Overview
Phio Pharmaceuticals Corp. is a biotechnology
company developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi (“
sd-rxRNA
®
”)
therapeutic platform. The Company’s efforts are focused on developing sd-rxRNA therapeutic compounds to be used in the context
of adoptive cell transfer by targeting checkpoints or other gene targets, or to be used in immunotherapy following intra-tumoral
injections. We aim to maximize the power of our sd-rxRNA therapeutic compounds by weaponizing therapeutic immune effector cells
to attack cancer, and to make tumors more susceptible to such attacks, and ultimately provide patients battling cancers with a
powerful new treatment option that goes beyond current treatment modalities.
In
January 2017, the Company entered into a Stock Purchase Agreement pursuant to which it acquired all of the issued and outstanding
shares of capital stock of MirImmune Inc. (“
MirImmune
”) for an aggregate of 275,036 shares of common stock of
the Company and 1,118,224 shares of the Company’s Series C Convertible Preferred Stock. With the approval of the Company’s
stockholders at the 2017 Annual Meeting of Stockholders, every ten shares of the Series C Convertible Preferred Stock issued and
outstanding were automatically converted into one share of common stock.
Prior
to the Company’s acquisition of MirImmune, our principal activities consisted of the preclinical and clinical development
of the Company’s sd-rxRNA compounds and topical immunotherapy agent in the areas of dermatology and ophthalmology. In January
2018, after a thorough review of its business operations, development programs and financial resources, the Company made a strategic
decision to focus its efforts solely on immuno-oncology to accelerate growth and support a potential return on investment for its
stockholders. In connection with this decision, the Company completed all open clinical trials in dermatology and ophthalmology
with RXI-109, our first sd-rxRNA clinical candidate, and Samcyprone
®
, and reported out on the results of those clinical
studies in 2018. The Company intends to seek a partner and/or out-licensee for its dermatology program and its ophthalmology program
to continue with their development. The Company’s current business strategy solely focuses on the development of immuno-oncology
therapeutics utilizing our proprietary sd-rxRNA technology.
On
November 19, 2018, the Company changed its name from RXi Pharmaceuticals Corporation to Phio Pharmaceuticals Corp., which reflects
the Company’s transition from a platform company to one that is fully committed to develop groundbreaking immuno-oncology
therapeutics.
Our development efforts are based on our
broadly patented sd-rxRNA technology platform. Our sd-rxRNA compounds do not require a delivery vehicle to penetrate into tissues
and cells and are designed to “silence,” or down-regulate, the expression of a specific gene that may be over-expressed
in a disease condition. We believe that our sd-rxRNA platform uniquely positions the Company in the field of immuno-oncology because
of this and for the following reasons:
|
·
|
Our sd-rxRNA compounds do not require facilitated delivery (mechanical or formulation);
|
|
|
|
|
·
|
Can target multiple genes (i.e. multiple immunosuppression pathways) in a single therapeutic entity;
|
|
|
|
|
·
|
Demonstrate efficient uptake of sd-rxRNA to immune cells;
|
|
|
|
|
·
|
Silencing by sd-rxRNA has been shown to have a sustained, or long-term, effect
in vivo
;
|
|
|
|
|
·
|
Favorable clinical safety profile of sd-rxRNA with local administration; and
|
|
|
|
|
·
|
Can be readily manufactured under current good manufacturing practices.
|
On
January 3, 2018, the Board of Directors of the Company approved a 1-for-10 reverse stock split of the Company’s outstanding
common stock, which was effected on January 8, 2018. All share and per share amounts have been retroactively adjusted for all periods
presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value to additional paid-in capital
in the financial statements.
Our Development Pipeline
We
currently have a pipeline of discovery and preclinical programs in three focus areas in which we are aligning our internal research
and development efforts with extramural collaborations.
The table below sets forth the Company’s stage of development
for product candidates in each of our three R&D focus areas:
Checkpoint Inhibition in Adoptive Cell Transfer
The Company has
developed sd-rxRNA targeting PD-1, TIGIT and other undisclosed checkpoints in adoptive cell transfer (“
ACT
”)
for the treatment of solid tumors. RXI-762 and RXI-804, sd-rxRNA compounds that are designed to suppress the expression of immune
checkpoint proteins PD-1 and TIGIT, respectively, which, when used in ACT, are expected to result in an improved efficacy to the
targeted tumors. We expect to enter clinical development with RXI-762, our most advanced program, as part of an ACT therapy for
solid tumors in melanoma by the end of 2019.
Our strategy includes advancing our sd-rxRNA
compounds towards clinical development, both independently and with extramural collaborations. We plan to focus our internal resources
on therapeutic areas where research and development is appropriate for the size and financial resources of the Company and to secure
partners in therapeutic areas with the requisite expertise and resources to advance our product and research candidates through
clinical development. We believe that this approach to our strategy will allow us to build upon these current collaborations to
add additional partnerships to our immuno-oncology pipeline, support the Company with a shorter path to the clinic by allowing
us to utilize and build upon already established protocols of our partners and provide us with the opportunity to expand our immuno-oncology
programs and pipeline in multiple areas. We have established a number of collaborations with cancer research institutions and companies
in this therapeutic area.
The Center for Cancer Immune Therapy (“
CCIT
”)
at Herlev Hospital is a leading European cancer center for use of tumor-infiltrating lymphocytes (“
TILs
”) for
ACT. CCIT has carried out numerous clinical trials based on a direct translation of the discoveries from the laboratory. Our collaboration
with CCIT is evaluating the potential of our sd-rxRNA technology platform to enhance the function of TILs for use in the treatment
for a number of cancer types, including melanoma and ovarian cancer. To date, CCIT has evaluated sd-rxRNA compounds targeting
immune checkpoints in preclinical screening models of matched TIL/tumor cell pairs from melanoma and cancer patients. Results
have shown a marked PD-1 reduction on the surface of TILs in a pilot rapid expansion protocol.
Iovance Biotherapeutics,
Inc. is a biotechnology company focused on the development and commercialization of autologous cellular immunotherapies optimizing
personalized, tumor-directed TILs. Our research collaboration with Iovance will evaluate the potential synergies with our novel
sd-rxRNA therapeutic compounds and Iovance’s autologous cell therapy based on TILs for the use in the treatment of cancer.
Data from this collaboration has shown that a sd-rxRNA mediated knock-down of PD-1 was associated with phenotypic changes indicative
of TIL activation. Our next steps with Iovance include further evaluation of the impact of sd-rxRNA mediated gene silencing on
TIL tumor reactivity and implementation of optimized silencing protocols and scale-up thereof.
Cell Maturation and Metabolism in
Adoptive Cell Transfer
We use our sd-rxRNA in T-cells and other
immune cell types, such as natural killer (“
NK
”) cells and dendritic cells, for targets other than immune checkpoints
in order to weaponize and improve cell persistence and cell viability in the immunosuppressive tumor micro-environment. We believe
this shows the broad applicability of our platform technology and that our potential impact in immuno-oncology is not limited to
checkpoints and TILs.
We have shown that sd-rxRNAs are rapidly
and efficiently taken up by immune effector cells without the use of transfection reagents. Using sd-rxRNA compounds against checkpoint
inhibitors, we can suppress their expression levels up to 95% in immune cells, including T-cells and NK cells. Furthermore, we
have demonstrated potent silencing activity as well as a phenotypic effect (enhanced degranulation activity) of NK cells treated
with sd-rxRNA compounds targeting checkpoints. By treating NK cells
ex-vivo
, prior to ACT with sd-rxRNA reducing the
expression of proteins such as Cbl-b and TIGIT, the anti-tumor response of these cells can be improved. Ongoing work expands these
findings to include compounds for more specific NK targets, including NK specific inhibitory receptors, which could be used alone
or in combination.
Through
our collaboration with Medigene AG, a German biotechnology company developing highly innovative, complementary treatment platforms
to target various types and stages of cancer, we are exploring the potential synergies of our sd-rxRNA technology in
combination with Medigene’s recombinant TCRs to develop modified T-cells with enhanced efficacy and/or safety with
the ultimate goal to further improve Medigene’s T-cell therapies for the treatment of cancer patients. In the studies
completed, Medigene observed the reduction of PD-1 surface levels in T-cells transduced with TCRs and treated with our sd-rxRNA
compound, RXI-762. While these studies utilized the Company’s PD-1 targeting sd-rxRNA for proof of concept, there is also
the potential to expand the collaboration to additional targets and t
he two complementing technologies could lead to synergistic
effects that might further sharpen and improve the therapeutic effects of Medigene’s receptor modified T-cells.
Direct Tumor and Tumor Micro-Environment
Our third focus area includes the use of
our sd-rxRNA directly towards tumor and/or tumor micro-environment (“
TME
”) targets. Impacting the tumor cells
and/or TME through a direct use of sd-rxRNA, such as via intra-tumoral injection, could potentially become an important form of
adjuvant therapy. We believe that this will also show that our contributions with our sd-rxRNA compounds in immuno-oncology are
not limited to use with another company’s cell platform. Additionally, the Company has shown that its sd-rxRNA compounds
are safe and well-tolerated via intradermal injections and injections in the eye through its completed clinical trials with RXI-109
in dermatology and ophthalmology.
Our collaborative research agreement with
Gustave Roussy, a leading comprehensive cancer center in France, concentrates on determining the feasibility of our sd-rxRNA platform
to target the TME via intra-tumoral injection. The goal of our recent
in vivo
study with Gustave Roussy was to demonstrate
sd-rxRNA compound delivery via intra-tumoral injection and demonstrate activity (silencing of gene expression) of sd-rxRNA compounds.
Results from this study showed an 80—85% reduction of the target gene expression in a mouse model of melanoma via intra-tumoral
injection.
Our sd-rxRNA Platform
Diseases are often related to the wrong
protein being made, excessive amounts of a specific protein being made, or the correct protein being made but at the wrong location
or time. Overall, RNA is involved in the synthesis, regulation and processing of proteins. RNA interference (“
RNAi
’)
is a biological process in which RNA molecules inhibit gene expression or translation into proteins by preventing certain RNA from
being read. RNAi offers a novel approach to the drug development process because RNAi compounds can potentially be designed to
target any one of the thousands of human genes, many of which are “undruggable” by other modalities. Supported by numerous
gene-silencing reports and our own research, we believe that this sequence information can be used to design RNAi compounds to
interfere with the expression of almost any specific gene.
The first design of RNAi compounds to be
pursued for the development of human therapeutics were short, double-stranded RNAs that included limited modifications, known as
small-interfering RNA (“
siRNA
”). Since the initial discovery of RNAi, drug delivery has been the primary challenge
in developing RNAi-based therapeutics. One conventional solution to the delivery problem involves encapsulation of siRNA into a
lipid-based particle, such as a liposome, to improve circulation time and cellular uptake. We have developed an alternative approach
where delivery and drug-like properties are built directly into the RNAi compound itself. These novel compounds are termed self-delivering
RNAi compounds, or sd-rxRNA.
sd-rxRNAs are hybrid oligonucleotide compounds
that the Company believes combines the beneficial properties of both conventional RNAi and antisense technologies. Traditional,
single-stranded antisense compounds have favorable tissue distribution and cellular uptake properties. However, they do not have
the intracellular potency that is a hallmark of double-stranded RNAi compounds. Conversely, the duplex structure and hydrophilic
character of traditional RNAi compounds results in poor tissue distribution and cellular uptake. In an attempt to combine the best
properties of both technologies, sd-rxRNA have a single-stranded phosphorothioate region, a short duplex region, and contain a
variety of nuclease-stabilizing and lipophilic chemical modifications. The combination of these features allows sd-rxRNA to achieve
efficient spontaneous cellular uptake and potent, long-lasting intracellular activity.
We believe that our next generation sd-rxRNA
compounds offer significant advantages over siRNAs used by other companies developing RNAi therapeutics, which are highlighted
by the following characteristics:
|
·
|
Efficient cellular uptake in the absence of a delivery vehicle;
|
|
·
|
More resistant to nuclease degradation than unmodified oligonucleotides;
|
|
·
|
Able to suppress long non-coding RNAs, both in cytoplasm and the nucleus;
|
|
·
|
Potentially more specific for the target gene; and
|
|
·
|
Reduced immune side effects compared to classic siRNA.
|
The route by which our sd-rxRNA compounds
are brought into contact with the body depends on the intended organ or tissue to be treated. Delivery routes can be simplified
into two major categories: (1) local, or when a drug is delivered directly to the tissue of interest, and (2) systemic,
when a drug accesses the tissue of interest through the circulatory system. The key to therapeutic success with RNAi lies in delivering
intact RNAi compounds to the target tissue and the interior of the target cells. To accomplish this, our chemically synthesized
sd-rxRNA compounds are optimized for stability and efficacy and have unique properties that improve tissue and cell uptake.
Our Adoptive Cell Transfer Approach
The self-delivering nature of our compounds
makes sd-rxRNA ideally suited for use with ACT treatments and direct therapeutic use.
In
ACT, immune cells are isolated from specific patients or retrieved from allogeneic immune cell banks. The immune cells are then
expanded and modified before being returned and used to treat the same patient. We believe our sd-rxRNA compounds are
ideally suited to be used in combination with ACT, in order to make these immune cells more effective.
ACT includes a number of different types
of immunotherapy treatments. These treatments all use immune cells, such as T-cells, that are grown in a lab to large numbers,
followed by administering them to the body to fight the cancer cells. Sometimes, immune cells that naturally recognize a tumor
are used, while other times immune cells are modified or “engineered” to make them recognize and kill the cancer cells.
There are several types of ACT, including: a.) non-engineered cell therapy in which immune cells are grown from the patient’s
tumor or blood, such as TILS, or from donor blood or tissue such as NK cells, and b.) engineered immune cells in which these cells
are genetically modified to recognize specific tumor proteins and to remain in an activated state (such as CAR T-cells and T-cell
Receptors, or TCRs, and CAR NK cells).
Our approach to immunotherapy builds on
well-established methodologies of ACT and involves the treatment of immune cells with our sd-rxRNA compounds during the expansion
and modification phase. As shown below, immune cells are isolated from specific patients or retrieved from allogeneic immune cell
banks and then expanded and sometimes processed to express tumor-binding receptors. Because our sd-rxRNA compounds do not require
a delivery vehicle to penetrate into the cells, we are able to enhance these cells (for example by inhibiting the expression of
immune checkpoint genes) by merely adding our sd-rxRNA compounds during the expansion process and without the need for genetic
engineering. After enhancing these cells
ex vivo
, they are returned to the patient for treatment.
Our method introduces an important step
in the
ex vivo
processing of immune cells. This step uses our sd-rxRNA technology to reduce or eliminate the expression
of genes that make the immune cells less effective. For example, with our sd-rxRNA compounds, we can reduce the expression of immunosuppressive
receptors or proteins by the therapeutic immune cells, potentially enabling them to overcome tumor resistance mechanisms and thus
improving their ability to destroy the tumor cells.
In various types of immune cells tested
to date, sd-rxRNA treatment results in potent silencing while maintaining close to 100% transfection efficiency and nearly
full cell viability.
We believe that a major advantage to our
approach is that pre-treatment with our targeted compounds allows for multiple immune checkpoints to be attenuated within the same
therapeutic cell, an improvement which could dramatically increase their tumor cell killing capability. In addition, these therapeutic
immune cells may lack some known side effects associated with systemic checkpoint inhibitor therapies, while potentially improving
efficacy over current immunotherapy approaches.
Additionally, one of the main issues with
ACT is that the cells are very susceptible to the cancer signals that turn down the immune response and continuous activation of
these cells causes them to become exhausted. These factors, among others, may reduce their efficacy and lifespan. A technology
that can reprogram the immune cells using ACT, such as sd-rxRNA, is of key interest now in the immuno-oncology world.
Our Dermatology and Ophthalmology Programs
The Company intends to seek a partner and/or
out-licensee for both its dermatology and ophthalmology programs, which includes RXI-109 and Samcyprone, to continue their development.
Dermatology – Hypertrophic Scarring
The Company’s
first RNAi clinical product candidate, RXI-109, is a sd-rxRNA that commenced human clinical trials in 2012. RXI-109 is designed
to reduce the expression of connective tissue growth factor (“
CTGF
”), a critical regulator of several biological
pathways involved in fibrosis, including scar formation in the skin and eye. Two Phase 1 clinical trials completed by the Company
demonstrated the safety and tolerability of RXI-109 in ascending single and multi-doses and also provided the first evidence of
clinical activity in a surgical setting. The Phase 1 clinical trials provided the desired profile to enable the initiation of a
Phase 2a clinical trial. Positive results from Study 1402, our Phase 2a clinical trial with RXI-109 in hypertrophic scars, were
reported in December 2017. The study met the primary effectiveness objective as shown by a statistically significant improved visual
appearance of revised scars after scar revision surgery and treatment with RXI-109 versus control, as assessed by the investigator.
The full study results showed that the product was safe and well tolerated for all dosage groups. Exploratory endpoint analysis
furthermore showed that the cosmetic outcomes of RXI-109 treated scars were highly preferred over the untreated revised scars,
by both investigators and patients. The study results show furthermore that RXI-109 was safe and well tolerated.
Dermatology – Warts
Samcyprone, the Company’s second clinical
candidate, is a proprietary topical formulation of the small molecule diphenylcyclopropenone (“
DPCP
”), an immunomodulator
that works by initiating a T-cell response.
In May 2018, the
Company announced results from its Phase 2 clinical trial with Samcyprone in cutaneous warts. The primary effectiveness objectives
were met as shown by high levels of immunotherapeutic response and therapeutic response. The immunotherapeutic response rate –
a prerequisite for therapeutic response – was 97.7% across all 88 subjects enrolled in the study. From a therapeutic response
viewpoint, with once weekly dosing for up to 10 weeks, more than 70% of all warts showed a positive wart response rate, i.e. reduction
of wart size of more than 50%. Complete wart clearance throughout the study was 54% for all warts, and up to 71.4% for certain
wart types (non-plantar warts). The study results show furthermore that Samcyprone was safe and well tolerated.
Dermatology – Uneven Skin
Tone and Pigmentation
Cosmetics are compounds that affect the
appearance of the skin and make no preventative or therapeutic claims. These compounds may be developed more rapidly than therapeutics,
therefore the path to market may be much shorter and less expensive. RXI-231, an sd-rxRNA compound targeting tyrosinase (“
TYR
”),
was selected by the Company for cosmetic development. TYR is a key enzyme in the synthesis of melanin. Melanin is produced by melanocytes
and is the pigment that gives human skin, hair and eyes their color. The inhibition of TYR can play a key role in the management
of skin conditions including cutaneous hyperpigmentation disorders such as lentigines (freckles, age spots and liver spots) and
possibly melanoma.
Three studies were performed under the consumer
testing program with RXI-231. The first two studies in volunteers determined that the RXI-231 gel formulation did not cause irritation
and sensitization when applied to the skin. The third study investigated the potential of RXI-231 to impact a skin melanin content
(pigmentation) increase induced by UV exposure in a study design similar to one well documented in peer-reviewed journal articles
and used by various cosmetic companies. Specific spectroscopic results showed that application of RXI-231 containing gel, as compared
to a vehicle gel, can reduce a change of skin tone triggered by UV. These results not only validate our preclinical data about
the effect of RXI-231 on skin pigmentation, but also provide important information on the capabilities of our proprietary topical
formulation for the use of our sd-rxRNA based cosmetic ingredients in the consumer care space.
Ophthalmology – Retinal Scarring
As in dermal scarring, RXI-109 can also
be used to target CTGF in the eye, where CTGF is known to be involved in retinal scarring. Building on the work in our dermal clinical
program, the Company initiated a Phase 1/2 clinical trial to evaluate the safety and clinical activity of RXI-109 in reducing the
progression of retinal scarring. In August 2018, the Company announced positive results from our Phase 1/2 clinical trial to evaluate
the safety and clinical activity of RXI-109 in reducing the progression of retinal scarring in subjects with wet age-related macular
degeneration with evidence of subretinal fibrosis. Each subject in the study received four doses of RXI-109 by intraocular injection
at one-month intervals for a total dosing period of three months. The primary objective was met as shown by the absence of dose-limiting
and serious toxicities, and only mild to moderate procedure related adverse events. None of the adverse events were drug related.
In addition, comprehensive ocular examinations showed no indications of inflammation nor any other tolerability issues related
to the treatment. The secondary objective of the study was also met with improved or stable disease in the study eyes of several
subjects.
Intellectual Property
We protect our proprietary information by
means of United States and foreign patents, trademarks and copyrights. In addition, we rely upon trade secret protection and contractual
arrangements to protect certain of our proprietary information and products. We have pending patent applications that relate to
potential drug targets, compounds we are developing to modulate those targets, methods of making or using those compounds and proprietary
elements of our drug discovery platform.
Much of our technology and many of our processes
depend upon the knowledge, experience and skills of key scientific and technical personnel. To protect our rights to our proprietary
know-how and technology, we require all employees, as well as our consultants and advisors when feasible, to enter into confidentiality
agreements that require disclosure and assignment to us of ideas, developments, discoveries and inventions made by these employees,
consultants and advisors in the course of their service to us, and we vigorously defend that position with partners, as well as
with employees who leave the Company.
We have also obtained rights to various
patents and patent applications under licenses with third parties, which require us to pay royalties, milestone payments, or both.
The degree of patent protection for biotechnology products and processes, including ours, remains uncertain, both in the United
States and in other important markets, because the scope of protection depends on decisions of patent offices, courts and lawmakers
in these countries. There is no certainty that our existing patents or others, if obtained, will afford us substantial protection
or commercial benefit. Similarly, there is no assurance that our pending patent applications or patent applications licensed from
third parties will ultimately be granted as patents or that those patents that have been issued or are issued in the future will
stand if they are challenged in court. We assess our license agreements on an ongoing basis and may from time to time terminate
licenses to technology that we do not intend to employ in our technology platforms, or in our product discovery or development
activities.
Patents and Patent Applications
We are actively seeking protection for our
intellectual property and are prosecuting a number of patents and pending patent applications covering our compounds and technologies,
including our sd-rxRNA technology. A combined summary of these patents and patent applications is set forth below in the following
table:
|
|
Pending
Applications
|
|
|
Issued
Patents
|
|
United States
|
|
|
24
|
|
|
|
40
|
|
Canada
|
|
|
11
|
|
|
|
3
|
|
Europe
|
|
|
16
|
|
|
|
37
|
|
Japan
|
|
|
11
|
|
|
|
11
|
|
Other Markets
|
|
|
18
|
|
|
|
10
|
|
Our RNAi portfolio includes 94 issued patents,
23 of which cover our self-delivering RNAi platform. There are 16 patent families broadly covering both the composition and methods
of use of our self-delivering platform technology and uses of our sd-rxRNAs targeting immune checkpoint, cellular differentiation
and metabolism targets for
ex vivo
cell-based cancer immunotherapies, as well as uses of our sd-rxRNAs targeting CTGF for
the treatment of fibrotic disorders (including RXI-109 for the treatment of dermal and ocular fibrosis). These patents are scheduled
to expire between 2029 and 2038. Furthermore, there are 75 patent applications, encompassing what we believe to be important new
RNAi compounds and their use as therapeutics and/or cosmetics, chemical modifications of RNAi compounds that improve the compounds’
suitability for therapeutic uses (including delivery) and compounds directed to specific targets (
i.e.
, that address specific
disease states).
The patents and any patents that may issue
from these pending patent applications will, if issued, be set to expire between 2022 and 2038, not including any patent term extensions
that may be afforded under the Federal Food, Drug, and Cosmetic Act (“
FFDCA
”) (and the equivalent provisions
in foreign jurisdictions) for any delays incurred during the regulatory approval process relating to human drug products (or processes
for making or using human drug products).
The Samcyprone portfolio includes 1 issued
patent and 5 patent applications. The patent and patent applications cover both the compositions and methods of use of Samcyprone
for the treatment of warts, human papilloma virus (HPV) skin infections, skin cancer (including melanoma) and immunocompromised
patients. The patent and any patents that may issue from the pending applications will be set to expire between 2019 and 2036,
not including any patent term extensions that may be afforded under the FFDCA (and the equivalent provisions in foreign jurisdictions)
for any delays incurred during the regulatory approval process relating to human drug products (or processed for making or using
human drug products).
License Agreements
We have secured exclusive and non-exclusive
rights to develop therapeutics by licensing key RNAi technologies, Samcyprone and patent rights from third parties. These rights
relate to chemistry and configuration of compounds, delivery technologies of compounds to cells and therapeutic targets. As we
continue to develop our own proprietary compounds, we continue to evaluate both our in-licensed portfolio as well as the field
for new technologies that could be in-licensed to further enhance our intellectual property portfolio and unique position in the
RNAi and immuno-oncology space.
Advirna LLC.
In September 2011, we
entered into an agreement with Advirna, LLC (“
Advirna
”) pursuant to which Advirna assigned to us its existing
patent and technology rights related to sd-rxRNA technology in exchange for our agreement to issue to Advirna common stock equal
to 5% of the Company’s fully-diluted shares, pay an annual maintenance fee of $100,000 and pay a one-time milestone payment
of $350,000 upon the issuance of the first patent with valid claims covering the assigned technology. The common shares of the
Company were issued to Advirna in 2012 upon the completion of the spin-out from our former parent company and the one-time milestone
payment was paid in 2014. Additionally, we will be required to pay a 1% royalty to Advirna on any license revenue received by us
with respect to future licensing of the assigned Advirna patent and technology rights. We also granted back to Advirna a license
under the assigned patent and technology rights for fields of use outside human therapeutics and diagnostics.
Our rights under the Advirna agreement will
expire upon the later of: (i) the expiration of the last-to-expire of the “patent rights” (as defined therein)
or (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance with the provisions
of the agreement.
We may terminate the Advirna agreement at
any time upon 90 days’ written notice to Advirna, and Advirna may terminate the agreement upon 90 days’ prior written
notice in the event that we cease using commercially reasonable efforts to research, develop, license or otherwise commercialize
the patent rights or “royalty-bearing products” (as defined therein), provided that we may refute such claim within
such 90-day period by showing budgeted expenditures for the research, development, licensing or other commercialization consistent
with other technologies of similar stage of development and commercial potential as the patent rights or royalty-bearing products.
Further, either party at any time may provide to the other party written notice of a material breach of the agreement. If the other
party fails to cure the identified breach within 90 days after the date of the notice, the aggrieved party may terminate the agreement
by written notice to the party in breach.
Hapten Pharmaceuticals, LLC
. In December
2014, the Company entered into an Assignment and License Agreement with Hapten Pharmaceuticals, LLC (“
Hapten
”)
under which Hapten agreed to sell and assign to us certain patent rights and related assets and rights, including an investigational
new drug application and clinical data, for Hapten’s Samcyprone products for therapeutic and prophylactic use. Under the
Assignment and License Agreement, and upon the closing of the agreement which occurred in February 2015, Hapten received a one-time
upfront cash payment of $100,000 and we issued to Hapten 2,000 shares of common stock of the Company. Pursuant to the Assignment
and License Agreement, Hapten will be entitled to receive: (i) future milestone payments tied to the achievement of certain
clinical and commercial objectives (all of which payments may be made at our option in cash or through the issuance of common stock)
and (ii) escalating royalties based on product sales by us and any sublicensees.
We have certain customary diligence obligations
under the Assignment and License Agreement requiring us to use commercially reasonable efforts to develop and commercialize one
or more products covered by the Assignment and License Agreement, which obligations, if not performed, could result in rights assigned
or licensed to us reverting back to Hapten.
In addition to the license agreements listed
above, the Company has entered into and may enter into other license agreements that may benefit us as we develop our therapeutic
pipelines.
Other Licensing Agreements
OPKO Health, Inc
. In March 2013,
the Company entered into an Asset Purchase Agreement (the “
Asset Purchase Agreement
”) with OPKO Health, Inc.
(“
OPKO
”), in which we acquired substantially all of its RNAi-related assets, which included patents and patent
applications, licenses, clinical and preclinical data and other related assets. In exchange for the assets that we purchased from
OPKO, we issued 16,667 shares of our common stock and agreed to pay, if applicable: (i) up to $50 million in development
and commercialization milestones for the successful development and commercialization of each “Qualified Drug” (as
defined therein) and (ii) royalty payments equal to: (a) a mid-single-digit percentage of “Net Sales” (as
defined therein) with respect to each Qualified Drug sold for an ophthalmologic use during the applicable “Royalty Period”
(as defined therein) and (b) a low-single-digit percentage of Net Sales with respect to each Qualified Drug sold for a non-ophthalmologic
use during the applicable Royalty Period.
We have certain customary diligence obligations
under the Asset Purchase Agreement requiring us to use commercially reasonable efforts to develop and commercialize one or more
products covered by the Asset Purchase Agreement, which obligations, if not performed, could result in assets transferred and rights
assigned or licensed to us reverting back to OPKO.
Thera Neuropharma, Inc
. In May 2016,
Phio granted an exclusive license to Thera Neuropharma, Inc. (“
Thera
”) to the Company’s novel and proprietary
sd-rxRNA platform to develop therapeutics for neurodegenerative diseases. Under the terms of the agreement, Thera will be responsible
for all research, development, manufacturing, regulatory and commercialization activities for the licensed products. Thera’s
initial focus will be on sd-rxRNA compounds targeting superoxide dismutase 1 (SOD1) for use in developing innovative treatments
for amyotrophic lateral sclerosis (ALS), commonly known as Lou Gehrig’s disease. Upon execution of the license agreement,
Phio was issued shares of common stock of Thera and was granted a five-year warrant to purchase additional shares of common stock
of Thera pursuant to the terms of the license agreement. The Company is eligible to receive future cash, additional equity and
royalties based on the achievement of certain milestones.
Research and Development
Our research and development expense primarily
consists of compensation-related costs for our employees dedicated to research and development activities, fees related to our
Scientific Advisory Board members, expenses related to our ongoing research and development efforts including laboratory supplies
and services for our research programs, our clinical trials, drug manufacturing, outside contract services, licensing fees and
patent fees.
Total research and development expense for
the years ended December 31, 2018 and 2017 was $4,326,000 and $5,370,000, respectively.
Acquired In-Process Research and Development
Assets purchased in an asset acquisition
transaction are expensed as in-process research and development unless the assets acquired have an alternative future use. Acquired
in-process research and development payments are immediately expensed and include upfront payments, as well as transaction fees
and subsequent milestone payments. Development costs incurred after the acquisition are expensed as incurred.
The Company did not complete an asset acquisition
transaction during the year ended December 31, 2018 that would require the recording of acquired in-process research and development
expense. Total acquired in-process research and development expense for the year ended December 31, 2017 was $4,696,000, and related
to the fair value of consideration given, which includes transaction costs, liabilities assumed and cancellation of notes receivable,
and the deferred tax impact of the Company’s acquisition of MirImmune.
Competition
The biotechnology and pharmaceutical industries,
including the immuno-oncology field, are a constantly evolving landscape with rapidly advancing technologies and significant competition.
There are a number of competitors in the immuno-oncology field including large and small pharmaceutical and biotechnology companies,
academic institutions, government agencies and other private and public research organizations.
A variety of cell-based autologous and
allogeneic approaches are being researched and developed, including but not limited to: CAR-T cell, TCR T-cell, GammaDelta T-cell,
CAR-NK cell, NK cell, NKT cell and CTL. We believe that competitors in this field include, but are not limited to Adicet Bio,
Allogene Therapeutics, Atara Bio, Autolus, Baylor College of Medicine, Bellicum Pharmaceuticals, bluebird bio, Celyad, Celgene,
Cell Medica, Cellectis Therapeutics, Cellularity, CiMaas, CRISPR Therapeutics, Fate Therapeutics, Formula Therapeutics, Fortress
Biotech, GAIA Biomedicine, Glycostem Therapeutics, Immatics, Iovance Biotherapeutics, Intrexon, Janssen Pharmaceuticals (with Nanjing
Legend), Juno Therapeutics (Celgene), Kite Pharma (Gilead), MediGene, Mustang Bio, NantKwest, Neon Therapeutics, Novartis, Precigen,
Refuge Biotechnologies Inc, Sorrento Therapeutics, Tactiva Therapeutics, TC Biopharm and Ziopharm Oncology.
A number of technological
approaches to modulating gene expression in the field of immuno-oncology have been identified and are being researched and developed,
including but not limited to: Antisense oligodeoxynucleotides (ASO), RNA interference (RNAi), zinc-finger nucleases (ZFNs), transcription
activator-like effector nucleases (TALENs), messenger RNA (mRNA), and genetic engineering techniques such as Clustered Regularly
Interspaced Short Palindromic Repeats (CRISPR) and various others. We believe that competitors in this field include, but are
not limited to BioNTech, Cellectis, CRISPR Therapeutics, Dicerna Pharmaceuticals, Editas Medicine, eTherna Immunotherapies, Horizon
Discovery, Intellia Therapeutics, Kymera Therapeutics, miRagen Therapeutics, Moderna Therapeutics, Noxxon Pharma, Obsidian Therapeutics,
OliPass Corporation, OncoSec Medical System, Oncotelic, PTC Therapeutics, Sangamo Therapeutics, Sirnaomics, Stemirna Therapeutics,
Takara Bio and Sangamo Therapeutics.
Government Regulation
The United States and many other countries
extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion,
export, marketing and distribution of drugs and biologic products. The U.S. Food and Drug Administration (“
FDA
”)
regulates pharmaceutical and biologic products under the FFDCA, the Public Health Service Act and other federal statutes and regulations.
To obtain approval of our future product
candidates from the FDA, we must, among other requirements, submit data supporting safety and efficacy for the intended indication
as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive
laboratory tests and preclinical and clinical trials. The collection of these data, as well as the preparation of applications
for review by the FDA involve significant time and expense. The FDA also may require post-marketing testing to monitor the safety
and efficacy of approved products or place conditions on any approvals that could restrict the therapeutic claims and commercial
applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards
or if we encounter problems at any time following initial marketing of our products.
The first stage of the FDA approval process
for a new biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the
FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data and other information submitted
to the FDA in an investigational new drug (“
IND
”) application, must become effective before human clinical trials
may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and animal studies
to assess the efficacy and safety of the product candidate.
After the IND becomes effective, a company
may commence human clinical trials. These are typically conducted in three sequential phases, but the phases may overlap. Phase
1 trials consist of testing the product candidate in a small number of patients or healthy volunteers, primarily for safety at
one or more doses. Phase 2 trials, in addition to safety, evaluate the efficacy of the product candidate in a patient population
somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for safety and clinical efficacy in an
expanded population at multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of
the Institutional Review Board (“
IRB
”) at the institutions participating in the trials, prior to commencement
of each clinical trial.
To obtain FDA marketing authorization, a
company must submit to the FDA the results of the preclinical and clinical testing, together with, among other things, detailed
information on the manufacture and composition of the product candidate, in the form of a new drug application (“
NDA
”),
or, in the case of a biologic, a biologics license application (“
BLA
”).
The amount of time taken by the FDA for
approval of an NDA or BLA will depend upon a number of factors, including whether the product candidate has received priority review,
the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment
of the disease in question and the workload at the FDA.
The FDA may, in some cases, confer upon
an investigational product the status of a fast track product. A fast track product is defined as a new drug or biologic intended
for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for
this condition. The FDA can base approval of an NDA or BLA for a fast track product on an effect on a surrogate endpoint, or on
another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data suggests that
a fast track product may be effective, the FDA may initiate review of entire sections of a marketing application for a fast track
product before the sponsor completes the application.
We anticipate that our products will be
manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect
the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in
compliance with the FDA’s cGMP, which are regulations that govern the manufacture, holding and distribution of a product.
Manufacturers of biologics also must comply with the FDA’s general biological product standards. Our manufacturers also will
be subject to regulation under the Occupational Safety and Health Act, the Nuclear Energy and Radiation Control Act, the Toxic
Substance Control Act and the Resource Conservation and Recovery Act and other applicable environmental statutes. Following approval,
the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the cGMP. Our manufacturers
will have to continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to
possible legal or regulatory action, such as suspension of manufacturing or recall or seizure of product. Adverse patient experiences
with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes
or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems
concerning safety or efficacy of the product occur following approval.
The labeling, advertising, promotion, marketing
and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission requirements which
include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities,
promotional activities involving the internet, and direct-to-consumer advertising. We also will be subject to a variety of federal,
state and local regulations relating to the use, handling, storage and disposal of hazardous materials, including chemicals and
radioactive and biological materials. In addition, we will be subject to various laws and regulations governing laboratory practices
and the experimental use of animals. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including
the ability to levy fines and civil penalties, suspend or delay issuance of product approvals, seize or recall products and deny
or withdraw approvals.
We will also be subject to a variety of
regulations governing clinical trials and sales of our products outside the United States. Whether or not FDA approval has been
obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained
prior to the commencement of marketing the product in those countries. The approval process varies from one regulatory authority
to another and the time may be longer or shorter than that required for FDA approval. In the European Union, Canada and Australia,
regulatory requirements and approval processes are similar, in principle, to those in the United States.
Environmental Compliance
Our research and development activities
involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive
compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of
these materials and specific waste products. We are also subject to numerous environmental, health and workplace safety laws and
regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous
materials. The cost of compliance with these laws and regulations could be significant and may adversely affect capital expenditures
to the extent we are required to procure expensive capital equipment to meet regulatory requirements.
Employees
As of March 22, 2019, we had nine full-time
employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement nor have we experienced
any work stoppages.
Corporate Information
We were incorporated in the state of
Delaware in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, the Company changed its name to Phio Pharmaceuticals Corp., to reflect
its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics. Our executive offices are located at 257 Simarano Drive, Suite 101, Marlborough, MA 01752, and our
telephone number is (508) 767-3861.
The Company’s website address is
http://www.phiopharma.com
.
We make available on our website, free of charge, copies of our annual reports on Form 10-K, our quarterly reports on Form 10-Q
and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after these reports are filed electronically
with, or otherwise furnished to, the Securities and Exchange Commission (the “
SEC
”). We also make available
on our website the charters of our audit committee, compensation committee, and nominating and corporate governance committee,
as well as our corporate code of ethics and conduct.
You may read and copy any materials the
Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding Phio and other issuers that file electronically with
the SEC. The SEC’s website address is
http://www.sec.gov
. The contents of these websites are not incorporated by reference
into this report and should not be considered to be part of this report.
Risks Relating to Our Business and Industry
The approach we are taking to discover
and develop novel therapeutics using RNAi may never lead to marketable products.
Our research and development efforts and
our future success is based on our sd-rxRNA technology platform. The use of RNA interference is a relatively new scientific discovery
and the first regulatory approval of an RNAi therapeutic recently occurred in August 2018. The scientific evidence to support the
feasibility of developing drugs based on these discoveries is limited. We may spend large amounts of money trying to develop our
sd-rxRNA technology and may never succeed in doing so. In addition, any compounds that we develop may not demonstrate in subjects
the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological
systems in unforeseen, ineffective or even harmful ways. If we are not successful in developing a product candidate using our sd-rxRNA
technology, we may not be able to identify and successfully implement an alternative product development strategy.
We have limited experience in operating
our current business in the area of immuno-oncology.
We have only a limited operating history
with our current business strategy on which a decision to invest in our Company can be based. Prior to the Company’s acquisition
of MirImmune Inc. in January 2017, the Company’s efforts were focused on the development of therapeutics in the areas of
dermatology and ophthalmology. We are currently conducting multiple discovery and preclinical research studies using our sd-rxRNA
technology for use in developing immuno-oncology therapeutics and we have limited experience as a company in developing such immuno-oncology
technologies. Because of the number of companies and intense competition in immuno-oncology, we may not have the ability to successfully
overcome many of the risks and uncertainties that companies face in this field.
We made a strategic decision to focus
our development solely on immuno-oncology, and the anticipated benefits of our new strategic focus may not be realized.
We acquired MirImmune, a privately-held
immuno-oncology company, in the past year and are undertaking to divest our current dermatology and ophthalmology programs. In
January 2018, the Company completed a thorough review of its business operations, development programs and financial resources
and announced its strategic decision to solely focus the Company’s development portfolio on the field of immuno-oncology.
There is no assurance that the Company will be able to consummate any strategic transactions for the dermatology and ophthalmology
programs or that we will be able to be successful in implementing our new focus as an immuno-oncology product development company.
If we are not successful in identifying
and developing product candidates, we will not be able to commence clinical trials in humans or obtain approval for our product
candidates.
Our sd-rxRNA technology has been subject
to only limited clinical testing with our first product candidate, RXI-109, for dermatologic and ophthalmic uses. We have identified
lead compounds for preclinical development with our sd-rxRNA technology in immuno-oncology but have not yet commenced clinical
testing. We may not be able to advance these or future product candidates through the preclinical stage into clinical trials. Additionally,
we may not be able to identify data that would support entering these or future candidates into clinical trials. Furthermore, even
if we successfully enter into clinical studies in immuno-oncology, the results from preclinical testing of a drug candidate may
not predict the results that will be achieved in human clinical trials. There is no assurance that we will be able to successfully
develop any product candidate(s), and we may focus our efforts and resources on product candidates that may prove to be unsuccessful.
We are dependent on the success of
our product candidates, which may not receive regulatory approval or be successfully commercialized.
We have no commercial products and currently
generate no revenue from product sales or collaborations and may never be able to develop marketable products. The FDA or similar
foreign governmental agencies must approve our products in development before they can be marketed. The process for obtaining FDA
approval is both time consuming and costly, with no certainty of a successful outcome. Before obtaining regulatory approval for
the sale of any drug candidate, we must conduct extensive preclinical tests and successful clinical trials to demonstrate the safety
and efficacy of our product candidates in humans. A failure of any preclinical study or clinical trial can occur at any stage of
testing. The results of preclinical and initial clinical testing of these products may not necessarily indicate the results that
will be obtained from later or more extensive testing. Preliminary observations made in early stages of clinical trials with small
numbers of subjects are inherently uncertain. Initial clinical trial results are not necessarily indicative of results that will
be obtained when full data sets are analyzed or in subsequent clinical trials.
While there have been a number of immunotherapy
drugs approved by the FDA, there have been no FDA drug approvals using the approach that we are taking. We will be subjected to
thorough regulatory review by the FDA, and there is limited experience in this area with a few precedents. The FDA may require
additional information from the Company regarding our current or planned clinical trials at any time, and such information may
be costly to provide or cause potentially significant delays in development. There is no assurance that we will be able to successfully
develop any of our product candidates, and we may spend large amounts of money trying to resolve these issues and may never succeed
in doing so.
A number of different factors could
prevent us from obtaining regulatory approval or commercializing our product candidates on a timely basis, or at all.
We, the FDA or other applicable regulatory
authorities, or an IRB may suspend clinical trials of a drug candidate at any time for various reasons, including if we or they
believe the subjects participating in such trials are being exposed to unacceptable health risks. Among other reasons, adverse
side effects of a drug candidate on subjects in a clinical trial could result in the FDA or other regulatory authorities suspending
or terminating the trial and refusing to approve a particular drug candidate for any or all indications of use.
Clinical trials of a new drug candidate
require the enrollment of a sufficient number of subjects, including subjects who are suffering from the disease or condition the
drug candidate is intended to treat and who meet other eligibility criteria. Rates of subject enrollment are affected by many factors,
and delays in subject enrollment can result in increased costs and longer development times.
Clinical trials also require the review
and oversight of IRBs, which approve and continually review clinical investigations and protect the rights and welfare of human
subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials,
and the FDA may decide not to consider any data or information derived from a clinical investigation not subject to initial and
continuing IRB review and approval.
Numerous factors could affect the timing,
cost or outcome of our drug development efforts, including the following:
|
·
|
Delays in filing or acceptance of initial drug applications for our product candidates;
|
|
·
|
Difficulty in securing centers to conduct clinical trials;
|
|
·
|
Conditions imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
|
|
·
|
Problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;
|
|
·
|
Difficulty in enrolling subjects in conformity with required protocols or projected timelines;
|
|
·
|
Third-party contractors failing to comply with regulatory requirements or to meet their contractual obligations to us in a
timely manner;
|
|
·
|
Our drug candidates having unexpected and different chemical and pharmacological properties in humans than in laboratory testing
and interacting with human biological systems in unforeseen, ineffective or harmful ways;
|
|
·
|
The need to suspend or terminate clinical trials if the participants are being exposed to unacceptable health risks;
|
|
·
|
Insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical
trials;
|
|
·
|
Effects of our drug candidates not having the desired effects or including undesirable side effects or the drug candidates
having other unexpected characteristics;
|
|
·
|
The cost of our clinical trials being greater than we anticipate;
|
|
·
|
Negative or inconclusive results from our clinical trials or the clinical trials of others for similar drug candidates or inability
to generate statistically significant data confirming the efficacy of the product being tested;
|
|
·
|
Changes in the FDA’s requirements for testing during the course of that testing;
|
|
·
|
Reallocation of our limited financial and other resources to other clinical programs; and
|
|
·
|
Adverse results obtained by other companies developing similar drugs.
|
It is possible that none of the product
candidates that we may attempt to develop will obtain the appropriate regulatory approvals necessary to begin selling them or that
any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product.
The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical
trials, depending upon the complexity of the drug candidate. Any analysis we perform of data from clinical activities is subject
to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay
or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenue from the particular
drug candidate.
We also are subject to numerous foreign
regulatory requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party
reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above,
as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure
approval by regulatory authorities outside of the United States.
The FDA could impose a unique regulatory
regime for our therapeutics.
The compounds we intend to develop may represent
a new class of drug, and even though the first RNAi therapeutic was approved in August 2018, the FDA has not yet established any
definitive policies, practices or guidelines in relation to these drugs. While we expect any product candidates that we develop
will be regulated as a new drug under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other
products we may develop as biologics under the Public Health Service Act. The lack of policies, practices or guidelines may hinder
or slow review by the FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining
requirements that we may not have anticipated.
Even if we receive regulatory approval
to market our product candidates, our product candidates may not be accepted commercially, which may prevent us from becoming profitable.
The product candidates that we are developing
are based on new technologies and therapeutic approaches. For example, RNAi products may be more expensive to manufacture than
traditional small molecule drugs, which may make them costlier than competing small molecule drugs. Additionally, RNAi products
do not readily cross the so-called blood brain barrier, are rapidly eliminated from circulating blood and, for various applications,
are likely to require injection or implantation, which will make them less convenient to administer than drugs administered orally.
Key participants in the pharmaceutical marketplace, such as physicians, medical professionals working in large reference laboratories,
public health laboratories and hospitals, third-party payors and consumers may not accept products intended to improve therapeutic
results based on our technologies. As a result, it may be more difficult for us to convince the medical community and third-party
payors to accept and use our products or to provide favorable reimbursement. If medical professionals working with large reference
laboratories, public health laboratories and hospitals choose not to adopt and use our technologies, our products may not achieve
broader market acceptance.
Additionally, although we expect that we
will have intellectual property protection for our technology, certain governments may elect to deny patent protection for drugs
targeting diseases with high unmet medical need (e.g., as in the case of HIV) and allow in their country internationally unauthorized
generic competition. If this were to happen, our commercial prospects for developing any such drugs would be substantially diminished
in these countries.
We are dependent on technologies
we license, and if we lose the right to license such technologies or fail to license new technologies in the future, our ability
to develop new products would be harmed.
Many patents in the fields we are pursuing
have already been exclusively licensed to third parties, including our competitors. If any of our existing licenses are terminated,
the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate
additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.
We may be unable to protect our intellectual
property rights licensed from other parties; our intellectual property rights may be inadequate to prevent third parties from using
our technologies or developing competing products; and we may need to license additional intellectual property from others.
Therapeutic applications of gene silencing
technologies, formulations, delivery methods and other technologies that we license from third parties are claimed in a number
of pending patent applications, but there is no assurance that these applications will result in any issued patents or that those
patents would withstand possible legal challenges or protect our technologies from competition. The United States Patent and Trademark
Office and patent granting authorities in other countries have upheld stringent standards for the RNAi patents that have been prosecuted
so far. Consequently, pending patents that we have licensed and those that we own may continue to experience long and difficult
prosecution challenges and may ultimately issue with much narrower claims than those in the pending applications. Third parties
may hold or seek to obtain additional patents that could make it more difficult or impossible for us to develop products based
on our technologies without obtaining a license to such patents, which licenses may not be available on attractive terms, or at
all.
In addition, others may challenge the patents
or patent applications that we currently license or may license in the future or that we own and, as a result, these patents could
be narrowed, invalidated or rendered unenforceable, which would negatively affect our ability to exclude others from using the
technologies described in these patents. There is no assurance that these patent or other pending applications or issued patents
we license or that we own will withstand possible legal challenges. Moreover, the laws of some foreign countries may not protect
our proprietary rights to the same extent as do the laws of the United States. Any patents issued to us or our licensors may not
provide us with any competitive advantages, and there is no assurance that the patents of others will not have an adverse effect
on our ability to do business or to continue to use our technologies freely. Our efforts to enforce and maintain our intellectual
property rights may not be successful and may result in substantial costs and diversion of management time. Even if our rights
are valid, enforceable and broad in scope, competitors may develop products based on technology that is not covered by our licenses
or patents or patent applications that we own.
There is no guarantee that future licenses
will be available from third parties for our product candidates on timely or satisfactory terms, or at all. To the extent that
we are required and are able to obtain multiple licenses from third parties to develop or commercialize a product candidate, the
aggregate licensing fees and milestones and royalty payments made to these parties may materially reduce our economic returns or
even cause us to abandon development or commercialization of a product candidate.
Our success depends upon our ability to
obtain and maintain intellectual property protection for our products and technologies.
The applications based on RNAi technologies
claim many different methods, compositions and processes relating to the discovery, development, delivery and commercialization
of RNAi therapeutics. Because this field is so new, very few of these patent applications have been fully processed by government
patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to whom and with
what claims. Although we are not aware of any blocking patents or other proprietary rights, it is likely that there will be significant
litigation and other proceedings, such as interference and opposition proceedings in various patent offices, relating to patent
rights in the RNAi field. It is possible that we may become a party to such proceedings.
We are subject to significant competition
and may not be able to compete successfully.
The biotechnology and pharmaceutical industries,
including immuno-oncology, have intense competition and contain a high degree of risk. We face a number of competitors that have
substantially greater experience and greater research and development capabilities, staffing, financial, manufacturing, marketing,
technical and other resources than us, and we may not be able to successfully compete with them. These companies include large
and small pharmaceutical and biotechnology companies, academic institutions, government agencies and other private and public research
organizations.
In addition, even if we are successful
in developing our product candidates, in order to compete successfully we may need to be first to market or to demonstrate that
our products are superior to therapies based on different technologies. Some of our competitors may develop and commercialize products
that are introduced to market earlier than our product candidates or on a more cost-effective basis. A number of our competitors
have already commenced clinical testing of product candidates and may be more advanced than we are in the process of developing
products. If we are not first to market or are unable to demonstrate superiority, on a cost-effective basis or otherwise, any products
for which we are able to obtain approval may not be successful.
Our competitors also compete with us in
acquiring technologies complementary to our sd-rxRNA technology. We may face competition with respect to product efficacy and safety,
ease of use and adaptability to modes of administration, acceptance by physicians, timing and scope of regulatory approvals, reimbursement
coverage, price and patent position, including dominant patent positions of others. If we are not able to successfully obtain regulatory
approval or commercialize our product candidates, we may not be able to establish market share and generate revenues from our technology.
We will rely upon third parties for
the manufacture of our product candidates.
We do not have the facilities or expertise
to manufacture supplies of any of our potential product candidates. Accordingly, we will be dependent upon contract manufacturers
to obtain supplies, and we will need to either develop, contract for, or otherwise arrange for the necessary manufacturers for
these supplies. If for any reason we are unable to obtain the supplies for our product candidates from our current manufacturer,
we would have to seek to obtain it from another major manufacturer. There is no assurance that we will be able to timely secure
needed supply arrangements on satisfactory terms, or at all. Our failure to secure these arrangements as needed could have a material
adverse effect on our ability to complete the development of our product candidates or, if we obtain regulatory approval for our
product candidates, to commercialize them.
We may not be able to establish or
maintain the third-party relationships that are necessary to develop or potentially commercialize some or all of our product candidates.
We expect to depend on collaborators, partners,
licensees, clinical research organizations and other third parties to support our discovery efforts, to formulate product candidates,
to manufacture our product candidates and to conduct clinical trials for some or all of our product candidates. We cannot guarantee
that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees,
clinical investigators, vendors and other third parties on favorable terms, if at all. Our ability to successfully negotiate such
agreements will depend on, among other things, potential partners’ evaluation of the superiority of our technology over competing
technologies, the quality of the preclinical and clinical data that we have generated and the perceived risks specific to developing
our product candidates. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate,
manufacture, obtain regulatory approvals for or commercialize our product candidates. We cannot necessarily control the amount
or timing of resources that our contract partners will devote to our research and development programs, product candidates or potential
product candidates, and we cannot guarantee that these parties will fulfill their obligations to us under these arrangements in
a timely fashion. We may not be able to readily terminate any such agreements with contract partners even if such contract partners
do not fulfill their obligations to us.
We are subject to potential liabilities
from clinical testing and future product liability claims.
If any of our future products are alleged
to be defective, they may expose us to claims for personal injury by subjects in clinical trials of our products. If our products
are approved by the FDA, users may claim that such products caused unintended adverse effects. We will seek to obtain clinical
trial insurance for clinical trials that we conduct, as well as liability insurance for any products that we market. There is no
assurance that we will be able to obtain insurance in the amounts we seek, or at all. We anticipate that licensees who develop
our products will carry liability insurance covering the clinical testing and marketing of those products. There is no assurance,
however, that any insurance maintained by us or our licensees will prove adequate in the event of a claim against us. Even if claims
asserted against us are unsuccessful, they may divert management’s attention from our operations and we may have to incur
substantial costs to defend such claims.
Any drugs we develop may become subject
to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material
adverse effect on our business.
If approved, we intend to sell our products
primarily to hospitals, oncologists and clinics, which receive reimbursement for the healthcare services they provide to their
patients from third-party payors, such as Medicare, Medicaid and other domestic and international government programs, private
insurance plans and managed care programs. Most third-party payors may deny reimbursement if they determine that a medical product
was not used in accordance with cost-effective treatment methods, as determined by the third-party payor, was used for an unapproved
indication or if they believe the cost of the product outweighs its benefits. Third-party payors also may refuse to reimburse for
experimental procedures and devices. Furthermore, because our programs are still in development, we are unable at this time to
determine their cost-effectiveness and the level or method of reimbursement for them. Increasingly, the third-party payors who
reimburse patients are requiring that drug companies provide them with predetermined discounts from list prices and are challenging
the prices charged for medical products. If the price we are able to charge for any products we develop is inadequate in light
of our development and other costs, our profitability could be adversely affected.
We currently expect that any drugs we develop
may need to be administered under the supervision of a physician. Under currently applicable law, drugs that are not usually self-administered
may be eligible for coverage by the Medicare program if:
|
·
|
They are “incidental” to a physician’s services;
|
|
·
|
They are “reasonable and necessary” for the diagnosis or treatment of the illness or injury for which they are
administered according to accepted standards of medical practice;
|
|
·
|
They are not excluded as immunizations; and
|
|
·
|
They have been approved by the FDA.
|
Insurers may refuse to provide insurance
coverage for newly approved drugs, including drugs in our clinical pipeline, or insurance coverage may be delayed or be more limited
than the purpose for which the drugs are approved by the FDA. Moreover, eligibility for insurance coverage does not imply that
any drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale
and distribution costs. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not
be made permanent. Reimbursement may be based on payments for other services and may reflect budgetary constraints or imperfections
in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs
or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be
sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations
in setting their own reimbursement rates. Our inability to promptly obtain coverage and profitable reimbursement rates from both
government-funded and private payors for new drugs that we develop could have a material adverse effect on our operating results,
our ability to raise capital needed to develop products and our overall financial condition.
Additionally, third-party payors are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services.
Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party
payors may adversely affect the demand for and price levels of our products. If our customers are not reimbursed for our products,
they may reduce or discontinue purchases of our products, which could have a material adverse effect on our business, financial
condition and results of operations.
Comprehensive healthcare reform legislation,
which became law in 2010, and any revisions to this legislation, could adversely affect our business and financial condition. Among
other provisions, the legislation provides that a “biosimilar” product may be approved by the FDA on the basis of analytical
tests and certain clinical studies demonstrating that such product is highly similar to an existing, approved product and that
switching between an existing product and the biosimilar product will not result in diminished safety or efficacy. This abbreviated
regulatory approval process may result in increased competition if we are able to bring a product to market. The legislation also
includes more stringent compliance programs for companies in various sectors of the life sciences industry with which we may need
to comply and enhanced penalties for non-compliance with the new healthcare regulations. Complying with new regulations may divert
management resources, and inadvertent failure to comply with new regulations may result in penalties being imposed on us.
Some states and localities have established
drug importation programs for their citizens, and federal drug import legislation has been introduced in Congress. The Medicare
Prescription Drug Plan legislation, which became law in 2003, required the Secretary of Health and Human Services to promulgate
regulations for drug reimportation from Canada into the United States under some circumstances, including when the drugs are sold
at a lower price than in the United States. The Secretary, however, retained the discretion not to implement a drug reimportation
plan, if the Secretary finds that the benefits do not outweigh the costs, and has so far declined to approve a reimportation plan.
Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances.
Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products
that we may develop and adversely affect our future revenues and prospects for profitability.
With the current U.S. administration and
Congress, there may be additional legislative changes, including repeal and replacement of certain provisions of the Affordable
Care Act. It remains to be seen, however, precisely what new legislation will provide, when it will be enacted and what impact
it will have on the availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an adverse
effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval
and may affect our overall financial condition and ability to develop product candidates.
Even if we obtain regulatory approvals,
our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and foreign regulations,
we could lose our approvals to market drugs and our business would be materially and adversely affected.
Following regulatory approval of any drugs
we may develop, we will remain subject to continuing regulatory review, including the review of adverse drug experiences and clinical
results that are reported after our drug products are made available to patients. This would include results from any post-marketing
tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make any of our
drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown
problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including
withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging,
storage, advertising, promotion, recordkeeping and submission of safety and other post-market information for all of our product
candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may
be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and
other adverse consequences.
If we fail to attract, hire and retain
qualified personnel, we may not be able to design, develop, market or sell our products or successfully manage our business.
Our business prospects are dependent on
the principal members of our executive team, the loss of whose services could make it difficult for us to manage our business successfully
and achieve our business objectives. While we have entered into employment agreements with each of our executive officers, they
could leave at any time, in addition to our other employees, who are all “at will” employees. Our ability to identify,
attract, retain and integrate additional qualified key personnel is also critical to our success. Competition for skilled research,
product development, regulatory and technical personnel is intense, and we may not be able to recruit and retain the personnel
we need. The loss of the services of any key research, product development, regulatory and technical personnel, or our inability
to hire new personnel with the requisite skills, could restrict our ability to develop our product candidates.
Risks Relating to Our Financial Condition
We may not be able to obtain sufficient
financing and may not be able to develop our product candidates.
We
believe that our existing cash will likely be sufficient to fund our currently planned operations for at least the next 12 months.
However, w
e have generated significant losses to date, have not generated any product revenue and may not generate product
revenue in the foreseeable future, or ever. We expect to incur significant operating losses as we advance our product candidates
through drug development and the regulatory process. In the future, we may need to issue equity or incur debt in order to fund
our planned expenditures, as well as to make acquisitions and other investments. We cannot assure you that equity or debt financing
will be available to us on acceptable terms, or at all. If we cannot, or are limited in the ability to, issue equity, incur debt
or enter into strategic collaborations, we may be unable to fund the discovery and development of our product candidates, address
gaps in our product offerings or improve our technology.
We anticipate that we will need to raise
substantial amounts of money to fund a variety of future activities integral to the development of our business, which may include
but is not limited to the following:
|
·
|
To conduct research and development to successfully develop our technologies;
|
|
·
|
To obtain regulatory approval for our products;
|
|
·
|
To file and prosecute patent applications and to defend and assess patents to protect our technologies;
|
|
·
|
To retain qualified employees, particularly in light of intense competition for qualified personnel;
|
|
·
|
To manufacture products ourselves or through third parties;
|
|
·
|
To market our products, either through building our own sales and distribution capabilities or relying on third parties; and
|
|
·
|
To acquire new technologies, licenses or products.
|
If we fail to obtain additional funding
when needed, we may ultimately be unable to continue to develop and potentially commercialize our product candidates, and we may
be forced to scale back or terminate our operations or seek to merge with or be acquired by another company.
Future financing may be obtained through,
and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on our stockholders
or may otherwise adversely affect our business.
If we raise funds through the issuance of
debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders
of our common stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled,
there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise funds through the issuance
of additional equity, whether through private placements or public offerings, such an issuance would dilute current stockholders’
ownership in us.
The terms of debt securities may also impose
restrictions on our operations, which may include limiting our ability to incur additional indebtedness, to pay dividends on or
repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring
us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of
our control.
We expect to continue to incur significant
research and development expenses, which may make it difficult for us to attain profitability, and may lead to uncertainty as to
our ability to continue as a going concern.
We expend substantial funds to develop our
technologies, and additional substantial funds will be required for further research and development, including preclinical testing
and clinical trials of any product candidates, and to manufacture and market any products that are approved for commercial sale.
Because the successful development of our products is uncertain, we are unable to precisely estimate the actual funds we will require
to develop and potentially commercialize them. In addition, we may not be able to generate enough revenue, even if we are able
to commercialize any of our product candidates, to become profitable.
If we are unable to achieve or sustain profitability
or to secure additional financing, we may not be able to meet our obligations as they come due, raising substantial doubts as to
our ability to continue as a going concern. Any such inability to continue as a going concern may result in our common stockholders
losing their entire investment. There is no guarantee that we will become profitable or secure additional financing. Our financial
statements do not include any adjustments to, or classification of, recorded asset amounts and classification of liabilities that
might be necessary if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated
working capital needs, the acceleration or modification of our expansion plans, increased expenses, potential acquisitions or other
events will all affect our ability to continue as a going concern.
Risks Relating to Our Securities
The price of our common stock has
been and may continue to be volatile.
The stock markets, in general, and the markets
for drug delivery and pharmaceutical company stocks, in particular, have experienced extreme volatility that has often been unrelated
to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of
our common stock. In addition, the limited trading volume of our stock may contribute to its volatility.
In the past, following periods of volatility
in the market price of a particular company’s securities, litigation has often been brought against that company. If litigation
of this type is brought against us, it could be extremely expensive and divert management’s attention and the Company’s
resources.
We have issued preferred stock in
the past and possibly may issue more preferred stock in the future, and the terms of the preferred stock may reduce the value of
our common stock.
We are authorized to issue up to 10,000,000
shares of preferred stock in one or more series. Our Board of Directors may determine the terms of future preferred stock offerings
without further action by our stockholders. The issuance of our preferred stock could affect the rights of existing stockholders
or reduce the value of our outstanding preferred stock or common stock. In particular, rights granted to holders of certain series
of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and
restrictions on our ability to merge with or sell our assets to a third party.
We may acquire other businesses or
form joint ventures that may be unsuccessful and could dilute your ownership interest in the Company.
As part of our business strategy, we may
pursue future acquisitions of other complementary businesses and technology licensing arrangements. We also may pursue strategic
alliances. We have limited experience with respect to acquiring other companies and with respect to the formation of collaborations,
strategic alliances and joint ventures. We may not be able to integrate such acquisitions successfully into our existing business,
and we could assume unknown or contingent liabilities. We also could experience adverse effects on our reported results of operations
from acquisition related charges, amortization of acquired technology and other intangibles and impairment charges relating to
write-offs of goodwill and other intangible assets from time to time following the acquisition. Integration of an acquired company
requires management resources that otherwise would be available for ongoing development of our existing business. We may not realize
the anticipated benefits of any acquisition, technology license or strategic alliance. For example, in January 2017, the Company
acquired 100% of the outstanding capital stock of MirImmune. The assets and development programs acquired from MirImmune were at
an early stage of development and will require significant investment of time and capital if we are to be successful in developing
them. There is no assurance that we will be successful in developing such assets, and a failure to successfully develop such assets
could diminish our prospects.
To finance future acquisitions, we may choose
to issue shares of our common stock or preferred stock as consideration, which would dilute current stockholders’ ownership
interest in us. Alternatively, it may be necessary for us to raise additional funds through public or private financings. Additional
funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our
stockholders. Any future acquisitions by us also could result in large and immediate write-offs, the incurrence of contingent liabilities
or amortization of expenses related to acquired intangible assets, any of which could harm our operating results.
We do not anticipate paying cash dividends
in the foreseeable future.
Our business requires significant funding.
We currently plan to invest all available funds and future earnings in the development and growth of our business and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. As a result, capital appreciation, if any, of our common
stock will be the sole source of potential gain for our stockholders for the foreseeable future.
We may not be able to regain compliance
with the continued listing requirements of The Nasdaq Capital Market.
On November 12,
2018, we received written notice (the “
Notification Letter
”) from the Nasdaq Stock Market (“
Nasdaq
”)
notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2)
for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum
bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement
exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of our common stock
for the 30 consecutive business days prior to the date of the Notification Letter, we no longer meet the minimum bid price requirement.
The Notification
Letter does not impact our listing on The Nasdaq Capital Market at this time. The Notification Letter states that we have 180 calendar
days, or until May 13, 2019, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our
common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days at any time
prior to May 13, 2019. In the event that we do not regain compliance by May 13, 2019, we may be eligible for additional time to
reach compliance with the minimum bid price requirement. However, if we fail to regain compliance with the minimum bid price listing
requirement or fail to maintain compliance with all other applicable continued listing requirements and Nasdaq determines to delist
our common stock, the delisting could adversely impact us by, among other things, reducing the liquidity and market price of our
common stock; reducing the number of investors willing to hold or acquire our common stock; limiting our ability to issue additional
securities in the future; and limiting our ability to fund our operations.
Provisions of our certificate of incorporation
and bylaws and Delaware law might discourage, delay or prevent a change of control of the Company or changes in our management
and, as a result, depress the trading price of our common stock.
Our certificate of incorporation and bylaws
contain provisions that could discourage, delay or prevent a change of control of the Company or changes in our management that
the stockholders of the Company may deem advantageous. These provisions:
|
·
|
Authorize the issuance of “blank check” preferred stock that our Board of Directors could issue to increase the
number of outstanding shares and to discourage a takeover attempt;
|
|
·
|
Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
|
|
·
|
Provide that the Board of Directors is expressly authorized to adopt, alter or repeal our bylaws; and
|
|
·
|
Establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that
can be acted upon by stockholders at stockholder meetings.
|
Although we believe these provisions collectively
provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board of Directors, they
would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or
prevent any attempts by our stockholders to replace or remove our current management team by making it more difficult for stockholders
to replace members of our Board of Directors, which is responsible for appointing the members of our management.
Moreover, because we are incorporated in
Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person
who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the
date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination
is approved in a prescribed manner.