Pathway for Biosimilars: The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) amended the PHSA to create an abbreviated approval pathway for “biosimilar”
biologics, that is, those shown to be highly similar to an already-FDA-licensed reference biologic. The abbreviated approval process for biosimilars under the BPCIA is similar in concept to the Abbreviated New Drug Application (“ANDA”) for generic
small molecule drugs established by the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch-Waxman”) amendments to the FDCA. As with Hatch-Waxman, the goal of the BPCIA was to increase access to lower-priced versions of drugs,
while balancing the need to continue incentivizing innovation in drug development. Biosimilarity is defined to mean that the proposed biologic is highly similar to the reference product notwithstanding minor differences in clinically inactive
components and that there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity and potency of the product. Further, a biosimilar may be determined to be “interchangeable”
with the reference product, in which case the biosimilar may be substituted for the reference product under state substitution laws, similar to the way generic small molecule drugs are substituted. The higher standard of interchangeability
requires a showing that the biosimilar is expect to produce the same clinical result as the reference biologic in any given patient, and further that the risk to the patient in terms of safety, purity, and/or potency pf switching between the
biosimilar and the reference product is no more than using the reference product without switching.
Regulatory Exclusivities Applicable to Biologics Under the BPCIA: The BPCIA established certain regulatory exclusivities that provide reference biologics with prescribed periods of time
during which competing biosimilars or interchangeable biosimilars may not be approved or may not be marketed. Once its BLA is approved (“date of first licensure) the reference biologic is entitled to a period of four years after its date of first
licensure during which time FDA is prohibited from accepting a marketing application that would seek approval of any products that are biosimilar to the branded product. In addition, the reference biologic is entitled to a period of 12 years after
its date of first licensure during which time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. In addition, the first interchangeable biosimilar may be entitled to a period of one
year after its date of first licensure, or other periods keyed to the outcome of patent litigation if instituted, during which FDA is prohibited from finding that any other biosimilars are interchangeable to the same reference biologic. The
reference biologic may also be entitled to regulatory exclusivity under other statutory provisions that apply to biologics and small molecule drugs.
Orphan Drug Exclusivity: Under the Orphan Drug Act, the FDA may grant orphan drug designation to biological products indicated for a rare disease or condition, generally a disease or
condition that affects fewer than 200,000 individuals in the United States, or in the alternative there is no reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will
be recovered from sales of the product. Orphan designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the biological product and its potential orphan use are disclosed publicly by the
FDA. The first BLA sponsor to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a period of 12 years after its date of first licensure during which time FDA is
prohibited from approving marketing applications for any products that are biosimilar to the branded product. There is an exception in certain limited circumstances, such as for a showing of clinical superiority to the product with orphan drug
exclusivity. A product is clinically superior if it is safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biological product for the same disease
or condition, or the same biological product for a different disease or condition. Other benefits of orphan drug designation include tax credits for certain research and a waiver of the BLA user fee.
Pediatric Study Requirements and Pediatric Exclusivity: Under the Best Pharmaceuticals for Children Act (BPCA), a sponsor qualifies for “pediatric
exclusivity” if it complies with a Written Request (WR) issued by FDA for pediatric studies. The sponsor may apply to FDA to issue a WR. Pediatric exclusivity operates by adding six months of exclusivity on to the end of the latest-expiring
form of exclusivity, and may apply to patent rights or to FDA regulatory exclusivities. To qualify for pediatric exclusivity, at least one of those rights must still be currently in force at the time
FDA approves the pediatric studies.
Patent Term Extensions: Patents have a limited lifespan. In most countries, including the U.S., the standard expiration of a patent is 20 years from the effective filing date. Various extensions of
patent terms may be available in certain circumstances, for example where there are delays in obtaining FDA regulatory approvals that result in a reduction of the period of time during which we could market a product under patent protection. In
the U.S., such possible extensions include those permitted under Hatch-Waxman, which permits a patent term extension of up to five years to cover an FDA-approved product. The actual length of the extension will depend on the amount of patent term
lost while the product was in clinical trials, and FDA must agree with our calculation of the time lost in regulatory review.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, PDS’s activities are potentially subject to regulation, either directly or indirectly, by various federal, state and local authorities in addition to the
FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, for instance the Office of Inspector General (OIG), the U.S. Department of Justice
(DOJ), and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act,
the criminal provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the federal Anti-Kickback Statute, the federal false claims laws, the physician payment transparency laws, and similar state laws, each as amended.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration,
directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal
healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers,
purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that
involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular
applicable statutory exception or regulatory safe harbor, however, does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative
review of all of its facts and circumstances. PDS’s practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. The lack of uniform court interpretation of the Anti-Kickback Statute
combined with emerging, novel enforcement theories, makes compliance with the law difficult. Violations of the federal Anti-Kickback Statute can result in significant criminal fines, exclusion from participation in Medicare and Medicaid and
follow-on civil litigation, among other things, for both entities and individuals.
Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person or entity no longer needs to
have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a per se false or fraudulent claim for purposes of the federal False Claims Act, as discussed below.
The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private
third-party payers. Federal criminal law at 18 U.S.C. § 1001, among other sections, prohibits 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.
The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim
to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or
approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The qui tam
provisions of the False Claims Act and similar state laws allow a private individual to bring civil actions on behalf of the federal or state government and to share in any monetary recovery. As a result of a modification made by the Fraud
Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government, whether directly or indirectly. Recently, several pharmaceutical and other healthcare companies have been
prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.
Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable,
uses.
HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or
fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or
covering up by trick, scheme or device, 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. Similar to the federal
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Also, many states have enacted similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in
several states, apply regardless of the payor, even extending to self-pay items and services.
PDS may be subject to data privacy and security regulations by both the federal government and the states in which it conducts its business. We are not a covered entity under
HIPAA and have not functioned as a business associate under HIPAA that would cause the HIPAA Security Rule and provisions of the Privacy Rule to apply directly to us as a business associate. To the extent that we ever function in a business
associate capacity, HIPAA, as amended by the HITECH Act, and its respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes requirements relating to the privacy, security and transmission of
individually identifiable health information. Following enactment of the HITECH Act, HIPAA’s privacy and security standards now directly apply to business associates of covered entities that receive or obtain protected health information in
connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to
enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from
each other in significant ways, and may apply more broadly thus complicating compliance efforts (for example, California recently enacted legislation — the California Consumer Privacy Act, or CCPA — which went into effect on January 1, 2020 and
among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information, and creates a private right of
action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach; the California Attorney General will issue final regulations, and although the law includes limited exceptions, including
for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context, and it remains unclear what language the final Attorney General
regulations will contain or how the statute and the regulations will be interpreted.)
Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to
take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a
company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce
vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. The FTC’s authority
under Section 5 is concurrent with HIPAA’s jurisdiction and with any action taken under state law.
Additionally, the Federal Physician Payments Sunshine Act under the Affordable Care Act, and its implementing regulations, require that certain manufacturers of drugs, devices,
biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, report information related to certain payments or other transfers of value made or
distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by
physicians and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per
year for “knowing failures”. In 2022 the Sunshine Act will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for
payments made in 2021). Certain states also mandate implementation of compliance programs, impose restrictions on pharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other
remuneration to healthcare providers and entities.
In order to distribute products commercially, PDS must also comply with state laws that require the registration of manufacturers and wholesale distributors of drug and
biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Several states have enacted
legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical studies and other activities,
and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to
prohibit certain other sales and marketing practices. All of PDS’s activities are potentially subject to federal and state consumer protection and unfair competition laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of
applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between pharmaceutical companies and providers and patients, which has led to a number of investigations,
prosecutions, convictions and settlements in the industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and
resource-consuming and can divert management’s attention from the business, even if investigators ultimately find that no violation has occurred.
If PDS operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to it, PDS may
be subject to penalties, including without limitation, civil, criminal and/or administrative penalties; damages; fines; disgorgement; exclusion from participation in government programs, such as Medicare and Medicaid; injunctions; private “qui tam”
actions brought by individual whistleblowers in the name of the government, or refusal to allow it to enter into government contracts; contractual damages; reputational harm; administrative burdens; diminished profits and future earnings; and the
curtailment or restructuring of its operations; any of which could adversely affect PDS’s ability to operate its business and its results of operations.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which PDS obtains regulatory approval. In the United States and markets
in other countries, sales of any products for which PDS receives regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such
products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage
for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list,
also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of
medical products, therapies and services, in addition to questioning their safety and efficacy. PDS may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of its tablet product
candidates, in addition to the costs required to obtain the FDA approvals. PDS’s product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. 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 PDS to maintain price levels sufficient to realize an appropriate return on its investment in product development.
Different pricing and reimbursement schemes exist in other countries. Some jurisdictions operate positive and negative list systems under which products may only be marketed
once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical studies that compare the cost-effectiveness of a particular product candidate to currently
available therapies. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are
being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which it receives regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide
adequate coverage and reimbursement, or require onerous prior approvals or other restricted access. In addition, emphasis on managed care in the United States has increased and PDS expects the pressure on healthcare pricing will continue to
increase. 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 PDS receives regulatory approval, less favorable coverage
policies and reimbursement rates may be implemented in the future.
U.S. Healthcare Reform
In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive reforms affecting the payment for, the availability
of and reimbursement for healthcare services. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs
and other medical products, government control and other changes to the healthcare system in the United States. PDS anticipates that current and future U.S. legislative healthcare reforms may result in additional downward pressure on the price that
PDS receives for any approved product, if covered, and could seriously harm its business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The
implementation of cost containment measures or other healthcare reforms may prevent PDS from being able to generate revenue, attain profitability or commercialize its product candidates. In addition, it is possible that there will be further
legislation or regulation that could harm its business, financial condition and results of operations.
The Patient Protection and Affordable Care Act (ACA) which was signed into law in the United States in March 2010, contained several provisions affecting the pharmaceutical
industry:
The Trump Administration and the Congressional Republicans have proposed several efforts to repeal and replace the ACA. President Trump has also signed Executive Orders and
other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Additionally, on December 15, 2019, a federal district court in Texas
struck down the ACA in its entirety, finding that the TCJA renders the individual mandate unconstitutional. The judge further concluded in Texas v. Azar that since the individual mandate is “essential” to
the ACA, it could not be severed from the rest of the ACA and therefore, the entire ACA was unconstitutional. Despite its decision, however, the court did not issue an injunction and therefore, immediate compliance is not required. In addition,
the Trump Administration announced that it will continue to administer the law until a formal decision is made by the U.S. Supreme Court. The Supreme Court has not yet announced when or whether it will hear a challenge in Texas v. United States, though it is highly anticipated that it will do so next term (beginning October 2020). Apart from Texas v. United States, ACA litigation continues across the
country in district and appellate courts, and before the Supreme Court. The Supreme Court will issue at least two ACA-related decisions before the end of its current term: one on the risk corridors program (Maine
Community Health Options v. United States) and the other on religious or moral exemptions to the contraceptive mandate (Trump v. Pennsylvania and Little Sisters of
the Poor v. Pennsylvania). Both decisions are expected before July 2020. It is unclear how the eventual decisions from the Supreme Court and the various other courts across the country to repeal and replace the ACA will impact the ACA and
our business. It is also unclear how regulations and sub-regulatory policy, which fluctuate continually, may affect interpretation and implementation of the ACA and its practical effects on our business, particularly entering an election year.
There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, U.S. federal prosecutors have issued
subpoenas to pharmaceutical companies seeking information about pricing practices in connection with an investigation into pricing practices being conducted by the U.S. Department of Justice. Several state attorneys general also have commenced drug
pricing investigations and filed lawsuits against pharmaceutical companies, and the U.S. Senate has publicly investigated a number of pharmaceutical companies relating to price increases and pricing practices. Proposed legislation has been designed
to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement
methodologies for drugs. Recent federal budget proposals have included measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to
eliminate cost sharing for generic drugs for low-income patients. The U.S. Congress and the Trump Administration have indicated that they will continue to seek new legislative and administrative measures to control drug costs, including by
addressing the role of pharmacy benefit managers (PBMs) in the supply chain. Drug pricing is and will remain a key bipartisan issue in the coming year. If drug pricing reform is not meaningfully addressed before the 2020 election, policies to be
pursued in the future may be more aggressive, regardless of which party controls the White House. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing. The boom in state laws targeting drug pricing is unprecedented and the requirements are not uniform from state to state, creating additional compliance and commercialization challenges for manufacturers. If PDS is
able to obtain marketing approval for one or more of our products, our revenue and future profitability could be negatively affected if these or other inquiries were to result in legislative or regulatory proposals that limit our ability to
increase the prices of any products for which we obtain marketing approval.
Foreign Regulation
In order to market any product outside of the United States, PDS would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions
regarding quality, safety and efficacy and governing, among other things, clinical studies, marketing authorization, commercial sales and distribution of its products. Whether or not PDS obtains FDA approval for a product, it would need to obtain
the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical studies or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the
United States apply similarly in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain
approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance
obligations. Moreover, the collection and use of personal health data in the European Union, which was formerly governed by the provisions of the European Union Data Protection Directive, was replaced with the European Union General Data Protection
Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and
confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union
to the United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The
recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure
compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may
increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the European Union and other
jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Employees
PDS’s management team possesses considerable experience in drug development research, manufacturing, clinical development and regulatory matters. PDS’ semi-virtual operating
strategy of collaborating with scientific and clinical experts in cancer immunology, tumor immunology and gynecological oncology provides additional considerable experience in immunotherapy development, clinical design and execution. PDS has no
collective bargaining agreements with its employees and it has not experienced any work stop pages.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information
contained in this Annual Report, including our financial statements and the related notes appearing elsewhere in this Annual Report, before making your decision to invest in shares of our common stock. We cannot assure you that any of the events
discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and cash flows and our future prospects would likely be materially and adversely
affected. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Business, Financial Position and Capital Requirements
We have a limited operating history and have never generated any product revenue.
We are a clinical-stage biopharmaceutical company with a limited operating history. We were founded in December 2005, and our operations to date have been limited to organizing
our company and developing the Versamune® platform and related immunotherapy product candidates that incorporate the technology of our Versamune® platform. We have not yet successfully completed a large-scale, pivotal clinical
trial, obtained marketing approval, manufactured Versamune® at commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize our Versamune® products. Consequently,
predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing immunotherapies.
Our ability to generate revenue and achieve and maintain profitability will depend upon our ability to successfully complete the development of our Versamune®-based
products for the treatment of HPV-related cancers, or PDS0101, and/or complete the development of our PDS0102, PDS0103, or PDS0104 products, or, collectively with PDS0101, the Versamune® Products, for treatment of non-HPV-related cancers
and other infectious diseases and to obtain the necessary regulatory approvals. We have never generated any product revenue and have no immunotherapy candidate in late-stage clinical development or approved for commercial sale.
Even if we receive regulatory approval for the sale of the Versamune® Products, we do not know when we will begin to generate revenue from PDS0101, if at all. Our
ability to generate revenue depends on a number of factors, including our ability to:
Because of the numerous risks and uncertainties associated with immunotherapy development and manufacturing, we are unable to predict the timing or amount of increased
development expenses, or when we will be able to achieve or maintain profitability, if at all. Our expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or comparable non-U.S. regulatory
authorities, to perform studies or clinical trials in addition to those we currently anticipate. Even if PDS0101 is approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of and the related
commercial-scale manufacturing requirements for PDS0101 and other Versamune® Products. If we cannot successfully execute on any of the factors listed above, our business may not succeed, and your investment will be adversely affected.
We have incurred significant losses since our inception and expect to continue to incur significant losses for the foreseeable future and may never achieve
or maintain profitability.
We have never generated any product revenues and expect to continue to incur substantial and increasing losses as we continue to develop PDS0101 and other Versamune®
based Products. PDS0101 has not been approved for marketing in the United States and may never receive such approval. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our
ability to generate revenue and achieve profitability is dependent on our ability to complete development, obtain necessary regulatory approvals, and have PDS0101 manufactured and successfully marketed. We cannot assure you that we will be
profitable even if we successfully commercialize PDS0101 or other Versamune® Products. If we successfully obtain regulatory approval to market PDS0101, our revenues will be dependent, in part, upon, the size of the markets in the
territories for which regulatory approval is received, the number of competitors in such markets for the approved indication, and the price at which we can offer PDS0101. If the indication approved by regulatory authorities is narrower than we
expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of PDS0101, even if approved. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis. If we fail to become and remain profitable the market price of our common stock and our ability to raise capital and continue operations will be adversely affected.
We expect research and development expenses to increase significantly for PDS0101 and other Versamune® Products. In addition, even if we obtain regulatory approval,
significant sales and marketing expenses will be required to commercialize PDS0101. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have had
and will continue to have an adverse effect on our financial position and working capital. As of December 31, 2019, we had an accumulated deficit of $26.6 million.
We are dependent on the success of PDS0101, which is still in early-stage clinical development, and if PDS0101 does not receive regulatory approval or is
not successfully commercialized, our business may be harmed.
PDS0101 is only in early clinical development, and as a consequence, it is too early to determine whether the Versamune® Products will ever be approved for
commercial sale or marketable. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to PDS0101 and other Versamune® Products. Accordingly, our business currently depends heavily on
the successful development, regulatory approval and commercialization of PDS0101. PDS0101 may not receive regulatory approval or be successfully commercialized even if regulatory approval is received. The research, testing, manufacturing, labeling,
approval, sale, marketing and distribution of PDS0101 is and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing regulations. We are not permitted
to market PDS0101 in the United States until it receives approval of a biologics license application, or BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. To date, we have only completed
Phase 1/2A clinical trials for certain applications of PDS0101. As a result, we have not submitted a BLA to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so for the foreseeable
future. Obtaining approval of a BLA is an extensive, lengthy, expensive and inherently uncertain process, and the FDA may delay, limit or deny approval of PDS0101 for many reasons, including:
We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and
commercialization of PDS0101.
We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize PDS0101. Even with our current cash reserves, we will
require substantial additional capital to complete the development and potential commercialization of PDS0101 and the development of other Versamune® Products. If we are unable to raise capital or find appropriate partnering or licensing
collaborations, when needed or on acceptable terms, if at all, we could be forced to delay, reduce or eliminate one or more of our development programs or any future commercialization efforts. In addition, attempting to secure additional financing
may divert the time and attention of our management from day-to-day activities and harm our development efforts.
Based upon our current operating plan, we believe that our cash reserves will be sufficient to fund our operating expenses and capital expenditure requirements for at least the
next 12 months from the date of this report. Our estimate as to what we will be able to accomplish is based on assumptions that may prove to be inaccurate, and we could exhaust our available capital resources sooner than is currently expected.
Because the length of time and activities associated with successful development of PDS0101 is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
Additional funding may not be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may
have to significantly delay, scale back or discontinue the development or commercialization of PDS0101 or potentially discontinue operations. In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with
Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, at our discretion, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock, or
the Purchased Shares, over the 30-month term of the Aspire Purchase Agreement. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of the Company’s outstanding shares of common stock on the date of the Aspire
Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979
share limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July
26, 2019. On July 29, 2019, we issued 100,654 shares of our common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. As of December 31, 2019, no Purchase Shares
have been sold to Aspire Capital under the Aspire Purchase Agreement. Further, our use of the Aspire Purchase Agreement is subject to certain additional limitations set forth elsewhere in this report. As such, our ability to use the Aspire Purchase
Agreement to raise additional capital is uncertain.
Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and
licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, as we can generate substantial product
revenues, we expect to finance our cash needs through a combination of equity offerings, including through the Aspire Purchase Agreement (assuming all conditions for the issuance of the Purchased Shares under the Aspire Purchase Agreement are
satisfied), debt financings, strategic alliances and license and development agreements in connection with any collaborations. In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a
public offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price. We received gross proceeds of approximately $13
million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions. To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership may experience
substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming our stock or making investments.
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, research programs or Versamune® Products 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, or through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties on acceptable terms, we may be required to delay, limit, reduce or terminate our PDS0101 development or
future commercialization efforts or grant rights to develop and market other Versamune® Products that we would otherwise develop and market.
Our future success depends on our ability to retain executive officers and attract, retain and motivate qualified personnel.
We are highly dependent on our executive officers and the other principal members of the executive and scientific teams, particularly our President and Chief Executive Officer,
Dr. Frank K. Bedu-Addo, our Chief Medical Officer, Dr. Lauren Wood, and our Chief Scientific Officer, Dr. Gregory L. Conn. The employment of our executive officers are at-will and our executive officers may terminate their employment at any time,
subject to applicable notice requirements. The loss of the services of any of our senior executive officers could impede the achievement of our research, development and commercialization objectives. We do not maintain “key person” insurance for
any executive officer or employee.
Recruiting and retaining qualified scientific, clinical, and operational personnel is also critical to our success. We may not be able to attract and retain these personnel on
acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. we also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
Our industry has experienced an increasing rate of turnover of management and scientific personnel in recent years. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in devising our research
and development and commercialization strategy. Our consultants and advisors may be employed by third parties and have commitments under consulting or advisory contracts with other entities that may limit their availability to advance our strategic
objectives. If any of these advisors or consultants can no longer dedicate a sufficient amount of time to the company, our business may be harmed
If we fail to obtain or maintain adequate coverage and reimbursement for PDS0101, our ability to generate revenue could be limited.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of any of
PDS0101 that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of PDS0101 will be paid 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. If reimbursement is not available, or is available only on a limited basis, we may not be able
to successfully commercialize PDS0101. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow it to realize a sufficient return on our investment.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing
emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price PDS0101 on less favorable terms than we currently anticipate. In many countries, particularly the countries of the European Union, the prices of
medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a
product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of PDS0101 to other available therapies. In general, the prices of products under such
systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could
restrict the amount that we are able to charge for PDS0101. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially
reasonable revenues and profits.
Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to
limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for PDS0101. We expect to experience pricing pressures in connection with the sale of PDS0101 due to the
trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and
other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market.
Additionally, on May 11, 2018, President Trump laid out his administration’s “Blueprint” to lower drug prices and reduce out of pocket costs of drugs, as well as additional
proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, and incentivize manufacturers to lower the list price of their products. Although some proposals related to the
administration’s Blueprint may require additional authorization to become effective, may ultimately be withdrawn, or may face challenges in the courts, the U.S. Congress and the Trump administration have indicated that they will continue to seek
new legislative and administrative measures to control drug costs, including by addressing the role of pharmacy benefit managers in the supply chain. At the state level, legislatures have increasingly passed legislation and implemented regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,
designed to encourage importation from other countries and bulk purchasing.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing
or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of
operations.
We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations.
Our future financial performance and our ability to commercialize PDS0101 and compete effectively will depend, in part, on our ability to effectively manage any future growth.
As of December 31, 2019, we had 15 employees and 5 consultants. We expect to hire additional employees for our managerial, clinical, scientific and engineering, operational, manufacturing, sales and marketing teams. Additionally, as part of our
material weakness remediation plan, we intend to hire a new Chief Financial Officer and accounting and finance personnel as needed. We may have operational difficulties in connection with identifying, hiring and integrating new personnel. Future
growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a
disproportionate amount of our attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in
weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may
divert financial resources from other projects, such as the development of PDS0101. If we are unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and
we may not be able to implement our business strategy.
Many of the other pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles
and a longer history in the industry than us. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what it
has to offer. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can select and develop PDS0101 and our business will be limited.
Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other
vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees and contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may
engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory
bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies, manufacturing standards, federal and state healthcare fraud and abuse and health regulatory laws and other similar foreign
fraudulent misconduct laws, or laws that require the true, complete and accurate reporting of financial information or data. Misconduct by these parties may also involve the improper use or misrepresentation 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 third-party 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 financial results, including the imposition of significant civil, criminal and
administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of our operations, any
of which could adversely affect our ability to operate our business and our results of operations.
Our business and operations would suffer in the event of system failures.
Our computer systems and those of our service providers, including our CROs, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism,
war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our or their operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or
clinical trial data from completed, ongoing or planned 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 were
to result in a loss of or damage to data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of PDS0101 could be delayed.
Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
EU member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations.
Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of the EU Data Protection Directive, was replaced with the EU General Data Protection Regulation, or the GDPR, in May 2018. The GDPR,
which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data
breach notification and the use of third party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., provides an enforcement authority and
imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party
transactions, but also to transfers of information between us and our subsidiaries, including employee information. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process,
including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new
regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations
and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws
apply more broadly than the Health Insurance Portability and Accountability Act, or HIPAA, and associated regulations. For example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went into effect
January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA
also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. The California Attorney General will issue clarifying regulations. Although the law
includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it remains unclear what language the final Attorney General regulations will contain, or how the statute and regulations
will be interpreted.
We expect to incur significant additional costs as a result of being a public company, which may adversely affect our operating results
and financial condition.
We expect to incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, the SEC, and Nasdaq. These rules and regulations are expected to increase our accounting, legal and financial compliance costs and make some activities more time-consuming
and costly. In addition, we will incur additional costs associated with our public company reporting requirements and we expect those costs to increase in the future. We also expect these rules and regulations to make it more expensive for us to
maintain directors’ and officers’ liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to
attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers. Increases in costs incurred as a result of becoming a publicly traded company may adversely affect our operating results and
financial condition.
We have identified material weaknesses in our internal control over financial reporting, and if we are unable to remediate such material weaknesses and to
maintain effective internal control over financial reporting in the future, there could be an elevated possibility of a material misstatement, and such a misstatement could cause investors to lose confidence in our financial statements, which
could have a material adverse effect on our stock price.
As disclosed in Item 9A of this report, we have identified material weaknesses as of December 31, 2019 in our internal control over financial reporting.
Our management team has taken action to begin to remediate the material weaknesses, primarily through improved processes, policies, training and skilled personnel, but we cannot be certain when
the remediation will be completed. If we fail to fully remediate the material weaknesses or fail to maintain effective internal controls, it could result in a material misstatement of our financial statements, which could cause investors to lose
confidence in our financial statements or cause our stock price to decline. In future periods, we may identify additional deficiencies in our system of internal control over financial reporting during the course of our remediation efforts that
may require additional work to address. Any future material weaknesses in internal control over financial reporting could result in material misstatements in our financial statements and we could be required to restate our financial results,
which could lead to substantial additional costs for accounting and legal fees and shareholder litigation. Moreover, any future disclosures of additional weaknesses, or errors as a result of those weaknesses, could result in investors losing
confidence in our reported financial information and may lead to a decline in the stock price. For more information about these material weaknesses, see Item 9A, “Controls and Procedures”.
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, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to
prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with
Section 404 of the Sarbanes-Oxley Act, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material
weakness or significant deficiency in our internal control over financial reporting once that firm begins its Section 404 reviews or becomes aware of either during the conduct of an audit, we could lose investor confidence in the accuracy and
completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Capital Market, the SEC or other 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.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably
assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In particular, Section 404 of the
Sarbanes-Oxley Act will require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the
effectiveness of our internal control over financial reporting. Pursuant to Section 404, as of December 31, 2020, once we are no longer an “emerging growth company,” and provided we also qualify as an “accelerated filer” or a “large accelerated
filer,” we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting and we will also be required to include with such annual report an attestation report on internal controls
over financial reporting issued by our independent registered public accounting firm. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that we have not maintained effective internal
controls over financial reporting, in all material respects. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business, results of operations and
financial condition and could cause a decline in the trading price of our common stock.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient
disclosures due to error or fraud may occur and not be detected.
Risks Related to Clinical Development, Regulatory Approval and Commercialization
Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they fail
to demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101.
PDS0101 is still in early-stage clinical development and will require extensive additional clinical testing before we are prepared to submit a BLA for regulatory approval for any indication or for
any other treatment regime. We cannot predict with any certainty if or when it might submit a BLA for regulatory approval for PDS0101 or whether any such BLAs will be approved by the FDA. Human clinical trials are very expensive and difficult to
design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not agree with our proposed endpoints for any clinical trial we propose, which may delay the commencement of our clinical trials.
The clinical trial process is also time-consuming. We estimate that the clinical trials we need to conduct to be in a position to submit BLAs for PDS0101 will take several years to complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In later stages of clinical trials, PDS0101 may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies
and initial clinical trials, and the results of early clinical trials of PDS0101 therefore may not be predictive of the results of our planned Phase 1 and 2 trials. A number of companies in the biopharmaceutical industry have suffered significant
setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials.
Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their immunotherapies performed satisfactorily in
preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Success in preclinical testing and early clinical trials does not ensure that later clinical trials, which involve many more subjects
and different cancers than we have studied in Phase 1/2A clinical trials to date, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize PDS0101, including
that:
If we are required to conduct additional clinical trials or other testing of PDS0101 beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of PDS0101
or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to
be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize PDS0101, could allow our competitors to bring products to
market before we do, and could impair our ability to successfully commercialize PDS0101, any of which may harm our business and results of operations.
Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made
more difficult or rendered impossible by multiple factors outside our control.
We may encounter delays in enrolling, or be unable to enroll, a sufficient number of participants to complete any of our clinical trials. Once enrolled, we may be unable to retain a sufficient
number of participants to complete any of our trials. Late-stage clinical trials of PDS0101 may require the enrollment and retention of large numbers of subjects. Subject enrollment and retention in clinical trials depends on many factors,
including the size of the subject population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing
drugs for the same indication, the proximity of subjects to clinical sites and the eligibility criteria for the study.
Furthermore, any negative results we may report in clinical trials of PDS0101 may make it difficult or impossible to recruit and retain participants in other clinical trials of PDS0101. Delays or
failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop PDS0101, or could render further development impractical. In addition, we expect
to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance
in compliance with applicable regulations. Enforcement actions brought against these third parties may cause further delays and expenses related to our clinical development programs.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will
suffer if we fail to compete effectively.
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As a result, PDS0101 could become obsolete before we
recoup any portion of our related research and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific and technological factors. These factors include the availability of
patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical
firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the
human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as
academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in
the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us.
We are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention, diagnosis, or treatment of certain diseases we have
targeted for drug development. Various companies are developing biopharmaceutical products that have the potential to directly compete with PDS0101 even though their approach to may be different. The biotechnology and biopharmaceutical industries
are highly competitive, and this competition comes from both biotechnology firms and from major pharmaceutical companies, including companies like Advaxis, Transgene, ISA Pharmaceuticals, Genexine, and Inovio as well as Etubics, Vaccibody, Admedus,
Cel-Sci, Neo-ImmuneTech, Kite Pharma, Immune Design, Dynavax, Bavarian Nordic, Seattle Genetics, and Selecta Bioscience, each of which is pursuing cancer vaccines and/or immunotherapies. Many of these companies have substantially greater financial,
marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience competition in the development of our
immunotherapies from universities and other research institutions and competes with others in acquiring technology from such universities and institutions.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may
succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more effective or less costly than PDS0101.
We will face competition from other drugs currently approved or that will be approved in the future for the treatment of the other cancers and infectious diseases we are currently targeting.
Therefore, our ability to compete successfully will depend largely on our ability to:
The availability of our competitors’ immunotherapies and other treatments could limit the demand, and the price we are able to charge, for PDS0101. The inability to compete
with existing or subsequently introduced immunotherapies and other treatments would have an adverse impact on our business, financial condition and prospects.
Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could PDS0101 less competitive. In addition,
any new immunotherapy that competes with an approved treatment must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our
competitors may succeed in obtaining patent protection, discovering, developing, receiving the FDA’s approval for or commercializing medicines before we do, which would have an adverse impact on our
business and results of operations.
PDS0101 may cause adverse effects or have other properties that could delay or prevent its regulatory approval or limit
the scope of any approved label or market acceptance.
Adverse events caused by PDS0101 could cause reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of
regulatory approval. If clinical trials for PDS0101 report an unacceptable frequency or severity of adverse events, our ability to obtain regulatory approval for PDS0101 may be negatively impacted.
Furthermore, if PDS0101 is approved and then causes serious or unexpected side effects, a number of potentially significant negative consequences could result, including:
Any of these events could prevent us from achieving or maintaining market acceptance of PDS0101 and could substantially increase the costs of commercialization.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able
to commercialize, or will be delayed in commercializing, PDS0101, and our ability to generate revenue will be impaired.
PDS0101 and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval,
advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for PDS0101
will prevent us from commercializing PDS0101. We have not received approval to market a PDS0101 from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing
approvals and expect to rely on CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic
indication to establish the safety and efficacy of PDS0101. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory
authority. PDS0101 may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude it from obtaining marketing approval or prevent or limit
commercial use.
The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors. We cannot assure
you that we will ever obtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for
each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application
or may decide that our data is insufficient for approval and require additional preclinical or other studies, and clinical trials. In addition, varying interpretations of the data obtained from preclinical testing and clinical trials could delay,
limit or prevent marketing approval of PDS0101. Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
We will not be able to commercialize our product candidates if our preclinical studies do not produce successful results and/or our clinical trials do not
demonstrate the safety and efficacy of our product candidates.
Our product candidates are susceptible to the risks of failure inherent at any stage of product development, including the occurrence of unexpected or unacceptable adverse events or the failure to
demonstrate efficacy in clinical trials. Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain.
The results of preclinical studies, preliminary study results, and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Our product
candidates may not perform as we expect, may ultimately have a different or no impact on tumors, may have a different mechanism of action than we expect in humans, and may not ultimately prove to be safe and effective.
Preliminary and final results from preclinical studies and early stage trials, and trials in compounds that we believe are similar to ours, may not be representative of results that are found in
larger, controlled, blinded, and longer-term studies. Product candidates may fail at any stage of preclinical or clinical development. Product candidates may fail to show the desired safety and efficacy traits even if they have progressed through
preclinical studies or initial clinical trials. Preclinical studies and clinical trials may also reveal unfavorable product candidate characteristics, including safety concerns. A number of companies in the biopharmaceutical industry have suffered
significant setbacks in clinical trials, notwithstanding promising results in earlier preclinical studies or clinical trials or promising mechanisms of action. In some instances, there can be significant variability in safety or efficacy results
between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the
clinical trial protocols and the rate of dropout among clinical trial participants. Moreover, should there be an issue with the design of a clinical trial, our results may be impacted. We may not discover such a flaw until the clinical trial is at
an advanced stage.
We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product
candidates. There may be regulatory questions or disagreements regarding interpretations of data and results at any stage. For example FDA or comparable foreign regulatory authorities may disagree with our study design, including endpoints, or
our interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks.
We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these
third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be
unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as
contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the
timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects
enrolled in such clinical trial unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible. In addition, certain of our scientific advisors or consultants who receive compensation
from us are clinical trial investigators for our clinical trial. Although we believe our existing relationships are within the FDA’s guidelines, if these relationships and any related compensation result in perceived or actual conflicts of
interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial
itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA. Any such delay or rejection could prevent us from commercializing PDS0101 or any other product candidates.
Even if we obtain FDA approval in the United States, we may never obtain approval for or commercialize PDS0101 in any other jurisdiction,
which would limit our ability to realize each product’s full market potential.
In order to market PDS0101 in a particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy.
Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions.
In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval
in any other country. Approval processes vary among countries and can involve additional testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and
require additional preclinical studies or clinical trials that could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of PDS0101 in those countries. PDS0101 is
not approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to
obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced.
Our product candidates are in various stages of development.
Favorable results in pre-clinical or early stage clinical trials may not be predictive of success in later clinical trials and may not lead to commercially viable products for any of several
reasons. For example, our product candidates may fail to be safe and effective in clinical trials or additional pre-clinical studies, or we may have inadequate financial or other resources to pursue discovery and development efforts for new product
candidates. Our product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment by us before they can be commercialized.
Even if we obtain regulatory approval, we will still face extensive ongoing regulatory requirements and PDS0101 may
face future development and regulatory difficulties.
Marketing of PDS0101, if approved, along with the manufacturing processes, post- approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export,
import, advertising and promotional activities for PDS0101, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety,
efficacy and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control,
quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and current Good Clinical Practice, or cGCP requirements for any clinical trials that we
conduct post-approval. Even if marketing approval of PDS0101 is granted, the approval may be subject to limitations on the indicated uses for which PDS0101 may be marketed or to the conditions of approval. If PDS0101 receives marketing approval, an
accompanying label may limit the approved use of PDS0101, which could limit sales.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety and/or efficacy of PDS0101. The FDA closely regulates the
post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we promote or otherwise market PDS0101 for indications other than those for which it is approved, we may be subject to certain enforcement actions. Violations of the Federal
Food, Drug, and Cosmetic Act relating to the promotion of prescription biopharmaceutical products may lead to FDA enforcement actions and investigations alleging violations of federal and state health care fraud and abuse laws, as well as state
consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with PDS0101, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may
yield various results, including:
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of PDS0101. If we
are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approvals or licenses that we may have obtained.
Even if PDS0101 receives licensure, it may fail to achieve market acceptance by physicians, patients, third-party
payors or others in the medical community necessary for commercial success.
If PDS0101 receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If PDS0101 does
not achieve an adequate level of acceptance, we may not generate significant revenues and become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a number of factors, including but not limited to:
Because we expect sales of PDS0101, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of PDS0101 to achieve market acceptance would harm our
business and could require us to seek additional financing sooner than we otherwise plan.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on
product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we are initially developing our lead product candidate, PDS0101 and the other Versamune® Products. As
a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on
viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not
accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would
have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and
customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, fines, disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm,
and the curtailment of our operations, any of which could harm our business.
Although we do not provide healthcare services or submit claims for third-party reimbursement, we are subject to healthcare fraud and abuse regulation and enforcement by federal and state
governments, which could significantly impact our business, particularly if and when we commercialize any product candidates and if and when payment becomes available from payors for our products. The laws that may affect our ability to operate
include, but are not limited to:
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The False Claims Act’s civil provisions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that
are false or fraudulent; knowingly making using, or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to be made or
used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Intent to deceive is not required to establish liability under the civil False Claims Act.
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The False Claims Act’s criminal provisions, which imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious or fraudulent.
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The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, prohibits, among other actions, executing or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully
embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material
fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
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HIPAA, as amended by the HITECH Act, and its respective implementing regulations, now makes HIPAA’s privacy and security standards directly applicable to business associates independent contractors or agents of covered entities
that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
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Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a), given that even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal
Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of its laws. The FTC expects a company’s
data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and
reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA
Security Rule.
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The federal ”Sunshine” and “Open Payments” requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively, the Affordable Care Act, which
require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services 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. Failure to submit timely,
accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures.” In 2022 the Sunshine
Act will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). In
addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to healthcare providers.
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state law equivalents of each of the above federal laws and state laws otherwise addressing the pharmaceutical and healthcare industries, such as anti-kickback and false claims laws that may apply to items or services
reimbursed by any third-party payor, including commercial insurers, and in some cases that may apply regardless of payor, i.e., even if reimbursement is not available; state laws that require pharmaceutical companies to
comply with the pharmaceutical industry’s voluntary compliance guidelines (the PhRMA Code) and the relevant compliance program guidance promulgated by the federal government (HHS-OIG), or otherwise prohibit, restrict or
impose tracking and disclosure requirements related to payments, gifts, or others remuneration that may be made to healthcare providers and other potential referral sources, or marketing practices to such persons and
entities or drug pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the
General Data Protection Regulation, which became effective in May 2018) and state laws governing the privacy and security of information in certain circumstances, many of which differ from each other in significant ways
and may not have the same effect, and may apply more broadly than HIPAA, thus complicating compliance efforts – for example, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020. The CCPA,
among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The
CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.
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