Filed Pursuant
to Rule 424(b)(5)
Registration No. 333-197824
The
information in this preliminary pro
spectus supplement is not complete
and
may be
changed. This
preliminary
prospectus supplement
and
the accompanying prospectus are part of an effective registration statement filed with the Securities and Exchange Commission.
This preliminary prospectus supplement and the accompanying prospectus are
not an offer to sell
these securities and
are
not solicitin
g
an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED OCTOBER 25, 2016
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 1, 2014
Units
Each Unit Consisting
of One Share of Common Stock
and
One Warrant to Purchase of a Share of Common Stock
We are offering
units, with each unit consisting of one share of our common stock, par value $0.001 per share (the “Shares”), and one
warrant to purchase of a share of common stock (the “Warrants”)
pursuant to this prospectus supplement and the accompanying prospectus. We are also offering up to shares
of common stock in the event the Warrants are exercised. Because we are prohibited from issuing fractional shares, the Warrants
can only be exercised in lots of , which means that each holder must exercise
Warrants to receive one share of common stock. The Warrants have an initial exercise price of $
per whole share, are exercisable immediately after the date of issuance, and will expire five years from the date of issuance.
Units will not be issued
or certificated. The Shares and the Warrants may be transferred separately immediately upon issuance. Each unit will be sold at
a price of $ per unit.
There is no established
public trading market for the Warrants and we do not expect a market to develop. In addition, we do not intend to apply for listing
of the Warrants on any national securities exchange or other trading market. For a more detailed description of the Warrants,
see the section entitled “
Description of Securities
” beginning of page S-30 of this prospectus supplement.
Our
common stock is listed on The NASDAQ Global Market under the symbol "TNXP". The last reported sales price of our common
stock on October 24, 2016 was $0.65 per share.
Dawson
James Securities, Inc., its officers and registered representatives, and their affiliates may participate in this offering on the
same terms and conditions as the investors in this offering.
Investing
in our common stock involves risks. See "Risk Factors" beginning on page S-8 of this prospectus supplement, and
under similar headings in the other documents that are incorporated by reference into this prospectus supplement and the accompanying
prospectus.
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Public offering price
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$
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$
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Underwriting discount
(1)
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$
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$
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Proceeds to us, before expenses
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$
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(1)
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The underwriters will receive compensation in addition to the underwriting discount. The underwriters will receive 50% of any
underwriting discount for shares sold to our executive officers and directors. See “Underwriting” beginning on page
S-32 of this prospectus supplement for a description of the compensation payable to the underwriters.
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Tonix’s
officers and directors may purchase units in this offering.
We
have granted to the underwriters a 45-day option to purchase up to (i)
additional
shares of common stock at a price of $
less the
underwriting discount and/or (ii) additional warrants to purchase up to
additional
shares of common stock at a purchase price of $0.001 per warrant less the underwriting discount to cover over-allotments, if any.
Delivery
of the units will be made on or about October , 2016.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or complete. Any representation to the contrary is a criminal
offense.
Dawson James Securities, Inc.
The date of this
prospectus supplement is October , 2016
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
ABOUT THIS PROSPECTUS
SUPPLEMENT
This document is
in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering and also adds to
and updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus. The second part, the accompanying prospectus, gives more general information about
securities we may offer from time to time, some of which does not apply to this offering. Generally, when we refer to this prospectus,
we are referring to both parts of this document combined together with all documents incorporated by reference. If the description
of the offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information contained
in this prospectus supplement. However, if any statement in one of these documents is inconsistent with a statement in another
document having a later date—for example, a document incorporated by reference into this prospectus supplement or the accompanying
prospectus—the statement in the document having the later date modifies or supersedes the earlier statement.
You should rely only
on the information contained in or incorporated by reference into this prospectus supplement or contained in or incorporated by
reference into the accompanying prospectus and any free writing prospectus to which we have referred you. Neither we nor the underwriters
have authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent
information, you should not rely on it. We do not, and the underwriters do not, take responsibility for, and can provide no assurances
as to, the reliability of any information that others provide you. The information contained in, or incorporated by reference into,
this prospectus supplement and contained in, or incorporated by reference into, the accompanying prospectus as well as any free
writing prospectus we send to you or file with the Securities and Exchange Commission, or SEC, is accurate only as of the respective
dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or of any sale
of securities. It is important for you to read and consider all information contained in this prospectus supplement and the accompanying
prospectus as well as any free writing prospectus we send to you or file with the SEC, including the documents incorporated by
reference herein and therein, in making your investment decision. You should also read and consider the information in the documents
to which we have referred you under the captions “Where You Can Find More Information” and “Incorporation of
Documents by Reference” in this prospectus supplement and in the accompanying prospectus.
We
are offering to sell, and are seeking offers to buy, the shares only in jurisdictions where such offers and sales are permitted.
The distribution of this prospectus supplement and the accompanying prospectus, as well as any free writing prospectus we send
to you or file with the SEC, and the offering of the shares in certain jurisdictions or to certain persons within such jurisdictions
may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying
prospectus must inform themselves about and observe any restrictions relating to the offering of the shares and the distribution
of this prospectus supplement, the accompanying prospectus and any free writing prospectus we send to you, outside the United States.
This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer
to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying prospectus
by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
We own or have rights
to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus
supplement may also contain trademarks, service marks and trade names of third parties, which are the property of their respective
owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus supplement
is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks,
service marks and trade names referred to in this prospectus may appear without the
®
,
TM
or
SM
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement and accompanying prospectus, including the documents that we incorporate by reference, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements include those that express
plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical
fact. These statements include, but are not limited to, statements regarding:
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our expectations regarding clinical studies, the timing of clinical
results, development timelines and regulatory filings and submissions for our product candidates;
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our intention to commence a Phase 3 clinical study of TNX-102 SL (cyclobenzaprine HCl sublingual tablets), or TNX-102
SL, in patients with military-related posttraumatic stress disorder, or PTSD, during the first quarter of 2017;
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our liquidity and our expectations regarding our needs for and ability
to raise additional capital; and
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the amount, and our expected uses, of the net proceeds of this offering.
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These
forward-looking statements are based on our current expectations and projections about future events and they are subject to risks
and uncertainties known and unknown to us that could cause actual results and developments to differ materially from those expressed
or implied in such statements, including the risks described under "Risk Factors" in this prospectus supplement, and
the other information in this prospectus supplement, the accompanying prospectus and our Annual Report on Form 10-K for the
year ended December 31, 2015.
In
some cases, you can identify forward-looking statements by terminology, such as "expects," "anticipates," "intends,"
"estimates," "plans," "believes," "seeks," "may," "should", "could"
or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties
that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified
in their entirety by reference to the factors discussed throughout this prospectus supplement and the accompanying prospectus.
You
should read this prospectus supplement, the accompanying prospectus and the documents that we reference herein and therein, completely
and with the understanding that our actual future results may be materially different from what we expect. You should assume that
the information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference
is accurate as of their respective dates. Our business, financial condition, results of operations and prospects may change. We
may not update these forward-looking statements, even though our situation may change in the future, unless required by law to
update and disclose material developments related to previously disclosed information. We qualify all of the information presented
in this prospectus supplement and the accompanying prospectus, and particularly our forward-looking statements, by these cautionary
statements.
PROSPECTUS SUPPLEMENT SUMMARY
The following summary
is qualified in its entirety by, and should be read together with, the more detailed information and financial statements and related
notes thereto appearing elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus. Before
you decide to invest in our securities, you should read the entire prospectus supplement and the accompanying prospectus carefully,
including the risk factors and the financial statements and related notes included or incorporated by reference in this prospectus
supplement and the accompanying prospectus
.
Unless otherwise
indicated or unless the context requires otherwise, this prospectus supplement includes the accounts of Tonix Pharmaceuticals Holding
Corp., a Nevada corporation and its wholly-owned subsidiaries, collectively referred to as “we”, “us”,
“Tonix” or the “Company”.
Overview
We are a clinical-stage
pharmaceutical company dedicated to the invention and development of next-generation medicines. Our most advanced drug development
program is directed toward disorders affecting the central nervous system, or CNS, including PTSD. PTSD is characterized by chronic
disability, inadequate treatment options, high utilization of healthcare services, and significant economic burden. We have assembled
a management team with significant industry experience to lead the development of our product candidates. We complement our management
team with a network of scientific, clinical, and regulatory advisors that includes recognized experts in the fields of PTSD and
other central nervous system disorders.
Our lead product candidate,
TNX-102 SL, is ready to commence Phase 3 clinical development as a potential treatment for PTSD. TNX-102 SL is an investigational
new drug, or IND, and has not been approved for any indication. Our preclinical pipeline includes a pre-IND-stage development candidate
for the treatment of alcohol use disorders, or AUD, a separate development candidate for the treatment of PTSD and cognitive dysfunction
associated with steroid use, as well as two biodefense development programs for protection from smallpox virus and from radiation
injury. We hold worldwide development and commercialization rights to all of our product candidates.
Our Product Pipeline
TNX-102 SL – Posttraumatic
Stress Disorder (PTSD) Program
TNX-102 SL is
a small, rapidly disintegrating tablet containing cyclobenzaprine, or CBP, for sublingual administration and transmucosal absorption.
We are developing TNX-102 SL for the management of PTSD under an IND cleared by the U.S. Food and Drug Administration, or FDA,
in June 2014.
An estimated 8.6 million
adults in the U.S. suffer from PTSD, a chronic disorder that is characterized by hyperarousal, avoidance, emotional numbing, and
sleep disturbances. People with PTSD suffer significant impairment in their functioning, including occupational activities and
social relations, and are at elevated risk for impulsive, violent behaviors toward others and themselves, including suicide. Many
patients fail to adequately respond to the medications approved for PTSD. Antidepressants, sedative-hypnotics and antipsychotics
not approved for PTSD are commonly prescribed despite generally weak evidence in support of their use. Antianxiety drugs, also
called anxiolytics, are not approved for PTSD, but are commonly prescribed despite the recommendations against their use by many
experts.
Phase 2 AtEase Study
In the first quarter
of 2015, we commenced the AtEase study, a randomized, double-blind, placebo-controlled, 12-week Phase 2 study of TNX-102 SL in
patients with military-related PTSD. We reported topline results from the AtEase study in May 2016. In the AtEase study, patients
were randomized in a 2:1:2 ratio to TNX-102 SL 2.8 mg, TNX-102 SL 5.6 mg, or placebo sublingual tablets at bedtime daily for 12
weeks. This study was conducted at 24 U.S. centers and enrolled 231 patients in the modified intent-to-treat population. The primary
objective of the AtEase study was to evaluate the potential clinical benefit of using TNX-102 SL to treat military-related PTSD
at a dose of 2.8 mg or 5.6 mg. The primary efficacy endpoint was the 12-week mean change from baseline in the severity of PTSD
symptoms as measured by the Clinician-Administered PTSD Scale for the Diagnostic and Statistical Manual-5, or CAPS-5, between those
treated with TNX-102 SL and those receiving placebo. The CAPS-5 scale is a standardized structured clinician interview and is considered
the gold standard in clinical research and regulatory approval for measuring the symptom severity of PTSD.
AtEase was adequately
designed to evaluate whether a 2.8 mg dose would be efficacious, which would have provided an opportunity for this study to be
used as one of the two pivotal efficacy studies required to support approval of TNX-102 SL for the treatment of PTSD. Although
the 2.8 mg dose trended in the direction of a therapeutic effect, it did not reach statistical significance on the primary endpoint.
The 5.6 mg dose had a therapeutic effect as assessed by the CAPS-5 scale, which was statistically significant by Mixed-effect Model
Repeated Measures, or MMRM, with Multiple Imputation, or MI, analysis (p-value = 0.031), even though this arm of the study, by
design, included only approximately half the number of patients of the 2.8 mg and placebo arms. The AtEase study demonstrated a
dose-effect on multiple efficacy and safety measurements.
In the AtEase study,
TNX-102 SL was well tolerated and the patient retention rate was 73% on placebo, 79% on TNX-102 SL 2.8 mg and 84% on TNX-102 SL
5.6 mg. Four distinct serious adverse events, or SAEs, were reported in the study; three were in the placebo group, and one (proctitis/peri-rectal
abscess), in the TNX-102 SL arm that was determined to be unrelated to TNX-102 SL. The most common non-dose related adverse events
were mild and transient local administration site conditions and of these oral hypoaesthesia, or numbness, was most frequent and
occurred in 39% of patients treated with the 2.8 mg dose and 36% of the patients treated with the 5.6 mg dose, compared to 2% of
the patients receiving placebo. Oral paresthesia, or tingling, occurred in 16% of patients treated with the 2.8 mg dose and 4%
of patients treated with the 5.6 mg dose, compared to 3% of the patients receiving placebo. Glossodynia, or a burning or stinging
sensation in the mouth, occurred in 3% of patients treated with the 2.8 mg dose and 6% of patients treated with the 5.6 mg dose,
compared to 1% of patients receiving placebo. Systemic adverse events that were potentially dose-related and occurred in greater
than or equal to 5% of patients treated with the 5.6 mg dose or placebo included: somnolence in 16% versus 6% of the patients receiving
placebo; dry mouth in 16% versus 11% of the patients receiving placebo; headache in 12% versus 4% of the patients receiving placebo;
insomnia in 6% versus 9% of the patients receiving placebo; sedation in 12% versus 1% of the patients receiving placebo; upper
respiratory tract infection in 4% versus 5% of the patients receiving placebo; abnormal dreams in 2% versus 5% of the patients
receiving placebo; and weight increase in 2% versus 5% of the patients receiving placebo. For the patients treated with the 2.8
mg dose, the incidence of the most common systemic adverse events reported above were less frequent then patients treated with
the 5.6 mg dose with the exception of insomnia, which was 8%.
Open-label Extension Study for AtEase
Patients who completed
the AtEase study were eligible to enroll into a three-month open-label extension study with TNX-102 SL 2.8 mg. We conducted this
open-label extension study to obtain additional safety information from patients in the AtEase Study. The clinical phase of this
open-label extension study is complete. Preliminary result did not reveal any new safety signals.
Clinical Development Plan
We held an End-of-Phase
2/Pre-Phase 3 meeting with the FDA in early August 2016 to discuss the Phase 3 program required to support the registration of
TNX-102 SL 5.6 mg for the treatment of PTSD and the remaining data package for the New Drug Application, or NDA, filing. Based
on this meeting discussion and the official FDA meeting minutes, we expect that positive results from two adequate, well-controlled
Phase 3 efficacy and safety studies and long-term (six- and 12-month) safety exposure studies would provide sufficient evidence
of efficacy and safety to support the clinical approval of TNX-102 SL 5.6 mg for the treatment of PTSD. In addition, we were advised
by the FDA that a Breakthrough Therapy designation request can be submitted based on the preliminary clinical evidence of TNX 102-SL
on military-related PTSD in the AtEase study.
Breakthrough
Therapy designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The
criteria for Breakthrough Therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial
improvement on at least one clinically significant endpoint over available therapy. A Breakthrough Therapy designation conveys
all of the fast track program features, more intensive FDA guidance on an efficient drug development program, an organizational
commitment involving senior managers, and eligibility for rolling review and priority review.
We held an End-of-Phase
2 Chemistry, Manufacturing and Controls, or CMC, meeting with the FDA in February 2016 to discuss the quality data requirement
for a New Drug Application, or NDA, submission for TNX-102 SL. In general, our proposed NDA CMC plan for TNX-102 SL was acceptable
to the FDA and can be applied to the PTSD NDA.
As described below,
the first Phase 3 study will be in patients with military-related PTSD and the second Phase 3 study will study predominately civilian
PTSD patients.
Prospective Phase 3 Studies
Once we receive FDA
acceptance of the first Phase 3 study design and interim statistical analysis proposal, we plan to commence this randomized, double-blind
Phase 3 study of TNX-102 SL in approximately 550 patients with military-related PTSD in the first quarter of 2017. This first Phase
3 study is an adaptive design study based on the results of the Phase 2 AtEase study. The study design is very similar to the Phase
2 AtEase study, except there will be two planned interim analyses for the purposes of sample size reassessment and to assess stopping
early for success. The first interim analysis will be conducted when approximately 30% (approximately 165-180 patients) of the
total planned enrollment is evaluable for efficacy and the second analysis when approximately 50% (approximately 270 – 330
patients) of the initially planned patient enrollment is evaluable for efficacy.
A second, randomized,
double-blind Phase 3 study of TNX-102 SL in approximately 550 predominantly civilian PTSD patients will follow. We expect each
of the studies to be conducted at approximately 30 U.S. centers. As in the case of the AtEase study, the primary efficacy endpoint
of each of these Phase 3 studies will be the 12-week mean change from baseline in the severity of PTSD symptoms as measured by
the CAPS-5 scale between those treated with TNX-102 SL 5.6 mg and those receiving placebo.
Long-Term Safety Exposure Study for
TNX-102 SL 5.6 mg
We plan to conduct
the registration-required 12-month open-label extension study of TNX-102 SL 5.6 mg in patients who complete either the military-related
PTSD Phase 3 study or the predominantly civilian PTSD Phase 3 study. The goal of the open-label extension study is to obtain long-term
safety exposure data from the maximum therapeutic dose to support an NDA filing for TNX-102 SL for the treatment of PTSD, a chronic
psychiatric condition. Based on the estimated sample size of the Phase 3 PTSD studies, we believe that we will have sufficient
long-term exposure data on TNX-102 SL 5.6 mg from the open-label extension study to support an NDA filing for TNX-102 SL 5.6 mg.
TNX-102 SL – Phase 1 Pharmacokinetic
Studies
Completed Bioequivalence Study
We completed a Phase
1 bioequivalence study that compared the pharmacokinetic profiles of single-dose of TNX-102 SL 2.8 mg tablets manufactured at two
facilities: (i) the facility used to produce TNX-102 SL, 2.8 mg tablets for the Phase 2 AtEase study; and (ii) the facility used
to produce TNX-102 SL, 2.8.mg tablets for our prospective PTSD Phase 3 studies and the to-be-marketed product. The study demonstrated
that the TNX-102 SL 2.8 mg tablets manufactured at these two facilities were bioequivalent, supporting the use of the AtEase study
to support the Phase 3 studies.
Prospective Multi-dose Bridging Pharmacokinetic
(PK) Study
We intend to seek FDA
marketing approval for TNX-102 SL pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, using AMRIX
®
extended-release capsules (30 mg) as our reference listed drug, or RLD. As agreed upon by the FDA, we plan to study TNX-102 SL
5.6 mg (two 2.8 mg tablets) in comparison to AMRIX 30 mg extended-release capsules in a multiple-dose bridging PK study to provide
a comparable systemic exposure bridge. If TNX-102 SL 2 x 2.8 mg shows comparable or less exposure to the RLD approved dose
(30 mg), the results of this study will provide the necessary systemic exposure bridge of TNX-102 SL, 5.6.mg to AMRIX 30 mg extended-release
capsules. We can rely on the safety findings (clinical and nonclinical) of the currently approved cyclobenzaprine drug products.
TNX-102 SL Nonclinical Development
In addition to the
clinical studies necessary to support the TNX-102 SL 505(b)(2) NDA filing for the management of FM, the FDA has accepted our proposed
nonclinical data package to support our PTSD NDA filing. In October 2016, we completed the six-month repeated-dose toxicology study
of TNX-102 in rats and a nine-month repeated-dose toxicology study in dogs required for the NDA filing and to support Phase 3 clinical
studies outside the U.S. These chronic toxicity studies were requested by the FDA to augment the nonclinical information in the
AMRIX approved prescribing information, or labeling, which is necessary to support the TNX-102 SL labeling for long-term use. Based
on the prescribing information of AMRIX and the post-marketing surveillance information, there is no evidence of abuse for cyclobenzaprine.
As a result, the FDA has advised that we will not have to assess the abuse potential of TNX-102 SL for the TNX-102 SL 505(b)(2)
NDA submission.
Additional Product Candidates
We also have a pipeline
of other drug product candidates, including a pre-IND program, TNX-301 and a preclinical candidate TNX-601.
TNX-301 is a fixed-dose
combination drug product, or CDP, containing two FDA-approved drugs, disulfiram and selegiline. We intend to develop TNX-301 CDP
under Section 505(b)(2) of the FDCA as a potential treatment for AUD, and we have commenced development work on TNX-301 formulations.
We have initiated pre-IND consultation with the FDA to discuss the clinical development program of TNX-301 for AUD. A pre-IND meeting
was held in February 2016. At that meeting, the FDA required us to complete certain nonclinical studies for the IND application
to support the initiation of the first-in-man study with TNX-301. We are preparing plans to address these requirements.
TNX-601 is a new formulation
of tianeptine, which is intended for use to treat PTSD and cognitive dysfunction associated with corticosteroid use. Tianeptine
has never been approved in the U.S., but a different formulation of tianeptine is approved in certain countries in Europe, Asia
and South America for treating major depressive disorder. On April 19, 2016, Tonix was issued US patent 9,314,469 B2 “Method
for treating neurocognitive dysfunction” which includes using tianeptine for cognitive dysfunction associated with corticosteroid
use. We intend to develop TNX-601 under Section 505(b)(1) of the FDCA as a potential treatment for PTSD and cognitive dysfunction
associated with corticosteroid use. Pharmaceutical development work on TNX-601 has been initiated.
In addition, we own
rights to intellectual property on two biodefense technologies: one relating to the development of novel smallpox vaccines; and
the other to the development of protective agents against radiation exposure. We have begun non-clinical research and development
on these programs. The FDA Animal Efficacy Rule provides a mechanism for product licensure when human efficacy studies are not
feasible or ethical. As a result, the licensure of these biodefense products in the U.S. may not require human efficacy studies,
which we believe will reduce our development costs and risks compared to the development of other new chemical entities, or NCEs,
or new biologic candidates.
Corporate Information
We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. On October 11, 2011, we changed our name
to Tonix Pharmaceuticals Holding Corp. Our principal executive offices are located at 509 Madison Avenue, Suite 306, New York,
New York 10022, and our telephone number is (212) 980-9155. Our website addresses are
www.tonixpharma.com, www.tonix.com,
and
www.krele.com
.
The information on our websites is not part of this prospectus supplement. We have included our website addresses as a factual
reference and do not intend them to be active links to our websites.
The Offering
Securities we are offering:
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units, each of which consisting of one share of our common stock, par value $0.001 per share and one warrant to purchase of a share of common stock at an exercise price per share of $ . The warrants are immediately exercisable, and will expire on the fifth anniversary of the date of issuance. This prospectus supplement also relates to the offering of the shares of common stock issuable up on exercise of the warrants. See “Description of Securities” beginning on page S-30.
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Common stock to be outstanding after this offering:
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shares of common stock (assuming no exercise of the warrants included in the units).
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Use of proceeds:
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We intend to use the net proceeds from this offering to support the continued development of TNX-102 SL for the treatment
of PTSD, including completion of the first interim analysis in the phase 3 study in military-related PTSD, to further develop
other pipeline programs, for working capital and other general corporate purposes, and possibly acquisitions of other companies,
products or technologies, though no such acquisitions are currently contemplated.
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Risk Factors:
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See "Risk Factors" beginning on page S-6 of this prospectus supplement and other information included or incorporated by reference into this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before investing in our securities.
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NASDAQ Global Market trading symbol:
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TNXP
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The
number of shares of our common stock outstanding prior to and to be outstanding immediately after this offering, as set forth in
the table above, is based on 29,681,106 shares outstanding as of October 24, 2016 and excludes:
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1,729,217 shares of common stock issuable upon the exercise of warrants outstanding at October 24, 2016 with a weighted average
exercise price of $10.54 per share;
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2,289,621 shares of common stock issuable upon the exercise of options outstanding at October 24, 2016 with a weighted average
exercise price of $8.97 per share;
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112,500 shares of common stock issuable upon the vesting of restricted stock units outstanding at October 24, 2016;
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1,968,096 shares of common stock reserved for future grants, awards and issuances under our equity compensation plans as of
October 24, 2016;
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219,450 shares of common stock reserved for future purchases under our employee stock purchase plan as of October 24, 2016;
and
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shares of common stock issuable upon the exercise of the Warrants sold in this offering.
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RISK FACTORS
You should carefully
consider the risks described below before making an investment decision. The risks described below are not the only ones we face.
Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations.
Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained
or incorporated by reference into this prospectus supplement and the accompanying prospectus, including our financial statements
and related notes.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses
and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues,
achieve profitability.
We are focused on product
development, and we have not generated any revenues to date. We have incurred losses in each year of our operations, and we expect
to continue to incur operating losses for the foreseeable future. These operating losses have adversely affected and are likely
to continue to adversely affect our working capital, total assets and shareholders’ equity.
The Company and its
prospects should be examined in light of the risks and difficulties frequently encountered by new and early-stage companies in
new and rapidly evolving markets. These risks include, among other things, the speed at which we can scale up operations, our complete
dependence upon development of products that currently have no market acceptance, our ability to establish and expand our brand
name, our ability to expand our operations to meet the commercial demand of our clients, our development of and reliance on strategic
and customer relationships and our ability to minimize fraud and other security risks.
The process of developing
our products requires significant clinical, nonclinical and CMC development, laboratory testing and clinical studies. In addition,
commercialization of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing
and manufacturing capabilities, either through internal hiring or through contractual relationships with others. We expect to incur
substantial losses for the foreseeable future as a result of anticipated increases in our research and development costs, including
costs associated with conducting preclinical and nonclinical testing and clinical studies, and regulatory compliance activities.
Our ability to generate
revenues and achieve profitability will depend on numerous factors, including success in:
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developing and testing product candidates;
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receiving regulatory approvals;
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commercializing our products; and
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establishing a favorable competitive position.
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Many of these factors
will depend on circumstances beyond our control. We cannot assure you that we will ever have a product approved by the FDA, that
we will bring any product to market or, if we are successful in doing so, that we will ever become profitable.
We expect to incur
substantial additional operating expenses over the next several years as our research, development, preclinical and nonclinical
testing, and clinical study activities increase. The amount of future losses and when, if ever, we will achieve profitability are
uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial
sale of products in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue
and achieve profitability will depend on, among other things, successful completion of the development of our product candidates;
obtaining necessary regulatory approvals from the FDA; establishing manufacturing, sales, and marketing arrangements with third
parties; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful
at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.
We have a limited operating history
and we expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it
difficult to predict our future performance.
We are a development-stage
biopharmaceutical company with a limited operating history. Our operations to date have been primarily limited to developing our
technology and undertaking preclinical and nonclinical testing and clinical studies of our clinical-stage product candidate, TNX-102
SL for PTSD. We have not yet obtained regulatory approvals for TNX-102 SL or any of our other product candidates. Consequently,
any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating
history or commercialized products. Our financial condition has varied significantly in the past and will continue to fluctuate
from quarter-to-quarter or year-to-year due to a variety of factors, many of which are beyond our control. Factors relating to
our business that may contribute to these fluctuations include other factors described elsewhere in this prospectus supplement
and also include:
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our ability to obtain additional funding to develop our product candidates;
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delays in the commencement, enrollment and timing of clinical studies;
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the success of our clinical studies through all phases of clinical development, including studies of our most advanced product candidate TNX-102 SL for PTSD;
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any delays in regulatory review and approval of product candidates in clinical development;
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our ability to obtain and maintain regulatory approval for our product candidate TNX-102 SL for PTSD or any of our other product candidates in the United States and foreign jurisdictions;
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potential nonclinical toxicity and/or side effects of our product candidates that could delay or prevent commercialization, limit the indications for any approved drug, require the establishment of risk evaluation and mitigation strategies, or cause an approved drug to be taken off the market;
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our dependence on third party contract manufacturing organizations, or CMOs, to supply or manufacture our products;
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our dependence on third party contract research organizations, or CROs, to conduct our clinical studies and nonclinical research;
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our ability to establish or maintain collaborations, licensing or other arrangements;
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market acceptance of our product candidates;
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our ability to establish and maintain an effective sales and marketing infrastructure, either through the creation of a commercial infrastructure or through strategic collaborations;
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competition from existing products or new products that may emerge;
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the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for our products;
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our ability to leverage our proprietary technology platform to discover and develop additional product candidates;
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our ability and our licensors’ abilities to successfully obtain, maintain, defend and enforce intellectual property rights important to our business;
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our ability to attract and retain key personnel to manage our business effectively;
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our ability to build our finance infrastructure and improve our accounting systems and controls;
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potential product liability claims;
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potential liabilities associated with hazardous materials; and
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our ability to obtain and maintain adequate insurance policies.
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Accordingly, the results
of any quarterly or annual periods should not be relied upon as indications of future operating performance.
We have no approved products on the
market and therefore do not expect to generate any revenues from product sales in the foreseeable future, if at all.
To date, we have no
approved product on the market and have generated no product revenues. We have funded our operations primarily from sales of our
securities. We have not received, and do not expect to receive for at least the next couple of years, if at all, any revenues from
the commercialization of our product candidates. To obtain revenues from sales of our product candidates, we must succeed, either
alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing drugs with commercial
potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations
or achieve profitability.
We are largely dependent on the success
of our clinical-stage product candidate, TNX-102 SL for PTSD, and we cannot be certain that this product candidate will receive
regulatory approval or be successfully commercialized.
We currently have no
products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our product candidates
are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other
things, research, testing, clinical studies, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping.
We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA for a product
candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive
and uncertain process. We currently have one product candidate, TNX-102 SL, in clinical stages of development for the treatment
of PTSD, and the success of our business currently depends on its successful development, approval and commercialization. Any projected
sales or future revenue predictions are predicated upon FDA approval and market acceptance of TNX-102 SL. If projected sales do
not materialize for any reason, it would have a material adverse effect on our business and our ability to continue operations.
TNX-102 SL has not
completed the clinical development process; therefore, we have not yet submitted an NDA or foreign equivalent or received marketing
approval for this product candidate anywhere in the world. The clinical development program for TNX-102 SL for PTSD may not lead
to commercial products for a number of reasons, including if we fail to obtain necessary approvals from the FDA or foreign regulatory
authorities because our clinical studies fail to demonstrate to their satisfaction that this product candidate is safe and effective
or a clinical program may be put on hold due to unexpected safety issues. We may also fail to obtain the necessary approvals if
we have inadequate financial or other resources to advance our product candidates through the clinical study process. Any failure
or delay in completing clinical studies or obtaining regulatory approvals for TNX-102 SL for PTSD in a timely manner would have
a material adverse impact on our business and our stock price.
We may use our financial and human
resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates
that may be more profitable or for which there is a greater likelihood of success.
Because we have limited
financial and human resources, we are currently focusing on the regulatory approval of TNX-102 SL for PTSD. As a result, we may
forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities. Our spending on existing and future product candidates for specific indications may not yield any commercially
viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate,
we may relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements
in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product
candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more
advantageous to enter into a partnering arrangement.
We will need additional capital.
If additional capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or
eliminate our research and development programs, reduce our commercialization efforts or curtail our operations.
In order to develop
and bring our product candidates to market, we must commit substantial resources to costly and time-consuming research, preclinical
and nonclinical testing, clinical studies and marketing activities. We anticipate that our existing cash and cash equivalents will
enable us to maintain our current operations for at least the next 12 months. We anticipate using our cash and cash equivalents
to fund further research and development with respect to our lead product candidate. We will, however, need to raise additional
funding sooner if our business or operations change in a manner that consumes available resources more rapidly than we anticipate.
Our requirements for additional capital will depend on many factors, including:
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successful commercialization of our product candidates;
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the time and costs involved in obtaining regulatory approval for our product candidates;
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costs associated with protecting our intellectual property rights;
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development of marketing and sales capabilities;
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payments received under future collaborative agreements, if any; and
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market acceptance of our products.
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To the extent we raise
additional capital through the sale of equity securities, the issuance of those securities could result in dilution to our shareholders.
In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for our business activities. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization
efforts or curtail our operations. In addition, we may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek
to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less
favorable to us than might otherwise be available.
We will require substantial
additional funds to support our research and development activities, and the anticipated costs of preclinical and nonclinical testing
and clinical studies, regulatory approvals and eventual commercialization. Such additional sources of financing may not be available
on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to commence
clinical studies or obtain approval of any product candidates from the FDA and other regulatory authorities. In addition, we could
be forced to discontinue product development, forego sales and marketing efforts and forego attractive business opportunities.
Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect
on our shareholders.
There is no assurance
that we will be successful in raising the additional funds needed to fund our business plan. If we are not able to raise sufficient
capital in the near future, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise
transfer all or substantially all of our remaining assets.
We face intense competition in the
markets targeted by our product candidates. Many of our competitors have substantially greater resources than we do, and we expect
that all of our product candidates under development will face intense competition from existing or future drugs.
We expect that all
of our product candidates under development, if approved, will face intense competition from existing and future drugs marketed
by large companies. These competitors may successfully market products that compete with our products, successfully identify drug
candidates or develop products earlier than we do, or develop products that are more effective, have fewer side effects or cost
less than our products.
Additionally, if a
competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for our
product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by the competitor
of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing drugs such
as our current product candidates can extend up to three and one-half years.
These competitive factors
could require us to conduct substantial new research and development activities to establish new product targets, which would be
costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve revenue and
profits.
Competition and technological change
may make our product candidates and technologies less attractive or obsolete.
We compete with established
pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing
and that have greater financial and other resources. Other companies may succeed in developing products earlier than us, obtaining
FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and
development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures
superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire
competing technology from universities and other research institutions. As these companies develop their technologies, they may
develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result
in a decrease in the revenue we would be able to derive from the sale of any products.
There can be no assurance
that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore,
if our competitors' products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even
if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that
physicians and patients will accept our product(s) as a treatment of choice.
Furthermore, the pharmaceutical
research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous
and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us
from forecasting revenues or income with certainty or even confidence.
If we fail to protect our intellectual
property rights, our ability to pursue the development of our technologies and products would be negatively affected.
Our success will depend
in part on our ability to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately
protect our intellectual property, competitors may be able to use our technologies to produce and market drugs using our technologies
and patents in direct competition with us and erode our competitive advantage. Some foreign countries lack rules and methods for
defending intellectual property rights and do not protect proprietary rights to the same extent as the United States. Many companies
have had difficulty protecting their proprietary rights in these foreign countries. We may not be able to prevent misappropriation
of our proprietary rights and intellectual property rights in these and other countries.
We have received, and
are currently seeking, patent protection for numerous compounds and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products
by obtaining and defending patents related to them. These risks and uncertainties include the following: patents that may be issued
or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide us any competitive advantage; our competitors,
many of which have substantially greater resources than we and many of which have made significant investments in competing technologies,
may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell
our potential products either in the United States or in international markets; there may be significant pressure on the United
States government and other international governmental bodies to limit the scope of patent protection both inside and outside the
United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns; and countries
other than the United States may have less robust patent laws than those upheld by United States courts, allowing foreign competitors
the ability to exploit these laws to create, develop, and market competing products using our technologies and patents.
Moreover, any patents
issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties
may also independently develop products similar to our products, duplicate our unpatented products or design around any patents
or propriety technologies on products we develop. Additionally, extensive time is required for development, testing and regulatory
review of a potential product. While extensions of patent term due to regulatory delays may be available, it is possible that,
before any of our product candidates can be commercialized, any related patent, even with an extension, may expire or remain in
force for only a short period following commercialization, thereby reducing any advantages to us of the patent.
In addition, the United
States Patent and Trademark Office, or USPTO, and patent offices in other jurisdictions have often required that patent applications
concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the innovations
specifically exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus,
even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.
Our success depends
on our patents and patent applications that may be licensed exclusively to us and other patents and patent applications to which
we may obtain assignment or licenses. We may not be aware, however, of all patents, published applications or published literature
that may affect our business either by blocking our ability to commercialize our product candidates, by preventing the patentability
of our product candidates to us or our licensors, or by covering the same or similar technologies. These patents, patent applications,
and published literature may limit the scope of our future patent claims or adversely affect our ability to market our product
candidates.
In addition to patents,
we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures
to protect our confidential and proprietary information. These measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive
advantage we may have. In addition, others may independently develop similar proprietary information or techniques or otherwise
gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent protection and
other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk
that such protections will prove inadequate.
We may be involved in lawsuits to
protect or enforce our patents, which could be expensive and time consuming.
The pharmaceutical
industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies
have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or
litigation arising out of present and future patents and other proceedings of our competitors. The defense and prosecution of intellectual
property suits are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary to determine
the enforceability, scope, and validity of the proprietary rights of others. An adverse determination in litigation to which we
may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict or
prevent us from selling our products in certain markets. Although patent and intellectual property disputes might be settled through
licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our paying
large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms or at
all.
Competitors may infringe
our patents, and we may file infringement claims to counter infringement or unauthorized use. Third parties may assert that our
patents are invalid and/or unenforceable in these proceedings. Such litigation can be expensive, particularly for a company of
our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid
or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do
not cover its technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents
at risk of being invalidated or interpreted narrowly.
Third parties may also
assert that our patents are invalid in patent office administrative proceedings. These proceedings include oppositions in the European
Patent Office and
inter partes
review and post-grant review proceedings in the USPTO. The success rate of these administrative
challenges to patent validity in the United States is higher than it is for validity challenges in litigation.
Interference or derivation
proceedings brought before the USPTO may be necessary to determine priority of invention with respect to innovations disclosed
in our patents or patent applications. During these proceedings, it may be determined that we do not have priority of invention
for one or more aspects in our patents or patent applications and could result in the invalidation in part or whole of a patent
or could put a patent application at risk of not issuing. Even if successful, an interference or derivation proceeding may result
in substantial costs and distraction to our management.
Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation or interference or derivation
proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, there could
be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive
these results to be negative, the price of our common stock could be adversely affected.
There are no unresolved
communications, allegations, complaints or threats of litigation related to the possibility that our patents are invalid or unenforceable.
Any litigation or claims against us, whether or not merited, may result in substantial costs, place a significant strain on our
financial resources, divert the attention of management and harm our reputation. An adverse decision in litigation or administrative
proceedings could result in inadequate protection for our product candidates and/or reduce the value of any license agreements
we have with third parties.
If we infringe the rights of third
parties we could be prevented from selling products, forced to pay damages, and defend against litigation.
If our products, methods,
processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may
have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an infringing product
candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed in the patents held
by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether we win or lose, and
which could result in a substantial diversion of our financial and management resources.
If preclinical and nonclinical testing
or clinical studies for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development
and commercialization timelines.
We rely and expect
to continue to rely on third parties, including CROs and outside consultants, to conduct, supervise or monitor some or all aspects
of preclinical and nonclinical testing and clinical studies involving our product candidates. We have less control over the timing
and other aspects of these preclinical and nonclinical testing activities and clinical studies than if we performed the monitoring
and supervision entirely on our own. Third parties may not perform their responsibilities for our preclinical and nonclinical testing
and clinical studies on our anticipated schedule or, for clinical studies, consistent with a clinical study protocol. Delays in
preclinical and nonclinical testing, and clinical studies could significantly increase our product development costs and delay
product commercialization. In addition, many of the factors that may cause, or lead to, a delay in the clinical studies may also
ultimately lead to denial of regulatory approval of a product candidate.
The commencement of
clinical studies can be delayed for a variety of reasons, including delays in:
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demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical study;
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reaching agreement on acceptable terms with prospective contract research organizations and study sites;
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developing a stable formulation of a product candidate;
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manufacturing sufficient quantities of a product candidate; and
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obtaining institutional review board approval to conduct a clinical study at a prospective site.
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Once a clinical study
has begun, it may be delayed, suspended or terminated by us or the FDA or other regulatory authorities due to a number of factors,
including:
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ongoing discussions with the FDA or other regulatory authorities regarding the scope or design of our clinical studies;
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failure to conduct clinical studies in accordance with regulatory requirements;
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lower than anticipated recruitment or retention rate of patients in clinical studies;
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inspection of the clinical study operations or study sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
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lack of adequate funding to continue clinical studies;
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negative results of clinical studies;
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investigational drug product out-of-specification; or
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nonclinical or clinical safety observations, including adverse events and serious adverse events.
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If clinical studies
are unsuccessful, and we are not able to obtain regulatory approvals for our product candidates under development, we will not
be able to commercialize these products, and therefore may not be able to generate sufficient revenues to support our business.
We rely on third parties to conduct,
supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We rely on CROs and
clinical study sites to ensure the proper and timely conduct of our clinical studies. While we have agreements governing their
activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’
activities. Nevertheless, we will be responsible for ensuring that our clinical studies are conducted in accordance with the applicable
protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are
required to comply with the FDA’s current good clinical practices requirements, or cGCP, for conducting, recording and reporting
the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity
and confidentiality of clinical study participants are protected. The FDA enforces these cGCPs through periodic inspections of
study sponsors, principal investigators and clinical study sites. If we or our CROs fail to comply with applicable cGCPs, the clinical
data generated in our clinical studies may be deemed unreliable and the FDA may require us to perform additional clinical studies
before approving any marketing applications. Upon inspection, the FDA may determine that our clinical studies did not comply with
cGCPs. In addition, our clinical studies, including our planned Phase 3 study in military-related PTSD, will require a sufficiently
large number of test subjects to evaluate the effectiveness and safety of TNX-102 SL. Accordingly, if our CROs fail to comply with
these regulations or fail to recruit a sufficient number of patients, our clinical studies may be delayed or we may be required
to repeat such clinical studies, which would delay the regulatory approval process.
Our CROs are not our
employees, and we are not able to control whether or not they devote sufficient time and resources to our clinical studies. These
CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting
clinical studies, or other drug development activities which could harm our competitive position. If our CROs do not successfully
carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical
data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other
reasons, our clinical studies may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for,
or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for such
product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
We also rely on other
third parties to store and distribute drug products for our clinical studies. Any performance failure on the part of our distributors
could delay clinical development or marketing approval of our product candidates or commercialization of our products, if approved,
producing additional losses and depriving us of potential product revenue.
We have limited experience in completing
a Phase 3 clinical study and have never submitted an NDA before, and may be unable to do so for TNX-102 SL or other product candidates
we are developing.
We plan to initiate
a phase 3 study in military-related PTSD in the first quarter of 2017. As this study is intended to provide efficacy and safety
evidence to support marketing approval by the FDA, it is considered a pivotal, confirmatory or registration, study. The conduct
of pivotal clinical studies and the submission of a successful NDA is a complicated process. Although members of our management
team have extensive industry experience, including in the development, clinical testing and commercialization of drug candidates,
we have conducted only one pivotal clinical study before (the AFFIRM study in fibromyalgia patients), have limited experience in
preparing, submitting and prosecuting regulatory filings, and have not submitted an NDA before. Consequently, we may be unable
to successfully and efficiently execute and complete this planned clinical study in a way that leads to NDA submission and approval
of TNX-102 SL and other product candidates we are developing. We may require more time and incur greater costs than our competitors
and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or
delays in, our planned clinical studies would prevent or delay commercialization of TNX-102 SL and other product candidates we
are developing.
Our product candidates may cause
serious adverse events or undesirable side effects which may delay or prevent marketing approval, or, if approval is received,
require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.
Serious adverse events
or undesirable side effects from TNX-102 SL or any of our other product candidates could arise either during clinical development
or, if approved, after the approved product has been marketed. The results of future clinical studies, including TNX-102 SL, may
show that our product candidates cause serious adverse events or undesirable side effects, which could interrupt, delay or halt
clinical studies, resulting in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities.
If TNX-102 SL or any
of our other product candidates cause serious adverse events or undesirable side effects or suffer from quality control issues:
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regulatory authorities may impose a clinical hold or risk evaluation and mitigation strategies, or REMS, which could result in substantial delays, significantly increase the cost of development, and/or adversely impact our ability to continue development of the product;
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regulatory authorities may require the addition of statements, specific warnings, or contraindications to the product label, or restrict the product’s indication to a smaller potential treatment population;
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we may be required to change the way the product is administered or conduct additional clinical studies;
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we may be required to implement a risk minimization action plan, which could result in substantial cost increases and have a negative impact on our ability to commercialize the product;
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we may be required to limit the patients who can receive the product;
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we may be subject to limitations on how we promote the product;
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we may, voluntarily or involuntarily, initiate field alerts for product recall, which may result in shortages;
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sales of the product may decrease significantly;
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regulatory authorities may require us to take our approved product off the market;
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we may be subject to litigation or product liability claims; and
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our reputation may suffer.
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Any of these events
could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization
costs and expenses, which in turn could delay or prevent us from generating significant revenues from the sale of our products.
If we are unable to file for approval
of TNX-102 SL under Section 505(b)(2) of the FDCA or if we are required to generate additional data related to safety and efficacy
in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and commercialization
timelines.
Our current plans for
filing NDAs for our product candidates include efforts to minimize the data we will be required to generate in order to obtain
marketing approval for our product candidates and therefore reduce the development time. We held a pre-IND meeting with the FDA
in October 2012 to discuss the development of TNX-102 SL in PTSD. Following the results of the AtEase Study, we held an End-of-Phase
2/Pre-Phase 3 meeting with the FDA in August 2016 to discuss our most advanced development program, in which we are developing
TNX-102 SL for the treatment of PTSD. Although our interactions with the FDA have encouraged our efforts to continue to develop
TNX-102 SL for PTSD, there is no assurance that we will satisfy the FDA’s requirements for approval in this indication. The
timeline for filing and review of our NDA for TNX-102 SL for PTSD is based on our plan to submit this NDA under Section 505(b)(2)
of the FDCA, which would enable us to rely in part on data in the public domain or elsewhere. We have not yet filed an NDA under
Section 505(b)(2) for any of our product candidates. Depending on the data that may be required by the FDA for approval, some of
the data may be related to products already approved by the FDA. If the data relied upon is related to products already approved
by the FDA and covered by third-party patents we would be required to certify that we do not infringe the listed patents or that
such patents are invalid or unenforceable. As a result of the certification, the third-party would have 45 days from notification
of our certification to initiate an action against us. In the event that an action is brought in response to such a certification,
the approval of our NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of
our product candidates under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully
challenge the applicability of those patents to our product candidates. Alternatively, we may elect to generate sufficient additional
clinical data so that we no longer rely on data which triggers a potential stay of the approval of our product candidates. Even
if no exclusivity periods apply to our applications under Section 505(b)(2), the FDA has broad discretion to require us to generate
additional data on the safety and efficacy of our product candidates to supplement third-party data on which we may be permitted
to rely. In either event, we could be required, before obtaining marketing approval for any of our product candidates, to conduct
substantial new research and development activities beyond those we currently plan to engage in order to obtain approval of our
product candidates. Such additional new research and development activities would be costly and time consuming.
We may not be able
to realize a shortened development timeline for TNX-102 SL for PTSD, and the FDA may not approve our NDA based on their review
of the submitted data. If CBP-containing products are withdrawn from the market by the FDA for any safety reason, we may not be
able to reference such products to support a 505(b)(2) NDA for TNX-102 SL, and we may need to fulfill the more extensive requirements
of Section 505(b)(1). If we are required to generate additional data to support approval, we may be unable to meet our anticipated
development and commercialization timelines, may be unable to generate the additional data at a reasonable cost, or at all, and
may be unable to obtain marketing approval of our lead product candidate.
We will need to expand our operations
and increase the size of our company, and we may experience difficulties in managing growth.
As we advance our product
candidates through preclinical and nonclinical testing and clinical studies, and develop new product candidates, we will need to
increase our product development, scientific, regulatory and compliance and administrative headcount to manage these programs.
In addition, to meet our obligations as a public company, we will need to increase our general and administrative capabilities.
Our management, personnel and systems currently in place may not be adequate to support this future growth. Our need to effectively
manage our operations, growth and various projects requires that we:
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successfully attract and recruit new employees with the expertise and experience we will require;
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manage our clinical programs effectively, which we anticipate being conducted at numerous clinical sites;
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develop a marketing, distribution and sales infrastructure in addition to a post-marketing surveillance program if we seek to market our products directly; and
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continue to improve our operational, manufacturing, quality assurance, financial and management controls, reporting systems and procedures.
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If we are unable to
successfully manage this growth and increased complexity of operations, our business may be adversely affected.
Our executive officers and other
key personnel are critical to our business, and our future success depends on our ability to retain them.
Our success depends
to a significant extent upon the continued services of Dr. Seth Lederman, our President and Chief Executive Officer. Dr. Lederman
has overseen Tonix Pharmaceuticals, Inc., a wholly-owned subsidiary, since inception and provides leadership for our growth and
operations strategy as well as being an inventor on many of our patents. Loss of the services of Dr. Lederman would have a material
adverse effect on our growth, revenues, and prospective business. The loss of any of our key personnel, or the inability to attract
and retain qualified personnel, may significantly delay or prevent the achievement of our research, development or business objectives
and could materially adversely affect our business, financial condition and results of operations.
Any employment agreement
we enter into will not ensure the retention of the employee who is a party to the agreement. In addition, we have only limited
ability to prevent former employees from competing with us. Furthermore, our future success will also depend in part on the continued
service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We experience
intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development
of our business. Moreover, competition for personnel with the scientific and technical skills that we seek is extremely high and
is likely to remain high. Because of this competition, our compensation costs may increase significantly.
If we are unable to hire additional
qualified personnel, our ability to grow our business may be harmed.
Over time we will need
to hire additional qualified personnel with expertise in drug development, product registration, clinical, preclinical and nonclinical
research, quality compliance, government regulation, formulation and manufacturing, financial matters and sales and marketing.
We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition
for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success.
We rely on third parties to manufacture
the compounds used in our studies, and we intend to rely on them for the manufacture of any approved products for commercial sale.
If these third parties do not manufacture our product candidates in sufficient quantities and at an acceptable cost, clinical development
and commercialization of our product candidates could be delayed, prevented or impaired.
We have no manufacturing
facilities, and we have no experience in the clinical or commercial-scale manufacture of drugs or in designing drug manufacturing
processes. We intend to rely on CMOs to manufacture some or all of our product candidates in clinical studies and our products
that reach commercialization. Completion of our clinical studies and commercialization of our product candidates requires the manufacture
of a sufficient supply of our product candidates. We have contracted with outside sources to manufacture our development compounds,
including TNX-102 SL. If, for any reason, we become unable to rely on our current sources for the manufacture of our product candidates,
either for clinical studies or, at some future date, for commercial quantities, then we would need to identify and contract with
additional or replacement third-party manufacturers to manufacture compounds for nonclinical, preclinical, clinical, and commercial
purposes. Although we are in discussions with other manufacturers we have identified as potential alternative CMOs of TNX-102 SL,
we may not be successful in negotiating acceptable terms with any of them.
We believe that there
are a variety of manufacturers that we may be able to retain to produce these products. However, once we retain a manufacturing
source, if our manufacturers do not perform in a satisfactory manner, we may not be able to develop or commercialize potential
products as planned. Certain specialized manufacturers are expected to provide us with modified and unmodified pharmaceutical compounds,
including finished products, for use in our preclinical and nonclinical testing and clinical studies. Some of these materials are
available from only one supplier or vendor. Any interruption in or termination of service by such sole source suppliers could result
in a delay or interruption in manufacturing until we locate an alternative source of supply. Any delay or interruption in manufacturing
operations (or failure to locate a suitable replacement for such suppliers) could materially adversely affect our business, prospects,
or results of operations. We do not have any short-term or long-term manufacturing agreements with many of these manufacturers.
If we fail to contract for manufacturing on acceptable terms or if third-party manufacturers do not perform as we expect, our development
programs could be materially adversely affected. This may result in delays in filing for and receiving FDA approval for one or
more of our products. Any such delays could cause our prospects to suffer significantly.
Failure by our third-party manufacturers
to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates could delay or prevent the
completion of clinical studies, the approval of any product candidates or the commercialization of our products.
Such third-party manufacturers
must be inspected by FDA for current Good Manufacturing Practice, or cGMP, compliance before they can produce commercial product.
We may be in competition with other companies for access to these manufacturers' facilities and may be subject to delays in manufacture
if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party
manufacturing capacity, the development and sales of our products and our financial performance may be materially affected.
Manufacturers are obligated
to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish and follow
cGMP requirements and to document their adherence to such practices may lead to significant delays in the availability of material
for clinical studies, may delay or prevent filing or approval of marketing applications for our products, and may cause delays
or interruptions in the availability of our products for commercial distribution following FDA approval. This could result in higher
costs to us or deprive us of potential product revenues.
Complying with cGMP
and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality
control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing
facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly
delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action
and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition,
and results of operations may be materially harmed.
Drug manufacturers
are subject to ongoing periodic unannounced inspections by the FDA, the Drug Enforcement Agency and corresponding state and foreign
agencies to ensure strict compliance with cGMP requirements and other requirements under Federal drug laws, other government regulations
and corresponding foreign standards. If we or our third-party manufacturers fail to comply with applicable regulations, sanctions
could be imposed on us, including fines, injunctions, civil penalties, failure by the government to grant marketing approval of
drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.
Corporate and academic collaborators
may take actions to delay, prevent, or undermine the success of our products.
Our operating and financial
strategy for the development, clinical testing, manufacture, and commercialization of drug candidates is heavily dependent on our
entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy
assumes that we will successfully establish these collaborations, or similar relationships; however, there can be no assurance
that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations
may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms,
or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There
can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue
or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we
may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to
develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead
to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.
Data provided by collaborators and
others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.
We rely on third-party
vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical
studies, and our business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and
results of operations could be materially adversely affected.
Our product candidates are novel
and still in development.
We are a clinical-stage
pharmaceutical company focused on the development of drug product candidates, all of which are still in development. Our drug development
methods may not lead to commercially viable drugs for any of several reasons. For example, we may fail to identify appropriate
targets or compounds, our drug candidates may fail to be safe and effective in clinical studies, or we may have inadequate financial
or other resources to pursue development efforts for our drug candidates. Our drug candidates will require significant additional
development, clinical studies, regulatory clearances and additional investment by us or our collaborators before they can be commercialized.
Successful development of our products
is uncertain.
Our development of
current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical
products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development,
clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability
to manufacture on its own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance.
Because of these risks,
our research and development efforts may not result in any commercially viable products. If a significant portion of these development
efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercially
successfully, our business, financial condition, and results of operations may be materially harmed.
Clinical studies required for our
product candidates are expensive and time-consuming, and their outcome is uncertain.
In order to obtain
FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements,
we must conduct "adequate and well controlled" clinical studies. Conducting clinical studies is a lengthy, time-consuming,
and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of
the product candidate, and often can be several years or more per study. Delays associated with products for which we are directly
conducting clinical studies may cause us to incur additional operating expenses. The commencement and rate of completion of clinical
studies may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of stable and qualified
materials under cGMP, for use in clinical studies; slower than expected rates of patient recruitment; failure to recruit a sufficient
number of patients; modification of clinical study protocols; changes in regulatory requirements for clinical studies; the lack
of effectiveness during clinical studies; the emergence of unforeseen safety issues; delays, suspension, or termination of the
clinical studies due to the institutional review board responsible for overseeing the study at a particular study site; and government
or regulatory delays or "clinical holds" requiring suspension or termination of the studies.
The results from early
clinical studies are not necessarily predictive of results obtained in later clinical studies. Accordingly, even if we obtain positive
results from early clinical studies, we may not be able to confirm the results in future clinical studies. For example, in our
phase 3 AFFIRM trial in fibromyalgia, we were not able replicate the results we received from our phase 2b BESTFIT trial. Clinical
studies may not demonstrate sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates.
Our clinical studies
may be conducted in patients with CNS conditions, and in some cases, our product candidates are expected to be used in combination
with approved therapies that themselves have significant adverse event profiles. During the course of treatment, these patients
could suffer adverse medical events or die for reasons that may or may not be related to our product candidates. We cannot ensure
that safety issues will not arise with respect to our product candidates in clinical development.
The failure of clinical
studies to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate
and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product
candidates. Any delay in, or termination of, our clinical studies would delay the filing of our NDAs with the FDA and, ultimately,
our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical
studies could materially harm our business, financial condition, and results of operations.
We are subject to extensive and costly
government regulation.
Product candidates
employing our technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA,
the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services, the
United States Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the
research, development, preclinical and nonclinical testing and clinical studies, manufacture, safety, effectiveness, record-keeping,
reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products.
The FDA regulates small molecule chemical entities as drugs, subject to an NDA under the FDCA. If products employing our technologies
are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained
FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United
States regulation.
Government regulation
substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review
and approval process, which includes preclinical and nonclinical testing and clinical studies of each product candidate, is lengthy,
expensive, and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct clinical studies.
We or our collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities
used for the products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive
preclinical, nonclinical and clinical data and other supporting information for each proposed therapeutic indication in order to
establish the product's safety and efficacy, and in the case of biologics also potency and purity, for each intended use. The development
and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.
Even if we are able
to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may
otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance,
and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example,
manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may
be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a
previously unknown safety issue.
If we, our collaborators,
or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications;
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved
applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial
suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
We do not have, and may never obtain,
the regulatory approvals we need to market our product candidates.
Following completion
of clinical studies, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA in order
to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may
require additional testing or information, may require that the product labeling be modified, may impose post-approval study and
other commitments or reporting requirements or other restrictions on product distribution, or may deny the application. The FDA
has established performance goals for review of NDAs: six months for priority applications and ten months for standard applications.
However, the FDA is not required to complete its review within these time periods. The timing of final FDA review and action varies
greatly, but can take years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales
in the United States may commence only when an NDA is approved.
To date, we have not
applied for or received the regulatory approvals required for the commercial sale of any of our products in the United States or
in any foreign jurisdiction. None of our product candidates have been determined to be safe and effective, and we have not submitted
an NDA to the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.
It is possible that
none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory
approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, may
impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain,
and/or may adversely affect our receipt of revenues or royalties.
Even if approved, our products will
be subject to extensive post-approval regulation.
Once a product is approved,
numerous post-approval requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA
monitoring and reporting obligations, including obligations to monitor and report adverse events and instances of the failure of
a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and report on ongoing clinical studies.
Depending on the circumstances,
failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products,
total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information
regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.
Even if we obtain regulatory approval
to market our product candidates, our product candidates may not be accepted by the market.
Even if the FDA approves
one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians and patients would
like to use our products, our products may not gain market acceptance among healthcare payors such as managed care formularies,
insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products will depend upon a
number of factors including: perceptions by members of the health care community, including physicians, about the safety and effectiveness
of our drug or device product; cost-effectiveness of our product relative to competing products; availability of reimbursement
for our product from government or other healthcare payors; and effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.
The degree of market
acceptance of any pharmaceutical product that we develop will depend on a number of factors, including:
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cost-effectiveness;
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the safety and effectiveness of our products, including any significant potential side effects (including drowsiness and dry mouth), as compared to alternative products or treatment methods;
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the timing of market entry as compared to competitive products;
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the rate of adoption of our products by doctors and nurses;
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product labeling or product insert required by the FDA for each of our products;
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reimbursement policies of government and third-party payors;
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effectiveness of our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative partners, if any; and
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unfavorable publicity concerning our products or any similar products.
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Our product candidates,
if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently under development
by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any of our product candidates.
If our products do not achieve market acceptance, we will not be able to generate significant revenues or become profitable.
Because we expect sales
of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,
the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.
If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates.
Our strategy with our
product candidates is to control, directly or through contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.
Sales of pharmaceutical
products largely depend on the reimbursement of patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These
third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments
for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our
products or enable our collaborators to sell them at profitable prices.
Our business strategy
might involve out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical
products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships;
that such relationships, if established, will be successful; or that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such
third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will
have to establish and rely on our own in-house capabilities.
We, as a company, have
no experience in marketing or selling pharmaceutical products and currently have no sales, marketing, or distribution infrastructure.
To market any of our products directly, we would need to develop a marketing, sales, and distribution force that both has technical
expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability
would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition
for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary
to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales,
or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish
are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships
with third parties.
In the event that we are successful
in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement
for our products from third-party payors.
Our ability to commercialize
pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:
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government and health administration authorities;
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private health insurers; and
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other third party payors, including Medicare and Medicaid.
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We cannot predict the
availability of reimbursement for health care products to be approved in the future. Third-party payors, including Medicare and
Medicaid, are challenging the prices charged for medical products and services. Government and other third-party payors increasingly
are limiting both coverage and the level of reimbursement for new drugs whether approved under Section 505(b)(1), 505(b)(2), or
505(j) of the FDCA, through direct payment mechanisms and through cost containment programs such as the Medicaid Drug Rebate Program.
Third-party insurance coverage may not be available to patients for any of our products.
The continuing efforts
of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government
and other third-party payors do not provide adequate coverage and reimbursement for any prescription product we bring to market,
doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement.
In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.
Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives
could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
If we obtain approval to commercialize
any approved products outside of the United States, a variety of risks associated with international operations could materially
adversely affect our business.
If TNX-102 SL or any
of our other product candidates are approved for commercialization outside of the United States, we intend to enter into agreements
with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject
to additional risks related to entering into international business relationships, including:
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different regulatory requirements for drug approvals;
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reduced protection for intellectual property rights, including trade secret and patent rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, hurricanes, floods and fires; and
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difficulty in importing and exporting clinical study materials and study samples.
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We face the risk of product liability
claims and may not be able to obtain insurance.
Our business exposes
us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our
collaborators' drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical
study participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability to
obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. While we currently
carry clinical study insurance and product liability insurance, we cannot predict all of the possible harms or side effects that
may result and, therefore, the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities
we might incur. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval
for our drug candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for
any products approved for marketing. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential
product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business
and financial position. If we are sued for any injury allegedly caused by our or our collaborators' products, our liability could
exceed our total assets and our ability to pay the liability. A product liability claim or series of claims brought against us
would decrease our cash and could cause our stock price to fall.
We use hazardous chemicals in our
business. Potential claims relating to improper handling, storage or disposal of these chemicals could affect us and be time consuming
and costly.
Our research and development
processes and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. These
hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also produce hazardous
waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous
materials. While we attempt to comply with all environmental laws and regulations, including those relating to the outsourcing
of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination from or discharge
of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for any resulting damages
and any liability could materially adversely affect our business, financial condition and results of operations.
Compliance with environmental
laws and regulations may be expensive. Current or future environmental regulations may impair our research, development or production
efforts. We might have to pay civil damages in the event of an improper or unauthorized release of, or exposure of individuals
to, hazardous materials. We are not insured against these environmental risks.
If we enter into collaborations
with third parties, they might also work with hazardous materials in connection with our collaborations. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.
In addition, the federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business,
financial condition and results of operations.
Our insurance policies are expensive
and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities.
We carry insurance
for most categories of risk that our business may encounter, however, we may not have adequate levels of coverage. We currently
maintain general liability, clinical study, property, workers’ compensation, products liability and directors’ and
officers’ insurance, along with an umbrella policy, which collectively costs approximately $600,000 per annum. We cannot
provide any assurances that we will be able to maintain existing insurance at current or adequate levels of coverage. Any significant
uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.
If we retain collaborative partners
and our partners do not satisfy their obligations, we will be unable to develop our partnered product candidates.
In the event we enter
into any collaborative agreements, we may not have day-to-day control over the activities of our collaborative partners with respect
to any of these product candidates. Any collaborative partner may not fulfill its obligations under these agreements. If a collaborative
partner fails to fulfill its obligations under an agreement with us, we may be unable to assume the development of the products
covered by that agreement or enter into alternative arrangements with a third party. In addition, we may encounter delays in the
commercialization of the product candidate that is the subject of the agreement. Accordingly, our ability to receive any revenue
from the product candidates covered by these agreements will be dependent on the efforts of our collaborative partner. We could
also become involved in disputes with a collaborative partner, which could lead to delays in or termination of our development
and commercialization programs and time-consuming and expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborators’ commitment to us and reduce the resources they devote to developing and commercializing our products.
Conflicts or disputes with our collaborators, and competition from them, could harm our relationships with our other collaborators,
restrict our ability to enter future collaboration agreements and delay the research, development or commercialization of our product
candidates. If any collaborative partner terminates or breaches its agreement, or otherwise fails to complete its obligations in
a timely manner, our chances of successfully developing or commercializing these product candidates would be materially and adversely
affected. We may not be able to enter into collaborative agreements with partners on terms favorable to us, or at all. Our inability
to enter into collaborative arrangements with collaborative partners, or our failure to maintain such arrangements, would limit
the number of product candidates that we could develop and ultimately, decrease our sources of any future revenues.
RISKS RELATED TO OUR STOCK AND
THIS OFFERING
You will
experience immediate dilution in the net tangible book value per share of the common stock you purchase.
The
public offering price of our units is substantially higher than our net tangible book value per share of common stock. Based on
the public offering price of $ per unit and attributing no value to the warrants, investors
purchasing our units in this offering will, therefore, incur immediate dilution of $ in
net tangible book value per share they acquire after deducting the underwriting discount and estimated offering expenses payable
by us.
In the event that you exercise your Warrants, you will experience additional dilution to the extent that the exercise
price of those Warrants is higher than the book value per share of our common stock.
In
the past, we have issued options and warrants to acquire common stock at prices significantly below this offering price. To the
extent these outstanding options and warrants are ultimately exercised, you will incur additional dilution. See "Dilution"
on page S-29.
Because
we will have broad discretion and flexibility in how the net proceeds from this offering are used, we may use the net proceeds
in ways in which you disagree.
We intend to use the net proceeds from this offering to support the continued development of TNX-102 SL for the treatment of
PTSD, including completion of the first interim analysis in the phase 3 study in military-related PTSD, to further
develop other pipeline programs, for working capital and other general corporate purposes, and possibly acquisitions of other
companies, products or technologies, though no such acquisitions are currently contemplated. See "Use of Proceeds"
on page S-28. We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing
purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this
offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will
not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being
used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any,
return for us. The failure of our management to use such funds effectively could have a material adverse effect on our
business, financial condition, operating results and cash flow.
Sales of
additional shares of our common stock could cause the price of our common stock to decline.
Sales
of substantial amounts of our common stock in the public market, or the availability of such shares for sale, by us or others,
including the issuance of common stock upon exercise of outstanding options and warrants, could adversely affect the price of our
common stock. We and our directors and officers may sell shares into the market, which could adversely affect the market price
of shares of our common stock.
The market price for our common stock
may be volatile, and your investment in our common stock could decline in value.
The stock market in
general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and specialty
pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly volatile and
may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular
companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on
the market price of our common stock:
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announcements of technological innovations or new products by us or our competitors;
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announcement of FDA approval or disapproval of our product candidates or other product-related actions;
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developments involving our discovery efforts and clinical studies;
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developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation against us or our potential licensees;
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developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;
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announcements concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;
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public concerns as to the safety or efficacy of our product candidates or our competitors’ products;
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changes in government regulation of the pharmaceutical or medical industry;
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changes in the reimbursement policies of third party insurance companies or government agencies;
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actual or anticipated fluctuations in our operating results;
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changes in financial estimates or recommendations by securities analysts;
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developments involving corporate collaborators, if any;
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changes in accounting principles; and
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the loss of any of our key scientific or management personnel.
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In the past, securities
class action litigation has often been brought against companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s
attention and resources, which could adversely affect our business, operating results and financial condition.
We do not anticipate paying dividends
on our common stock and, accordingly, shareholders must rely on stock appreciation for any return on their investment.
We have never declared
or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is
subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial
condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment
in our company if you require dividend income from your investment in our company. The success of your investment will likely depend
entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no
guarantee that our common stock will appreciate in value.
We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline.
Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate.
Due to the possibility
of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
The rights of the holders of common stock may be impaired
by the potential issuance of preferred stock.
Our articles of incorporation
give our board of directors the right to create new series of preferred stock. As a result, the board of directors may, without
stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely
affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right
to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The
possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention
to issue any shares of preferred stock or to create a series of preferred stock, we may issue such shares in the future.
If we fail to comply with the rules under
the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures, or if we discover material weaknesses and deficiencies
in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more
difficult.
If we fail to comply
with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material
weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly
and raising capital could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments
of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these
assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieve and maintain
the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal
controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we
cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could
lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.
Because certain of our stockholders
control a significant number of shares of our common stock, they may have effective control over actions requiring stockholder
approval.
As of October 24, 2016,
our directors, executive officers and principal stockholders (those beneficially owning in excess of 5%), and their respective
affiliates, beneficially own approximately 15.8% of our outstanding shares of common stock. As a result, these stockholders, acting
together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election
of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders,
acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of
ownership might harm the market price of our common stock by:
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delaying, deferring or preventing a change in corporate control;
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impeding a merger, consolidation, takeover or other business combination involving us; or
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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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If securities or industry analysts
do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our
stock price and trading volume could decline.
The trading market
for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our
business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases,
if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these
analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to decline.
There is no public market for the
Warrants being sold in this offering.
There is no established
public trading market for the Warrants contained in the units being offered in this offering, and we do not expect a market to
develop. We do not intend to apply for listing of any such Warrants on any national securities exchange or other trading market.
Without an active market, there will be no or limited liquidity for the Warrants.
The Warrants included in this offering
may not have any value.
The Warrants will be
immediately exercisable, and will expire on the fifth anniversary of the date of issuance. In the event the trading price of our
common stock does not exceed the exercise price of the Warrants during the period when the Warrants are exercisable, the Warrants
may not have any value.
As a holder of Warrants, you will
have no rights as a common stockholder with respect to the common stock underlying the Warrants until you acquire our common stock.
Until you acquire our
common stock upon exercise of your Warrants, you will have no rights with respect to the common stock underlying those Warrants.
Upon exercise of your Warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which
the record date for actions to be taken by our common stockholders occurs after the date you exercise your Warrants.
USE OF PROCEEDS
We
estimate that our net proceeds from the sale of the units offered pursuant to this prospectus supplement will be approximately
$
million, after deducting the underwriting discount
and estimated offering expenses payable by us.
We will receive additional proceeds from any cash exercise of the Warrants
offered by this prospectus supplement. We cannot provide any assurance as to the amount or timing of receipt of any such additional
proceeds, and it is possible that these Warrants may expire and never be exercised.
We intend to use the net proceeds from this offering to support the continued development of TNX-102 SL for the treatment
of PTSD, including completion of the first interim analysis in the phase 3 study in military-related PTSD, to further develop
other pipeline programs, for working capital and other general corporate purposes, and possibly acquisitions of other companies,
products or technologies, though no such acquisitions are currently contemplated.
We
have not yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, our
management will have significant discretion and flexibility in applying the net proceeds from this offering. Pending any use, as
described above, we intend to invest the net proceeds in high-quality, short-term, interest-bearing securities.
DIVIDEND POLICY
We
have never declared or paid cash dividends on our capital stock. We currently intend to retain our future earnings, if any, for
use in our business and therefore do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends,
if any, will be at the discretion of our board of directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for expansion.
DILUTION
If
you purchase our securities in this offering, your interest will be diluted to the extent of the difference between the public
offering price per unit
and attributing no value to the warrants,
and
the net tangible book value per share of our common stock after this offering. We calculate net tangible book value per share by
dividing our net tangible assets (tangible assets less total liabilities) by the number of shares of our common stock issued and
outstanding as of June 30, 2016.
Our
net tangible book value at June 30, 2016 was approximately $29.9 million, or $1.19 per share. After giving effect to the issuance
and sale of units in this offering at the public offering price of $
per unit,
after deducting the underwriting discount and estimated
offering expenses payable by us
and attributing no value to the warrants, our as adjusted net tangible book value at June
30, 2016 would have been approximately $ million or $ per
share. This represents an immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to investors in this offering
after deducting the underwriting discount and estimated offering expenses payable by us
. The following table illustrates
this per share dilution:
Public offering price per unit
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$
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Net tangible book value per share as of June 30, 2016
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1.19
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Increase per share attributable to investors in this offering
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As adjusted net tangible book value per share as of June 30, 2016
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$
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Dilution per share to investors in this offering
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$
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The
above discussion and table are based on 25,079,475 shares of our common stock outstanding as of June 30, 2016 and excludes, as
of that date:
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1,729,217 shares of common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $10.54 per share;
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2,326,621 shares of common stock issuable upon the exercise of outstanding options with a weighted average exercise price of $8.90 per share;
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112,500 shares of common stock issuable upon the vesting of restricted stock units outstanding at June 30, 2016;
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1,967,332 shares of common stock reserved for future grants, awards and issuance under our equity compensation plan as of June 30, 2016; and
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250,406 shares of common stock reserved for future purchases under our employee stock purchase plan as of June 30, 2016.
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The
foregoing illustration does not reflect potential dilution from the exercise of outstanding options or warrants to purchase shares
of our common stock.
DESCRIPTION OF SECURITIES
Each
investor which purchases securities offered hereby will receive, for each unit purchased, one share of common stock and one Warrant
to purchase (0. ) of one share of common stock. Because we are prohibited
from issuing fractional shares, the Warrants can only be exercised in lots of , which means
that each holder must exercise Warrants to receive one share of common stock. The offering also
includes up to shares of common stock issuable upon the
exercise of the Warrants. The securities of which the units are composed are being sold in this offering only as part of the units,
will not be certificated and are immediately separable. Upon issuance, each security underlying the units may be transferred independent
of any other underlying security, subject to applicable law and transfer restrictions.
The
following description of our capital stock and provisions of our Articles of Incorporation, as amended, and our Amended and Restated
Bylaws, is only a summary. You should also refer to our Articles of Incorporation, as amended, and our Amended and Restated Bylaws,
copies of which are incorporated by reference as exhibits to the registration statement of which this prospectus is a part.
Preferred Stock
Our
Board of Directors is authorized to issue 5,000,000 shares of preferred stock, $0.001 par value per share, in one or more series
and to fix the rights, preferences, privileges, qualifications, limitations and restrictions thereof, including dividend rights
and rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without any vote or action by our shareholders. Any preferred
stock to be issued could rank prior to our common stock with respect to dividend rights and rights on liquidation. Our Board of
Directors, without shareholder approval, may issue preferred stock with voting and conversion rights which could adversely affect
the voting power of holders of our common stock and discourage, delay or prevent a change in control of the Company. As of the
date of this prospectus, no shares of preferred stock are outstanding.
Common Stock
We
are authorized to issue up to a total of 150,000,000 shares of common stock, $0.001 par value per share. Each holder of common
stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. We do no
provide for cumulative voting for the election of directors in our Articles of Incorporation, as amended. This means that the holders
of a majority of the shares voted can elect all of the directors then standing for election. Subject to preferences that may apply
to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive
dividends out of assets legally available at the times and in the amounts that our Board of Directors may determine from time to
time.
Holders
of common stock have no preemptive subscription, redemption or conversion rights or other subscription rights. Upon our liquidation,
dissolution or winding-up, the holders of common stock are entitled to share in all assets remaining after payment of
all liabilities and the liquidation preferences of any outstanding preferred stock. Each outstanding share of common stock is,
and all shares of common stock to be issued in this offering, when they are paid for will be, fully paid and nonassessable.
Warrants Included
in the Units
In
connection with this offering, we will issue Warrants to purchase shares
of our common stock. For every unit purchased, investors will receive one share and Warrant to purchase (0.
) of one share of common stock. Because we are prohibited from issuing fractional shares, the Warrants can only be exercised in
lots of , which means that each holder must exercise four Warrants to receive one share of common
stock at an initial exercise price of $ per share. The
Warrants are exercisable commencing upon consummation of this offering and terminating on the fifth anniversary of the date of
issuance.
Pursuant to a warrant
agency agreement between us and VStock Transfer, LLC, as warrant agent, the warrants will be issued in book-entry form and shall
initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository
Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
The
material provisions of the Warrants are set forth herein but are only a summary and are qualified in their entirety by the provisions
of the warrant agreement that has been filed as an exhibit with the Securities and Exchange Commission.
The Warrants may be
exercised by delivering an exercise notice, appropriately completed and duly signed on or prior to the expiration date at the offices
of the warrant agent, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for
the number of Warrants being exercised, unless such Warrant holders are utilizing the cashless exercise provision of the Warrants,
which is only available in certain circumstances such as if the underlying shares are not registered with the SEC pursuant to an
effective registration statement. We intend to use commercially reasonable efforts to have the registration statement of which
this prospectus forms a part, effective when the warrants are exercised. The Warrant holders do not have the rights or privileges
of holders of common stock and any voting rights until they exercise their Warrants and receive shares of common stock. After the
issuance of shares of common stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held
of record on all matters to be voted on by stockholders.
Because we are prohibited
from issuing fractional shares, the Warrants can only be exercised in lots of , which means
that each holder must exercise Warrants to receive one share of common stock. No fractional
shares of common stock will be issued upon exercise of the Warrants. If multiple Warrants are exercised by the holder at the same
time, we will aggregate the number of whole shares issuable upon exercise of all the Warrants tendered for exercise.
The exercise price
and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances, including
in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation. However,
the Warrants will not be adjusted for issuances of common stock at a price below the exercise price of the Warrants.
Subject to limited
exceptions, a holder of warrants will not have the right to exercise any portion of its warrants if the holder (together with such
holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates)
would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the holder, 9.99%) of the
shares of our common stock then outstanding after giving effect to such exercise (the “Beneficial Ownership Limitation”);
provided, however, that upon notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided
that in no event shall the Beneficial Ownership Limitation exceed 9.99% and any increase in the Beneficial Ownership Limitation
will not be effective until 61 days following notice of such increase from the holder to us.
In the event we consummate
a merger or consolidation with or into another person or other reorganization event in which our common shares are converted or
exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey or otherwise dispose of
all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of common stock, then
following such event, the holders of the Warrants will be entitled to receive upon exercise of the Warrants the same kind and amount
of securities, cash or property which the holders would have received had they exercised the Warrants immediately prior to such
fundamental transaction. Any successor to us or surviving entity shall assume the obligations under the Warrants.
Listing and Transfer Agent
Our common stock is
listed on The NASDAQ Global Market and trades under the symbol “TNXP.” The Warrants to purchase common stock issued
to the investors in this offering are not expected to be eligible for trading on any market. In addition, we do not intend to apply
for listing of the Warrants on any national securities exchange or other trading market.
The transfer agent
of our common stock and warrant agent for the Warrants is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598.
UNDERWRITING
We have entered into
an underwriting agreement with Dawson James Securities, Inc. with respect to the common stock and Warrants being offered. Subject
to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter, and the underwriter has agreed
to purchase from us on a firm commitment basis, the number of units set forth opposite its name in the table below.
Underwriter
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Number of Units
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Dawson James Securities, Inc.
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Total
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The underwriters are
committed to purchase all the common stock and warrants offered by us if they purchase any such securities. The underwriters are
not obligated to purchase the units, or combinations thereof, covered by the underwriters’ over-allotment option described
below. The underwriters are offering the units, subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by their counsel, and other conditions contained in the underwriting agreement, such as the receipt
by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel
or modify offers to the public and to reject orders in whole or in part. We have granted to the underwriters an option to purchase
up to additional shares of common stock at price of $ per
share, less underwriting discounts and commissions, and/or (ii) additional Warrants at a purchase
price of $0.001 per warrant, less underwriting discounts and commissions. The over-allotment option may be used to purchase common
stock, warrants or any combination thereof, as determined by the underwriters, but such purchases cannot exceed an aggregate of
15% of the number of common stock and Warrants underlying the units sold in the primary offering. The underwriters may exercise
this option for 45 days from the date of this prospectus solely to cover sales of common stock and Warrants by the underwriters
in excess of the total number set forth in the table above. Dawson James Securities, Inc., its officers and its registered representatives,
and their affiliates, may participate in this offering on the same terms and conditions as the investors participating in this
offering.
Discounts and Commissions
The underwriter proposes
to offer to the public the units purchased pursuant to the underwriting agreement at the public offering price per unit on the
cover page of this prospectus supplement. The underwriter may offer some of the units to other securities dealers at such price
less a concession of $ per unit. The underwriter may also allow, and such
dealers may reallow, a concession not in excess of $ per unit to other dealers.
After the units are released for sale to the public, the underwriter may change the offering price and other selling terms at various
times.
The factors considered
in determining the public offering price included the recent market price of our common stock, the general condition of the securities
market at the time of this offering, the history of, and the prospects for, the industry in which we compete, our past and present
operations and our prospects for future revenues.
The following table
shows the per unit price and total underwriting discounts and commissions we will pay in connection with the sale of the units.
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Per Unit
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Total Without Over-
Allotment Option
|
|
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Maximum Total
With Over-
Allotment Option
|
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Public offering price
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$
|
|
|
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$
|
|
|
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$
|
|
|
Underwriting discounts and commissions (1)
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$
|
|
|
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$
|
|
|
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$
|
|
|
Proceeds, before expenses, to us
|
$
|
|
|
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$
|
|
|
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$
|
|
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(1) The information in the table shows
the maximum underwriting discounts and commissions payable to the underwriters. We and the underwriters have agreed that the underwriters
shall receive 50% of the foregoing amount with respect to any sales of units made to our officers and directors (including any
entity under their control).
We have also agreed
to reimburse the underwriter for its expenses in connection with this offering, up to $60,000, and have agreed to reimburse the
underwriter for its reasonable “blue sky” fees and expenses, up to $15,000.
We have agreed to issue
to the underwriter or its designees warrants to purchase up to 5% of the number of shares of common stock included in the units
sold in this offering. The underwriter warrants will be exercisable at any time and from time to time, in whole or in part, during
the period commencing six months following the consummation of this offering, and ending five years from the date of this prospectus
supplement, at a price per share equal to 125% of the public offering price per unit in this offering. The underwriter warrants
provide for a cashless exercise provision, piggyback registration rights and customary anti-dilution provisions (for stock dividends
and splits and recapitalizations) consistent with FINRA Rule 5110. The underwriter warrants and the underlying securities are deemed
compensation by FINRA, and are therefore subject to FINRA Rule 5110(g)(1). In accordance with FINRA Rule 5110(g)(1), neither the
underwriter warrants nor any securities issued upon exercise of the underwriter warrants may be sold, transferred, assigned, pledged,
or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective
economic disposition of such securities by any person for a period of 180 days immediately following the date of effectiveness
or commencement of sales of the offering pursuant to which the underwriter warrants are being issued, except the transfer of any
security: (i) by operation of law or by reason of reorganization of our company; (ii) to any FINRA member firm participating in
this offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction
described above for the remainder of the time period; (iii) if the aggregate amount of our securities held by either an underwriter
or a related person do not exceed 1% of the securities being offered; (iv) that is beneficially owned on a pro-rata basis by all
equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund,
and participating members in the aggregate do not own more than 10% of the equity in the fund; or (v) the exercise or conversion
of any security, if all securities received remain subject to the lock-up restriction set forth above for the remainder of the
time period. The underwriter warrants and the shares of common stock underlying the underwriter warrants are being registered pursuant
to this prospectus supplement.
We have also granted
to the underwriter a right of first refusal to act as lead managing underwriter or book runner, or as lead placement agent for
any and all future equity, equity-linked or debt (excluding commercial bank debt) offerings during the 90-day period following
the consummation of this offering. In addition, with certain exceptions, Dawson James Securities, Inc. shall be entitled to the
same fees as provided in this offering with respect to any public or private offering or other financing or capital-raising transaction
of any kind to the extent that such financing or capital is provided to us by investors whom Dawson had introduced to us, if such
financing is consummated at any time within the 90-day period following completion of the offering.
We estimate the total
expenses of this offering which will be payable by us, excluding the underwriting discount, will be approximately $
. After deducting the underwriting discount and our estimated offering expenses, we expect the net proceeds from this
offering to be approximately $ .
Indemnification
We have agreed to indemnify
the underwriter and certain other persons against certain liabilities relating to or arising out of the underwriter’s activities
under the underwriting agreement. We have also agreed to contribute to payments that the underwriter may be required to make in
respect of such liabilities.
Price Stabilization, Short Positions
and Penalty Bids
Stabilization
.
In connection with this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate
covering transactions, penalty bids and purchases to cover positions created by short sales.
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·
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Stabilizing transactions permit bids to purchase common stock so long as the stabilizing bids do not exceed a specified maximum,
and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while the offering
is in progress.
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·
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Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. If the underwriters sell more shares than set forth herein and, therefore, have a
naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares
in the open market that could adversely affect investors who purchase in the offering.
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|
·
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Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the common stock originally
sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
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Electronic Offers; Other
This prospectus supplement
and the accompanying prospectus may be made available in electronic format on Internet sites or through other online services maintained
by the underwriter or its affiliates. In those cases, prospective investors may view offering terms online and may be allowed to
place orders online. Other than this prospectus supplement and the accompanying prospectus in electronic format, any information
on the underwriter’s or its affiliates’ websites and any information contained in any other website maintained by the
underwriter or any affiliate of the underwriter is not part of this prospectus supplement, the accompanying prospectus or the registration
statement of which this prospectus supplement and the accompanying prospectus form a part, has not been approved and/or endorsed
by us or the underwriter and should not be relied upon by investors.
The underwriter or
its affiliates may engage in transactions with, and may perform, from time to time, investment banking and advisory services for
us in the ordinary course of their business and for which they would receive customary fees and expenses. In addition, in the ordinary
course of their business activities, the underwriter and its affiliates may make or hold a broad array of investments and actively
trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for its own
account and for the accounts of its customers. Such investments and securities activities may involve securities and/or instruments
of ours or our affiliates. However, except as disclosed in this prospectus, we have no present arrangements with any of the underwriters
for any further services. The underwriter and its affiliates may also make investment recommendations and/or publish or express
independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they
acquire, long and/or short positions in such securities and instruments.
This summary of the
material provisions of the underwriting agreement does not purport to be a complete statement of its terms and conditions. A copy
of the underwriting agreement is filed with the Securities and Exchange Commission, and is incorporated by reference into the registration
statement of which this prospectus supplement is a part. See the sections below entitled “
Where You Can Find More Information
”
and “
Incorporation of Certain Documents by Reference
.”
LEGAL MATTERS
The
validity of the securities offered hereby will be passed upon for us by Sichenzia Ross Ference Kesner LLP, New York, New York.
Schiff Hardin LLP, Washington, DC, is acting as counsel for the underwriters in connection with this offering.
EXPERTS
The
consolidated financial statements of Tonix Pharmaceuticals Holding Corp. as of December 31, 2015 and 2014 and for each of the three
years ended December 31, 2015 and management’s assessment of the effectiveness of internal control over financial reporting
as of December 31, 2015 appearing in Tonix Pharmaceuticals Holding Corp.’s Annual Report (Form 10-K) for the year ended December
31, 2015, have been audited by EisnerAmper LLP, independent registered public accounting firm, as set forth in their reports
thereon included therein and incorporated herein by reference. Such consolidated financial statements and internal control assessment
are incorporated herein by reference in reliance upon such reports given on the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN
FIND MORE INFORMATION
This
prospectus supplement and the accompanying prospectus are part of the registration statement on Form S-3 we filed with the
Securities and Exchange Commission, or SEC, under the Securities Act, and do not contain all the information set forth in the registration
statement. Whenever a reference is made in this prospectus supplement or the accompanying prospectus to any of our contracts, agreements
or other documents, the reference may not be complete, and you should refer to the exhibits that are a part of the registration
statement or the exhibits to the reports or other documents incorporated by reference into this prospectus supplement and the accompanying
prospectus for a copy of such contract, agreement or other document. You may inspect a copy of the registration statement, including
the exhibits and schedules, without charge, at the SEC's public reference room mentioned below, or obtain a copy from the SEC upon
payment of the fees prescribed by the SEC.
We file annual, quarterly
and current reports, proxy statements and other information with the SEC. You may read, without charge, and copy the documents
we file at the SEC’s public reference rooms in Washington, D.C. at 100 F Street, NE, Room 1580, Washington, DC 20549.
You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public
at no cost from the SEC’s website at http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
We incorporate by reference
the filed documents listed below, except as superseded, supplemented or modified by this prospectus supplement, and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (unless otherwise noted, the
SEC file number for each of the documents listed below is 001-36019):
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·
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Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 3, 2016,
as amended by our Annual Report on Form 10-K/A filed on April 28, 2016;
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·
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Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016 filed
on May 6, 2016 and August 6, 2016, respectively;
|
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·
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Definitive Proxy Statement on Schedule 14A filed on March 25, 2016;
|
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·
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Current Reports on Form 8-K filed on January 8, 2016, February 16, 2016, February 25, 2016,
March 9, 2016, March 29, 2016, April 28, 2016, May 2, 2016 (as to Item 8.01 only), May 12, 2016, May 19, 2016, May 31, 2016, June
3, 2016, June 9, 2016, June 16, 2016, June 21, 2016, July 12, 2016, July 26, 2016 (as to Item 8.01 only), August 15, 2016, August
29, 2016, September 6, 2016 (as to Item 8.01 only) and October 21, 2016; and
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·
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The description of our common stock contained in our Form 8-A filed on July 23, 2013.
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In addition, all documents
filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus supplement
and before the termination of the offering under this prospectus supplement are deemed to be incorporated by reference into, and
to be a part of, this prospectus supplement.
You may request, and
we will provide you with, a copy of these filings, at no cost, by contacting us at:
Bradley Saenger
Chief Financial
Officer
Tonix Pharmaceuticals
Holding Corp.
509 Madison Avenue,
Suite 306
New York, New York
10022
Telephone (212)
980-9155
PROSPECTUS
$150,000,000
Common Stock
Preferred Stock
Warrants
Units
We may offer and sell,
from time to time in one or more offerings, any combination of common stock, preferred stock, warrants, or units having an aggregate
initial offering price not exceeding $150,000,000. The preferred stock, warrants, and units may be convertible or exercisable or
exchangeable for common stock or preferred stock or other securities of ours.
Each time we sell a
particular class or series of securities, we will provide specific terms of the securities offered in a supplement to this prospectus.
The prospectus supplement may also add, update or change information in this prospectus. You should read this prospectus
and any prospectus supplement, as well as the documents incorporated by reference or deemed to be incorporated by reference into
this prospectus, carefully before you invest in any securities.
This prospectus
may not be used to offer or sell our securities unless accompanied by a prospectus supplement relating to the offered securities.
Our common stock is
presently listed on The NASDAQ Capital Market under the symbol “TNXP”. On July 31, 2014, the last reported sale price
of our common stock was $11.51.
These securities may
be sold directly by us, through dealers or agents designated from time to time, to or through underwriters or dealers or through
a combination of these methods on a continuous or delayed basis. See “Plan of Distribution” in this prospectus.
We may also describe the plan of distribution for any particular offering of our securities in a prospectus supplement. If
any agents, underwriters or dealers are involved in the sale of any securities in respect of which this prospectus is being delivered,
we will disclose their names and the nature of our arrangements with them in a prospectus supplement. The net proceeds we expect
to receive from any such sale will also be included in a prospectus supplement.
Investing in our
securities involves various risks. See “Risk Factors” beginning on page 4 of this prospectus and in the applicable
prospectus supplement, as updated in our future filings made with the Securities and Exchange Commission that are incorporated
by reference into this prospectus. You should carefully read and consider these risk factors before you invest in our securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated August 1, 2014
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is
part of a shelf registration statement that we filed with the Securities and Exchange Commission (the “SEC”) using
a “shelf” registration process. Under this shelf registration process, we may sell any combination of the securities
described in this prospectus in one or more offerings from time to time having an aggregate initial offering price of $50,000,000.
This prospectus provides you with a general description of the securities we may offer. Each time we offer securities, we will
provide you with a prospectus supplement that describes the specific amounts, prices and terms of the securities we offer. The
prospectus supplement also may add, update or change information contained in this prospectus. You should read carefully both this
prospectus and any prospectus supplement together with additional information described below under the caption “Where You
Can Find More Information.”
This prospectus does
not contain all the information provided in the registration statement we filed with the SEC. You should read both this prospectus,
including the section titled “Risk Factors,” and the accompanying prospectus supplement, together with the additional
information described under the heading “Where You Can Find More Information.”
You should rely only
on the information contained or incorporated by reference in this prospectus or a prospectus supplement. We have not authorized
any other person to provide you with different information. If anyone provides you with different or inconsistent information,
you should not rely on it. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities
in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus
or any prospectus supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate
as of the date on the front of those documents only. Our business, financial condition, results of operations and prospects may
have changed since those dates.
OUR BUSINESS
Unless otherwise
indicated or unless the context requires otherwise, this prospectus includes the accounts of Tonix Pharmaceuticals Holding Corp.
(“Tonix”) and its wholly-owned subsidiaries, as follows, collectively referred to as “we”, “us”
or the “Company”: Tonix Pharmaceuticals, Inc., a Delaware corporation ("Tonix Sub"), Krele LLC, a Delaware
limited liability company ("Krele"), Tonix Pharmaceuticals (Canada), Inc., a corporation incorporated under the laws
of the province of New Brunswick, Canada ("Tonix Canada") and Tonix Pharmaceuticals (Barbados) Ltd., a corporation incorporated
under the laws of Barbados ("Tonix Barbados"). Tonix Sub is a wholly-owned subsidiary of Tonix, and Krele, Tonix Canada
and Tonix Barbados are wholly-owned subsidiaries of Tonix Sub.
Business Overview
We are a clinical-stage
pharmaceutical company dedicated to the development of novel prescription products for common yet challenging medical disorders.
Our lead drug development programs are directed toward conditions affecting the central nervous system, or CNS. Our pipeline of
product candidates is led by TNX-102 SL (cyclobenzaprine HCl sublingual tablets), which is in late-stage clinical development as
a potential treatment for fibromyalgia, or FM, and represents a new class of medication for this disorder. We expect to report
topline results from our ongoing Phase 2b/3 trial of TNX-102 SL in FM, potentially the first of two pivotal trials needed to support
marketing approval in this indication, in the fourth quarter of 2014. TNX-102 SL is also in development as a potential treatment
for post-traumatic stress disorder, or PTSD, and we expect to commence a Phase 2 trial for this indication in the fourth quarter
of 2014. We are also developing TNX-201 (isometheptene mucate single isomer) as a potential treatment for episodic tension-type
headache, or ETTH. We plan to file an Investigational New Drug, or IND, application in the fourth quarter of 2014 for clearance
to commence a Phase 1 trial of TNX-201 for this indication. We expect to commence the Phase 1 trial in the first quarter of 2015.
We hold worldwide commercialization rights to TNX-102 SL and TNX-201. Our pipeline also includes preclinical programs for the treatment
of alcohol abuse and dependence, and for protection from smallpox as well as from radiation and chemical exposure.
TNX-102 SL
Our lead product candidate,
TNX-102 SL, is a small, rapidly disintegrating tablet containing cyclobenzaprine, or CBP, for sublingual administration. CBP is
the active pharmaceutical ingredient of two widely prescribed products, or CBP products, that are approved for acute use only.
We are developing TNX-102 SL as a bedtime therapy for the management of FM and PTSD, which are chronic indications for which CBP
products are not approved. We believe that three key aspects of TNX-102 SL distinguish it from CBP products: (1) it is being developed
at a dose level significantly below the lowest marketed doses of CBP products; (2) it is dosed daily at bedtime under the tongue,
to disintegrate, dissolve and provide sublingual absorption, whereas CBP products are swallowed and provide absorption in the small
intestine; and (3) it is being developed for chronic use, whereas CBP products are marketed for two to three weeks of use. We expect
that any applications we submit to the Food and Drug Administration, or FDA, for approval of TNX-102 SL will be submitted under
Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, which we believe will allow for a shorter timeline of clinical
and non-clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1), under which new chemical
entities, or NCEs, that have never been approved in the United States, are generally developed to meet the FDA’s new drug
registration requirements.
We have conducted several
clinical and non-clinical pharmacokinetic trials of TNX-102 sublingual formulations, which we believe support the development of
TNX-102 SL as a novel therapeutic product for FM and PTSD. Results from these trials demonstrate a number of potentially advantageous
characteristics as compared to CBP products, which are not approved for these indications. For example, our Phase 1 comparative
trials showed that TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first
hour following administration relative to oral CBP tablets. TNX-102 SL was generally well-tolerated, with no serious adverse events
reported in these studies. Some subjects experienced transient numbness on the tongue after TNX-102 SL administration, and other
side-effects reported were similar to those associated with CBP products.
TNX-102 SL – Fibromyalgia Program
We are developing TNX-102
SL for the treatment of FM under an IND cleared by the FDA in 2011. At an End-of-Phase 2/Pre-Phase 3 meeting with the FDA in February
2013, we discussed the design of our clinical program, including the acceptability of the pivotal study design and the proposed
registration plan, to support the approval of TNX-102 SL for the management of FM. On the basis of our discussions with the FDA,
we believe that positive results from two adequate, well-controlled safety and efficacy studies and the establishment of long-term
safety for chronic use, as evidenced by results from open-label safety exposure studies per FDA requirements, would support the
approval of TNX-102 SL for the management of FM.
Following our meeting
with the FDA, in September 2013, we commenced our 200 patient, 17 site, randomized, double-blind, placebo-controlled Phase 2b/3
BESTFIT clinical trial, or the BESTFIT trial. In the BESTFIT trial, patients with FM are being treated with either TNX-102 2.8
mg sublingual tablets (SL) or a placebo at bedtime daily for 12 weeks. The primary outcome measure of the BESTFIT trial is the
mean change in week 12 average daily pain intensity from baseline on the 11-point Numeric Rating Scale, or NRS, using a daily telephonic
diary. This endpoint is similar to that utilized in clinical trials of drug products currently approved for use in FM. We are also
collecting information on other outcome measures, including NRS scores at other time points, the revised Fibromyalgia Impact Questionnaire,
and the Patient Global Impression of Change. In May 2014, we announced the completion of patient enrollment into the BESTFIT trial.
We expect to report topline results from the BESTFIT trial in the fourth quarter of 2014.
In December 2013, we
commenced Study F203, a 12-month open-label extension study of TNX-102 SL in patients who have completed the BESTFIT study. The
goal of Study F203 is to obtain the prerequisite 6- and 12-month safety exposure data to support the NDA filing.
Our therapeutic strategy
is supported by results from a randomized, double-blind, placebo-controlled Phase 2a clinical trial of low dose TNX-102 immediate
release capsules, or TNX-102 capsules, which we have also referred to as VLD CBP, taken between dinner and bedtime in 36 subjects
with FM, which demonstrated a significant decrease in pain and other symptoms after eight weeks of treatment. This trial also demonstrated
that TNX-102 capsules led to a significant improvement in objective measures of sleep quality, which we believe relates to the
mechanism by which CBP leads to improvement of FM symptoms. We have completed four Phase 1 trials of TNX-102 formulations under
Canadian Clinical Trial Applications as well as under our IND, including two trials of TNX-102 SL. These Phase 1 trials demonstrated
TNX-102 SL to exhibit a pharmacokinetic profile that we believe supports chronic bedtime administration for the treatment of FM,
and is distinct from those of CBP products.
FM is a chronic syndrome
characterized by widespread musculoskeletal pain accompanied by fatigue, sleep, memory and mood issues. According to the National
Institutes of Health, there are approximately five million people suffering from FM in the U.S. The peak incidence of FM occurs
at 20 – 50 years of age, and 80-90% of diagnosed patients are female. FM may have a substantial negative impact on social
and occupational function, including disrupted relationships with family and friends, social isolation, reduced activities of daily
living and leisure activities, avoidance of physical activity, and loss of career or inability to advance in careers or education.
Although the disordered
brain processes that underlie FM are yet to be fully understood, the mechanisms of drugs that treat central pain are believed to
target certain aspects of nerve signaling. Three drugs, Lyrica® (pregabalin), Cymbalta® (duloxetine), and Savella®
(milnacipran), are approved by the FDA for the management of FM and are believed to act upon molecular pathways involved in central
pain. Lyrica is believed to affect nerve signaling by blocking calcium channels on nerve cells, and is considered a nerve membrane
stabilizer. Cymbalta and Savella are believed to directly inhibit the reuptake of serotonin and norepinephrine by nerves, and are
referred to as Serotonin and Norepinephrine Reuptake Inhibitors, or SNRIs. CBP, the active ingredient of TNX-102 SL, is a selective
antagonist of serotonin and norepinephrine receptors as well as an inhibitor of serotonin and norepinephrine reuptake, and we refer
to it as a Serotonin and Norepinephrine receptor Antagonist and Reuptake Inhibitor, or SNARI.
As many products used
for the treatment of FM are approved and marketed for other conditions, sales of these products related specifically to FM can
only be estimated. Based on information obtained from publicly available sources, we believe U.S. sales of prescription drugs specifically
for the treatment of FM totaled approximately $1.5 billion in 2012, and we believe this segment had grown at a compounded annual
growth rate of approximately 14% between 2007 and 2012. Based on information obtained from publicly available sources, we believe
2012 sales of Cymbalta, Lyrica, and Savella in FM were approximately $600 million, $475 million, and $100 million, respectively.
Cymbalta lost its U.S. patent exclusivity in December 2013.
Despite the availability
and use of a variety of pharmacologic and non-pharmacologic interventions, FM remains a significant unmet medical need. Many patients
fail to adequately respond to the approved medications, or discontinue therapy due to poor tolerability. Prescription pain and
sleep medications are frequently prescribed for symptomatic relief, despite the lack of evidence that such medications provide
a meaningful or durable therapeutic effect. An important goal of FM treatment is to reduce the use of opiate analgesics as well
as of benzodiazepine and non-benzodiazepine sedative-hypnotic medications by FM patients. Since CBP has no recognized addictive
potential, we believe that TNX-102 SL, if approved, could reduce the exposure of FM patients to medications that have not been
shown to be effective in treating FM and are associated with significant safety risks.
TNX-102 SL – Post-Traumatic
Stress Disorder Program
We are also developing
TNX-102 SL for the management of PTSD under an IND cleared by the FDA in June 2014. We expect to commence a 220 patient, approximately
25 site, randomized, double-blind, placebo-controlled, Phase 2 trial of TNX-102 SL in subjects with military-related PTSD, or the
AtEase trial, in the fourth quarter of 2014. The AtEase trial is designed to study the safety and efficacy of two doses of TNX-102
SL administered once daily at bedtime. The objective of the AtEase trial is to evaluate the efficacy of TNX-102 SL 2.8 mg as compared
to placebo following six weeks of treatment using the Clinician-Administered PTSD Scale.
If the results of the
AtEase trial are positive, we intend to meet with the FDA to finalize the design of the registration studies that would be required
to support approval of an NDA for this indication. Based on our conversations with the FDA to date, we believe positive results
from two adequate, well-controlled efficacy and safety studies and long-term (6 and 12 month) safety exposure data will be sufficient
to support FDA approval for this indication. We expect that we will be able to use the long-term safety exposure data generated
by our clinical development of TNX-102 SL in FM to supplement the long-term safety exposure data required for the PTSD NDA.
TNX-201 – Episodic Tension-Type
Headache Program
TNX-201 is a single
isomer of isometheptene mucate, or IMH, and is under development as a treatment for ETTH, an indication believed to affect approximately
20% of the global adult population. Although currently not approved for any indication, IMH has an extensive history of use as
a prescription pharmaceutical in the U.S. as a mixture of two mirror-image isomers, or IMH enantiomers, also known as a racemic
mixture. Racemic IMH has been marketed as Octin® for conditions including tension and vascular headache. In addition, racemic
IMH has been marketed in combination products for the relief of tension and vascular headaches (examples include Midrin® and
MigraTen®). Based on our evaluation studies, we believe that one of the IMH enantiomers, which we are developing as TNX-201,
is primarily responsible for the efficacy associated with the racemic mixture in the treatment of headache, and that the other
IMH isomer may be associated with greater safety and tolerability risks. As a result, we believe that TNX-201 may have an improved
clinical profile as compared to the racemic mixture for headache indications. According to the FDA’s Stereoisomeric Drugs
Development Policy, the development of a single enantiomer of a drug is particularly desirable in cases in which one enantiomer
has a toxic or undesirable pharmacologic effect and the other does not.
We held a pre-IND meeting
with the FDA in January 2014 to discuss the regulatory pathway for the development of TNX-201 for the treatment of ETTH. Based
on that meeting, we believe that the initial IND for TNX-201 will not require any additional nonclinical data to support a first-in-man
Phase I comparative pharmacokinetic and safety study, which we expect to commence in the first quarter of 2015. Although the development
of TNX-201 will be based on the available information on racemic IMH, approval of any NDA will be pursuant to Section 505(b)(1)
of the FDCA.
Additional Product Candidates
We also have a pipeline
of other product candidates, including TNX-301. TNX-301 is a fixed dose combination of two FDA-approved drugs, disulfiram and selegiline.
We intend to develop TNX-301 under Section 505(b)(2) of the FDCA as a potential treatment for alcohol abuse and dependence, and
plan to begin formulation work on TNX-301 later in the second half of 2014. In addition, we recently acquired rights to intellectual
property on two biodefense technologies: one relating to the development of novel smallpox vaccines, and the other to the development
of protective agents against radiation exposure. We plan to perform non-clinical research and development on these programs later
in the second half of 2014. The FDA Animal Efficacy Rule provides a mechanism for drug licensure when human efficacy studies are
not feasible or ethical. As a result, the licensure of these biodefense products in the United States may not require human efficacy
studies, which we believe will reduce our development costs and risks compared to the development of other NCEs or new biologic
candidates.
Corporate Information
We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. On October 11, 2011, we changed our name
to Tonix Pharmaceuticals Holding Corp. Our principal executive offices are located at 509 Madison Avenue, Suite 306, New York,
New York 10022, and our telephone number is (212) 980-9155. Our website addresses are
www.tonixpharma.com
and
www.krele.com
.
The information on our websites is not part of this prospectus. We have included our website addresses as a factual reference and
do not intend them to be active links to our websites.
RISK FACTORS
You should carefully
consider the risks described below before making an investment decision. The risks described below are not the only ones we face.
Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations.
Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained
or incorporated by reference into this prospectus supplement and the accompanying prospectus, including our financial statements
and related notes.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses
and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues,
achieve profitability.
We are focused on product
development, and we have not generated any revenues to date. We have incurred losses in each year of our operations, and we expect
to continue to incur operating losses for the foreseeable future. These operating losses have adversely affected and are likely
to continue to adversely affect our working capital, total assets and shareholders’ equity.
The Company and its
prospects should be examined in light of the risks and difficulties frequently encountered by new and early stage companies in
new and rapidly evolving markets. These risks include, among other things, the speed at which we can scale up operations, our complete
dependence upon development of products that currently have no market acceptance, our ability to establish and expand our brand
name, our ability to expand our operations to meet the commercial demand of our clients, our development of and reliance on strategic
and customer relationships and our ability to minimize fraud and other security risks.
The process of developing
our products requires significant clinical, development and laboratory testing and clinical trials. In addition, commercialization
of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing and manufacturing
capabilities, either through internal hiring or through contractual relationships with others. We expect to incur substantial losses
for the foreseeable future as a result of anticipated increases in our research and development costs, including costs associated
with conducting preclinical testing and clinical trials, and regulatory compliance activities.
Our ability to generate
revenues and achieve profitability will depend on numerous factors, including success in:
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developing and testing product candidates;
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receiving regulatory approvals;
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commercializing our products; and
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establishing a favorable competitive position.
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Many of these factors
will depend on circumstances beyond our control. We cannot assure you that we will ever have a product approved by the FDA, that
we will bring any product to market or, if we are successful in doing so, that we will ever become profitable.
We expect to incur
substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, and clinical
trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have
no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products
in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability
will depend on, among other things, successful completion of the development of our product candidates; obtaining necessary regulatory
approvals from the FDA; establishing manufacturing, sales, and marketing arrangements with third parties; and raising sufficient
funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations may be materially adversely affected.
We have a limited operating history
and we expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it
difficult to predict our future performance.
We are a development
stage biopharmaceutical company with a limited operating history. Our operations to date have been primarily limited to developing
our technology and undertaking preclinical studies and clinical trials of our lead product candidate, TNX-102 SL. We have not yet
obtained regulatory approvals for TNX-102 SL or any of our other product candidates. Consequently, any predictions made about our
future success or viability may not be as accurate as they could be if we had a longer operating history or commercialized products.
Our financial condition has varied significantly in the past and will continue to fluctuate from quarter-to-quarter or year-to-year
due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these
fluctuations include other factors described elsewhere in this prospectus and also include:
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our ability to obtain additional funding to develop our product candidates;
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delays in the commencement, enrollment and timing of clinical trials;
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the success of our clinical trials through all phases of clinical development, including our trials of TNX-102 SL;
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any delays in regulatory review and approval of product candidates in clinical development;
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our ability to obtain and maintain regulatory approval for TNX-102 SL or any of our other product candidates in the United
States and foreign jurisdictions;
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potential side effects of our product candidates that could delay or prevent commercialization, limit the indications for any
approved drug, require the establishment of risk evaluation and mitigation strategies, or cause an approved drug to be taken off
the market;
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our dependence on third party contract manufacturing organizations, or CMOs, to supply or manufacture our products;
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our dependence on third party contract research organizations, or CROs, to conduct our clinical trials and non-clinical research;
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our ability to establish or maintain collaborations, licensing or other arrangements;
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market acceptance of our product candidates;
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our ability to establish and maintain an effective sales and marketing infrastructure, either through the creation of a commercial
infrastructure or through strategic collaborations;
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competition from existing products or new products that may emerge;
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the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for our products;
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our ability to leverage our proprietary technology platform to discover and develop additional product candidates;
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our ability and our licensors’ abilities to successfully obtain, maintain, defend and enforce intellectual property rights
important to our business;
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our ability to attract and retain key personnel to manage our business effectively;
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our ability to build our finance infrastructure and improve our accounting systems and controls;
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potential product liability claims;
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potential liabilities associated with hazardous materials; and
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our ability to obtain and maintain adequate insurance policies.
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Accordingly, the results
of any quarterly or annual periods should not be relied upon as indications of future operating performance.
We have no approved products on the
market and therefore do not expect to generate any revenues from product sales in the foreseeable future, if at all.
To date, we have no
approved product on the market and have generated no product revenues. We have funded our operations primarily from sales of our
securities. We have not received, and do not expect to receive for at least the next several years, if at all, any revenues from
the commercialization of our product candidates. To obtain revenues from sales of our product candidates, we must succeed, either
alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing drugs with commercial
potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations
or achieve profitability.
We are largely dependent on the success
of our lead product candidate, TNX-102 SL, and we cannot be certain that this product candidate will receive regulatory approval
or be successfully commercialized.
We currently have no
products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our product candidates
are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other
things, research, testing, clinical trials, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping.
We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA for a product
candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive
and uncertain process. We currently have one lead product candidate, TNX-102 SL for the treatment of FM, and the success of our
business currently depends on its successful development, approval and commercialization. Any projected sales or future revenue
predictions are predicated upon FDA approval and market acceptance of TNX-102 SL. If projected sales do not materialize for any
reason, it would have a material adverse effect on our business and our ability to continue operations.
TNX-102 SL has not
completed the clinical development process; therefore, we have not yet submitted an NDA or foreign equivalent or received marketing
approval for this product candidate anywhere in the world. The clinical development program for TNX-102 SL may not lead to commercial
products for a number of reasons, including if we fail to obtain necessary approvals from the FDA or foreign regulatory authorities
because our clinical trials fail to demonstrate to their satisfaction that this product candidate is safe and effective or the
clinical program may be put on hold due to unexpected safety issues with marketed CBP products. We may also fail to obtain the
necessary approvals if we have inadequate financial or other resources to advance our product candidates through the clinical trial
process. Any failure or delay in completing clinical trials or obtaining regulatory approval for TNX-102 SL in a timely manner
would have a material adverse impact on our business and our stock price.
We may use our financial and human
resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates
that may be more profitable or for which there is a greater likelihood of success.
Because we have limited
financial and human resources, we are currently focusing on the regulatory approval of TNX-102 SL. As a result, we may forego or
delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial
potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market
opportunities. Our spending on existing and future product candidates for specific indications may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements in cases
in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate,
or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous
to enter into a partnering arrangement.
We may need additional capital. If
additional capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate
our research and development programs, reduce our commercialization efforts or curtail our operations.
In order to develop
and bring our product candidates to market, we must commit substantial resources to costly and time-consuming research, preclinical
and clinical trials and marketing activities. We anticipate that our existing cash and cash equivalents will enable us to maintain
our current operations for at least the next twelve months. We anticipate using our cash and cash equivalents to fund further research
and development with respect to our lead product candidates. We may, however, need to raise additional funding sooner if our business
or operations change in a manner that consumes available resources more rapidly than we anticipate. Our requirements for additional
capital will depend on many factors, including:
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successful commercialization of our product candidates;
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the time and costs involved in obtaining regulatory approval for our product candidates;
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costs associated with protecting our intellectual property rights;
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development of marketing and sales capabilities;
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payments received under future collaborative agreements, if any; and
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market acceptance of our products.
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To the extent we raise
additional capital through the sale of equity securities, the issuance of those securities could result in dilution to our shareholders.
In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for our business activities. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization
efforts or curtail our operations. In addition, we may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek
to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less
favorable to us than might otherwise be available.
We will require substantial
additional funds to support our research and development activities, and the anticipated costs of preclinical studies and clinical
trials, regulatory approvals and eventual commercialization. Such additional sources of financing may not be available on favorable
terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to commence clinical trials
or obtain approval of any product candidates from the FDA and other regulatory authorities. In addition, we could be forced to
discontinue product development, forego sales and marketing efforts and forego attractive business opportunities. Any additional
sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our shareholders.
There is no assurance
that we will be successful in raising the additional funds needed to fund our business plan. If we are not able to raise sufficient
capital in the near future, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise
transfer all or substantially all of our remaining assets.
We face intense competition in the
markets targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and we
expect that all of our product candidates under development will face intense competition from existing or future drugs.
We expect that all
of our product candidates under development, if approved, will face intense competition from existing and future drugs marketed
by large companies. These competitors may successfully market products that compete with our products, successfully identify drug
candidates or develop products earlier than we do, or develop products that are more effective, have fewer side effects or cost
less than our products.
Additionally, if a
competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for our
product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by the competitor
of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing drugs such
as our current product candidates can extend up to three and one-half years.
These competitive factors
could require us to conduct substantial new research and development activities to establish new product targets, which would be
costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve revenue and
profits.
Competition and technological change
may make our product candidates and technologies less attractive or obsolete.
We compete with established
pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing
and that have greater financial and other resources. Other companies may succeed in developing products earlier than us, obtaining
FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and
development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures
superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire
competing technology from universities and other research institutions. As these companies develop their technologies, they may
develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result
in a decrease in the revenue we would be able to derive from the sale of any products.
There can be no assurance
that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore,
if our competitors' products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even
if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that
physicians and patients will accept our product(s) as a treatment of choice.
Furthermore, the pharmaceutical
research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous
and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us
from forecasting revenues or income with certainty or even confidence.
If we fail to protect our intellectual
property rights, our ability to pursue the development of our technologies and products would be negatively affected.
Our success will depend
in part on our ability to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately
protect our intellectual property, competitors may be able to use our technologies to produce and market drugs in direct competition
with us and erode our competitive advantage. Some foreign countries lack rules and methods for defending intellectual property
rights and do not protect proprietary rights to the same extent as the United States. Many companies have had difficulty protecting
their proprietary rights in these foreign countries. We may not be able to prevent misappropriation of our proprietary rights.
We have received, and
are currently seeking, patent protection for numerous compounds and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products
by obtaining and defending patents. These risks and uncertainties include the following: patents that may be issued or licensed
may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage; our competitors, many
of which have substantially greater resources than us and many of which have made significant investments in competing technologies,
may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell
our potential products either in the United States or in international markets; there may be significant pressure on the United
States government and other international governmental bodies to limit the scope of patent protection both inside and outside the
United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns; countries
other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop, and market competing products.
Moreover, any patents
issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties
may also independently develop products similar to our products, duplicate our unpatented products or design around any patents
on products we develop. Additionally, extensive time is required for development, testing and regulatory review of a potential
product. While extensions of patent term due to regulatory delays may be available, it is possible that, before any of our product
candidates can be commercialized, any related patent, even with an extension, may expire or remain in force for only a short period
following commercialization, thereby reducing any advantages of the patent.
In addition, the United
States Patent and Trademark Office (the "PTO") and patent offices in other jurisdictions have often required that patent
applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only
the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges.
Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.
Our success depends
on our patents, patent applications that may be licensed exclusively to us and other patents to which we may obtain assignment
or licenses. We may not be aware, however, of all patents, published applications or published literature that may affect our business
either by blocking our ability to commercialize our product candidates, by preventing the patentability of our product candidates
to us or our licensors, or by covering the same or similar technologies that may invalidate our patents, limit the scope of our
future patent claims or adversely affect our ability to market our product candidates.
In addition to patents,
we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures
to protect our confidential and proprietary information. These measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive
advantage we may have. In addition, others may independently develop similar proprietary information or techniques or otherwise
gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent protection and
other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk
that such protections will prove inadequate.
We may be involved in lawsuits to
protect or enforce our patents, which could be expensive and time consuming.
The pharmaceutical
industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies
have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or
litigation arising out of patents and pending applications of our competitors, or additional interference proceedings declared
by the PTO to determine the priority of inventions. The defense and prosecution of intellectual property suits, PTO proceedings,
and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation
may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability,
scope, and validity of the proprietary rights of others. An adverse determination in litigation or interference proceedings to
which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict
or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might be settled
through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our
paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms
or at all.
Competitors may infringe
our patents, and we may file infringement claims to counter infringement or unauthorized use. This can be expensive, particularly
for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of
ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover its technology. An adverse determination of any litigation or defense proceedings could put one or
more of our patents at risk of being invalidated or interpreted narrowly.
Also, a third party
may assert that our patents are invalid and/or unenforceable. There are no unresolved communications, allegations, complaints or
threats of litigation related to the possibility that our patents are invalid or unenforceable. Any litigation or claims against
us, whether or not merited, may result in substantial costs, place a significant strain on our financial resources, divert the
attention of management and harm our reputation. An adverse decision in litigation could result in inadequate protection for our
product candidates and/or reduce the value of any license agreements we have with third parties.
Interference proceedings
brought before the U.S. Patent and Trademark Office may be necessary to determine priority of invention with respect to our patents
or patent applications. During an interference proceeding, it may be determined that we do not have priority of invention for one
or more aspects in our patents or patent applications and could result in the invalidation in part or whole of a patent or could
put a patent application at risk of not issuing. Even if successful, an interference proceeding may result in substantial costs
and distraction to our management.
Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation or interference proceedings,
there is a risk that some of our confidential information could be compromised by disclosure. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results
to be negative, the price of our common stock could be adversely affected.
If we infringe the rights of third
parties we could be prevented from selling products, forced to pay damages, and defend against litigation.
If our products, methods,
processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may
have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an infringing product
candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed in the patents held
by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether we win or lose, and
which could result in a substantial diversion of our financial and management resources.
If preclinical testing or clinical
trials for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development and commercialization
timelines.
We rely and expect
to continue to rely on third parties, including CROs and outside consultants, to conduct, supervise or monitor some or all aspects
of preclinical testing or clinical trials involving our product candidates. We have less control over the timing and other aspects
of these preclinical testing or clinical trials than if we performed the monitoring and supervision entirely on our own. Third
parties may not perform their responsibilities for our preclinical testing or clinical trials on our anticipated schedule or, for
clinical trials, consistent with a clinical trial protocol. Delays in preclinical and clinical testing could significantly increase
our product development costs and delay product commercialization. In addition, many of the factors that may cause, or lead to,
a delay in the clinical trials may also ultimately lead to denial of regulatory approval of a product candidate.
The commencement of
clinical trials can be delayed for a variety of reasons, including delays in:
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demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;
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reaching agreement on acceptable terms with prospective contract research organizations and trial sites;
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manufacturing sufficient quantities of a product candidate; and
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obtaining institutional review board approval to conduct a clinical trial at a prospective site.
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Once a clinical trial
has begun, it may be delayed, suspended or terminated by us or the FDA or other regulatory authorities due to a number of factors,
including:
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ongoing discussions with the FDA or other regulatory authorities regarding the scope or design of our clinical trials;
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failure to conduct clinical trials in accordance with regulatory requirements;
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lower than anticipated recruitment or retention rate of patients in clinical trials;
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inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition
of a clinical hold;
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lack of adequate funding to continue clinical trials;
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negative results of clinical trials; or
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If clinical trials
are unsuccessful, and we are not able to obtain regulatory approvals for our product candidates under development, we will not
be able to commercialize these products, and therefore may not be able to generate sufficient revenues to support our business.
We rely on third parties to conduct,
supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We rely on CROs and
clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities,
we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities.
Nevertheless, we will be responsible for ensuring that our clinical trials are conducted in accordance with the applicable protocol,
legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are
required to comply with the FDA’s current good clinical practices requirements, or cGCP, for conducting, recording and reporting
the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity
and confidentiality of clinical trial participants are protected. The FDA enforces these cGCPs through periodic inspections of
trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical
data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials
before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with
cGCPs. In addition, our clinical trials, including our Phase 2b/3 trial of TNX-102 SL in FM, will require a sufficiently large
number of test subjects to evaluate the safety and effectiveness of a product candidate. Accordingly, if our CROs fail to comply
with these regulations or fail to recruit a sufficient number of patients, our clinical trials may be delayed or we may be required
to repeat such clinical trials, which would delay the regulatory approval process.
Our CROs are not our
employees, and we are not able to control whether or not they devote sufficient time and resources to our clinical trials. These
CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting
clinical trials, or other drug development activities which could harm our competitive position. If our CROs do not successfully
carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical
data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other
reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for,
or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for such
product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
We also rely on other
third parties to store and distribute drug products for our clinical trials. Any performance failure on the part of our distributors
could delay clinical development or marketing approval of our product candidates or commercialization of our products, if approved,
producing additional losses and depriving us of potential product revenue.
We have never conducted a pivotal
clinical trial or submitted an NDA before, and may be unable to do so for TNX-102 SL and other product candidates we are developing.
If our BESTFIT trial
is successful, we then expect to conduct a Phase 3 confirmatory study in support of product registration. As these trials are intended
to provide evidence to support marketing approval by the FDA, they are considered pivotal trials. The conduct of pivotal clinical
trials and the submission of a successful NDA is a complicated process. Although members of our management team have extensive
industry experience, including in the development, clinical testing and commercialization of drug candidates, our company has never
conducted a pivotal clinical trial before, has limited experience in preparing, submitting and prosecuting regulatory filings,
and has not submitted an NDA before. Consequently, we may be unable to successfully and efficiently execute and complete these
planned clinical trials in a way that leads to NDA submission and approval of TNX-102 SL and other product candidates we are developing.
We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of
product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials would prevent or
delay commercialization of TNX-102 SL and other product candidates we are developing.
Our product candidates may cause
serious adverse events or undesirable side effects which may delay or prevent marketing approval, or, if approval is received,
require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.
Serious adverse events
or undesirable side effects from TNX-102 SL or any of our other product candidates could arise either during clinical development
or, if approved, after the approved product has been marketed. The results of future clinical trials, including TNX-102 SL, may
show that our product candidates cause serious adverse events or undesirable side effects, which could interrupt, delay or halt
clinical trials, resulting in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities.
If TNX-102 SL or any
of our other product candidates cause serious adverse events or undesirable side effects:
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regulatory authorities may impose a clinical hold which could result in substantial delays and adversely impact our ability
to continue development of the product;
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regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts
to physicians and pharmacies;
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we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling
of the product;
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we may be required to implement a risk minimization action plan, which could result in substantial cost increases and have
a negative impact on our ability to commercialize the product;
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we may be required to limit the patients who can receive the product;
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we may be subject to limitations on how we promote the product;
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sales of the product may decrease significantly;
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regulatory authorities may require us to take our approved product off the market;
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we may be subject to litigation or product liability claims; and
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our reputation may suffer.
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Any of these events
could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization
costs and expenses, which in turn could delay or prevent us from generating significant revenues from the sale of our products.
If we are unable to file for approval
under Section 505(b)(2) of the FDCA or if we are required to generate additional data related to safety and efficacy in order to
obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and commercialization timelines.
Our current plans for
filing NDAs for our product candidates include efforts to minimize the data we will be required to generate in order to obtain
marketing approval for our product candidates and therefore possibly obtain a shortened review period for the applications. We
held an End-of-Phase 2/Pre-Phase 3 meeting with the FDA in February 2013 to discuss the development of our lead product candidate,
TNX-102 SL, in FM. Although our interactions with the FDA have encouraged our efforts to continue to develop TNX-102 SL for FM,
there is no assurance that we will satisfy the FDA’s requirements for approval in this indication. We have not come to any
agreement with the FDA as to the nature and extent of studies we may be required to conduct in order to achieve approval of TNX-102
SL in PTSD. The timeline for filing and review of our NDAs for TNX-102 SL is based on our plan to submit those NDAs under Section
505(b)(2) of the FDCA, wherein we will rely in part on data in the public domain or elsewhere. We have not yet filed an NDA under
Section 505(b)(2) for any of our lead product candidates. Depending on the data that may be required by the FDA for approval, some
of the data may be related to products already approved by the FDA. If the data relied upon is related to products already approved
by the FDA and covered by third-party patents we would be required to certify that we do not infringe the listed patents or that
such patents are invalid or unenforceable. As a result of the certification, the third-party would have 45 days from notification
of our certification to initiate an action against us. In the event that an action is brought in response to such a certification,
the approval of our NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of
our product candidates under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully
challenge the applicability of those patents to our product candidates. Alternatively, we may elect to generate sufficient additional
clinical data so that we no longer rely on data which triggers a potential stay of the approval of our product candidates. Even
if no exclusivity periods apply to our applications under Section 505(b)(2), the FDA has broad discretion to require us to generate
additional data on the safety and efficacy of our product candidates to supplement third-party data on which we may be permitted
to rely. In either event, we could be required, before obtaining marketing approval for any of our product candidates, to conduct
substantial new research and development activities beyond those we currently plan to engage in order to obtain approval of our
product candidates. Such additional new research and development activities would be costly and time consuming.
We may not be able
to obtain shortened review of our applications for TNX-102 SL, and the FDA may not agree that any of our products qualify for marketing
approval. If CBP-containing products are withdrawn from the market by the FDA for any reason, we may not be able to reference such
products to support a 505(b)(2) NDA for TNX-102 SL, and we may need to fulfill the more extensive requirements of Section 505(b)(1).
If we are required to generate additional data to support approval, we may be unable to meet our anticipated development and commercialization
timelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain marketing
approval of our product candidates.
We will need to expand our operations
and increase the size of our company, and we may experience difficulties in managing growth.
As we advance our product
candidates through preclinical studies and clinical trials and develop new product candidates, we will need to increase our product
development, scientific and administrative headcount to manage these programs. In addition, to meet our obligations as a public
company, we will need to increase our general and administrative capabilities. Our management, personnel and systems currently
in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and various projects
requires that we:
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successfully attract and recruit new employees with the expertise and experience we will require;
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manage our clinical programs effectively, which we anticipate being conducted at numerous clinical sites;
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develop a marketing, distribution and sales infrastructure if we seek to market our products directly; and
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continue to improve our operational, manufacturing, financial and management controls, reporting systems and procedures.
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If we are unable to
successfully manage this growth and increased complexity of operations, our business may be adversely affected.
Our executive officers and other
key personnel are critical to our business, and our future success depends on our ability to retain them.
Our success depends
to a significant extent upon the continued services of Dr. Seth Lederman, our President and Chief Executive Officer. Dr. Lederman
has overseen Tonix Sub since inception and provides leadership for our growth and operations strategy as well as being an inventor
on many of our patents. Loss of the services of Dr. Lederman would have a material adverse effect on our growth, revenues, and
prospective business. We have key-man insurance on the lives of Dr. Lederman, Dr. Leland Gershell, our Chief Financial Officer,
and Dr. Bruce Daugherty, our Chief Scientific Officer. We are also highly dependent on our directors and scientific team. We are
not aware of any present intention of any of our key personnel to leave our company or to retire. While we have employment agreements
with all our executives, they may terminate their employment at any time upon 30 days notice. The loss of any of our key personnel,
or the inability to attract and retain qualified personnel, may significantly delay or prevent the achievement of our research,
development or business objectives and could materially adversely affect our business, financial condition and results of operations.
Any employment agreement
we enter into will not ensure the retention of the employee who is a party to the agreement. In addition, we have only limited
ability to prevent former employees from competing with us. Furthermore, our future success will also depend in part on the continued
service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We experience
intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development
of our business. Moreover, our work force is located in the "Pharmaceutical Corridor" that spans New York, New Jersey
and Pennsylvania, as well as in the San Francisco Bay Area, where competition for personnel with the scientific and technical skills
that we seek is extremely high and is likely to remain high. Because of this competition, our compensation costs may increase significantly.
If we are unable to hire additional
qualified personnel, our ability to grow our business may be harmed.
Over time we will need
to hire additional qualified personnel with expertise in drug development, product registration, clinical and non-clinical research,
quality compliance, government regulation, formulation and manufacturing, financial matters and sales and marketing. We compete
for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition
for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success.
We rely on third parties to manufacture
the compounds used in our trials, and we intend to rely on them for the manufacture of any approved products for commercial sale.
If these third parties do not manufacture our product candidates in sufficient quantities and at an acceptable cost, clinical development
and commercialization of our product candidates could be delayed, prevented or impaired.
We have no manufacturing
facilities, and we have no experience in the clinical or commercial-scale manufacture of drugs or in designing drug manufacturing
processes. We intend to rely on CMOs to manufacture some or all of our product candidates in clinical trials and our products that
reach commercialization. Completion of our clinical trials and commercialization of our product candidates requires the manufacture
of a sufficient supply of our product candidates. We have contracted with outside sources to manufacture our development compounds,
including TNX-102 SL. If, for any reason, we become unable to rely on our current sources for the manufacture of our product candidates,
either for clinical trials or, at some future date, for commercial quantities, then we would need to identify and contract with
additional or replacement third-party manufacturers to manufacture compounds for pre-clinical, clinical, and commercial purposes.
Although we are in discussions with other manufacturers we have identified as potential alternative CMOs of TNX-102 SL, we may
not be successful in negotiating acceptable terms with any of them.
We believe that there
are a variety of manufacturers that we may be able to retain to produce these products. However, once we retain a manufacturing
source, if our manufacturers do not perform in a satisfactory manner, we may not be able to develop or commercialize potential
products as planned. Certain specialized manufacturers are expected to provide us with modified and unmodified pharmaceutical compounds,
including finished products, for use in our preclinical and clinical studies. Some of these materials are available from only one
supplier or vendor. Any interruption in or termination of service by such sole source suppliers could result in a delay or interruption
in manufacturing until we locate an alternative source of supply. Any delay or interruption in manufacturing operations (or failure
to locate a suitable replacement for such suppliers) could materially adversely affect our business, prospects, or results of operations.
We do not have any short-term or long-term manufacturing agreements with many of these manufacturers. If we fail to contract for
manufacturing on acceptable terms or if third-party manufacturers do not perform as we expect, our development programs could be
materially adversely affected. This may result in delays in filing for and receiving FDA approval for one or more of our products.
Any such delays could cause our prospects to suffer significantly.
Failure by our third-party manufacturers
to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates could delay or prevent the
completion of clinical trials, the approval of any product candidates or the commercialization of our products.
Such third-party manufacturers
must be inspected by FDA for current Good Manufacturing Practice, or cGMP, compliance before they can produce commercial product.
We may be in competition with other companies for access to these manufacturers' facilities and may be subject to delays in manufacture
if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party
manufacturing capacity, the development and sales of our products and our financial performance may be materially affected.
Manufacturers are obligated
to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish and follow
cGMP requirements and to document their adherence to such practices may lead to significant delays in the availability of material
for clinical trials, may delay or prevent filing or approval of marketing applications for our products, and may cause delays or
interruptions in the availability of our products for commercial distribution following FDA approval. This could result in higher
costs to us or deprive us of potential product revenues.
Complying with cGMP
and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality
control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing
facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly
delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action
and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition,
and results of operations may be materially harmed.
Drug manufacturers
are subject to ongoing periodic unannounced inspections by the FDA, the Drug Enforcement Agency and corresponding state and foreign
agencies to ensure strict compliance with cGMP requirements and other requirements under Federal drug laws, other government regulations
and corresponding foreign standards. If we or our third-party manufacturers fail to comply with applicable regulations, sanctions
could be imposed on us, including fines, injunctions, civil penalties, failure by the government to grant marketing approval of
drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.
Corporate and academic collaborators
may take actions to delay, prevent, or undermine the success of our products.
Our operating and financial
strategy for the development, clinical testing, manufacture, and commercialization of drug candidates is heavily dependent on our
entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy
assumes that we will successfully establish these collaborations, or similar relationships; however, there can be no assurance
that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations
may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms,
or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There
can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue
or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we
may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to
develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead
to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.
Data provided by collaborators and
others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.
We rely on third-party
vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical
trials, and our business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and
results of operations could be materially adversely affected.
Our product candidates are novel
and still in development.
We are a pharmaceutical
company focused on the development of drug product candidates, all of which are still in development. Our drug development methods
may not lead to commercially viable drugs for any of several reasons. For example, we may fail to identify appropriate targets
or compounds, our drug candidates may fail to be safe and effective in clinical trials, or we may have inadequate financial or
other resources to pursue development efforts for our drug candidates. Our drug candidates will require significant additional
development, clinical trials, regulatory clearances and additional investment by us or our collaborators before they can be commercialized.
Successful development of our products
is uncertain.
Our development of
current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical
products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development,
clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability
to manufacture on its own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance.
Because of these risks,
our research and development efforts may not result in any commercially viable products. If a significant portion of these development
efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercially
successfully, our business, financial condition, and results of operations may be materially harmed.
Clinical trials required for our
product candidates are expensive and time-consuming, and their outcome is uncertain.
In order to obtain
FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements,
we must conduct "adequate and well controlled" clinical trials. Conducting clinical trials is a lengthy, time-consuming,
and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of
the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly
conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical
trials may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of qualified materials
under cGMP, for use in clinical trials; slower than expected rates of patient recruitment; failure to recruit a sufficient number
of patients; modification of clinical trial protocols; changes in regulatory requirements for clinical trials; the lack of effectiveness
during clinical trials; the emergence of unforeseen safety issues; delays, suspension, or termination of the clinical trials due
to the institutional review board responsible for overseeing the study at a particular study site; and government or regulatory
delays or "clinical holds" requiring suspension or termination of the trials.
The results from early
clinical trials are not necessarily predictive of results obtained in later clinical trials. Accordingly, even if we obtain positive
results from early clinical trials, we may not achieve the same success in future clinical trials. Clinical trials may not demonstrate
sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates.
Our clinical trials
may be conducted in patients with CNS conditions, and in some cases, our products are expected to be used in combination with approved
therapies that themselves have significant adverse event profiles. During the course of treatment, these patients could suffer
adverse medical events or die for reasons that may or may not be related to our products. We cannot ensure that safety issues will
not arise with respect to our products in clinical development.
The failure of clinical
trials to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate
and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product
candidates. Any delay in, or termination of, our clinical trials would delay the filing of our NDAs with the FDA and, ultimately,
our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical
trials could materially harm our business, financial condition, and results of operations.
We are subject to extensive and costly
government regulation.
Product candidates
employing our technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA,
the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services, the
United States Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the
research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling,
storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products. The FDA regulates
small molecule chemical entities as drugs, subject to an NDA under the FDCA. If products employing our technologies are marketed
abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval
for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.
Government regulation
substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review
and approval process, which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive,
and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct clinical trials. We or our
collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the
products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive preclinical
and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product's
safety and efficacy, and in the case of biologics also potency and purity, for each intended use. The development and approval
process takes many years, requires substantial resources, and may never lead to the approval of a product.
Even if we are able
to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may
otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance,
and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example,
manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may
be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a
previously unknown safety issue.
If we, our collaborators,
or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications;
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved
applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial
suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
We do not have, and may never obtain,
the regulatory approvals we need to market our product candidates.
Following completion
of clinical trials, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA in order
to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may
require additional testing or information, may require that the product labeling be modified, may impose post-approval study or
reporting requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance
goals for review of NDAs-six months for priority applications and ten months for standard applications. However, the FDA is not
required to complete its review within these time periods. The timing of final FDA review and action varies greatly, but can take
years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States
may commence only when an NDA is approved.
To date, we have not
applied for or received the regulatory approvals required for the commercial sale of any of our products in the United States or
in any foreign jurisdiction. None of our product candidates has been determined to be safe and effective, and we have not submitted
an NDA to the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.
It is possible that
none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory
approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, may
impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain,
and/or may adversely affect our receipt of revenues or royalties.
Even if approved, our products will
be subject to extensive post-approval regulation.
Once a product is approved,
numerous post-approval requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA
monitoring and reporting obligations, including obligations to monitor and report adverse events and instances of the failure of
a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and report on ongoing clinical trials.
Depending on the circumstances,
failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products,
total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information
regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.
Even if we obtain regulatory approval
to market our product candidates, our product candidates may not be accepted by the market.
Even if the FDA approves
one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians and patients would
like to use our products, our products may not gain market acceptance among healthcare payors such as managed care formularies,
insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products will depend upon a
number of factors including: perceptions by members of the health care community, including physicians, about the safety and effectiveness
of our drug or device product; cost-effectiveness of our product relative to competing products; availability of reimbursement
for our product from government or other healthcare payers; and effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.
The degree of market
acceptance of any pharmaceutical product that we develop will depend on a number of factors, including:
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the safety and effectiveness of our products, including any significant potential side effects (including drowsiness and dry
mouth), as compared to alternative products or treatment methods;
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the timing of market entry as compared to competitive products;
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flat or declining use of off-label muscle-relaxant products for fibromyalgia prior to the launch of TNX-102 SL;
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the rate of adoption of our products by doctors and nurses;
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product labeling or product insert required by the FDA for each of our products;
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reimbursement policies of government and third-party payors;
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effectiveness of our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative
partners, if any; and
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unfavorable publicity concerning our products or any similar products.
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Our product candidates,
if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently under development
by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any of our product candidates.
If our products do not achieve market acceptance, we will not be able to generate significant revenues or become profitable.
Because we expect sales
of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,
the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.
If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates.
Our strategy with our
lead product candidates is to control, directly or through contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.
Sales of pharmaceutical
products largely depend on the reimbursement of patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These
third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments
for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our
products or enable our collaborators to sell them at profitable prices.
Our business strategy
might involve out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical
products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships;
that such relationships, if established, will be successful; or that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such
third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will
have to establish and rely on our own in-house capabilities.
We, as a company, have
no experience in marketing or selling pharmaceutical products and currently have no sales, marketing, or distribution infrastructure.
To market any of our products directly, we would need to develop a marketing, sales, and distribution force that both has technical
expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability
would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition
for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary
to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales,
or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish
are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships
with third parties.
In the event that we are successful
in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement
for our products from third-party payors.
Our ability to commercialize
pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:
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government and health administration authorities;
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private health insurers; and
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other third party payors, including Medicare.
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We cannot predict the
availability of reimbursement for health care products to be approved in the future. Third-party payors, including Medicare, are
challenging the prices charged for medical products and services. Government and other third-party payors increasingly are limiting
both coverage and the level of reimbursement for new drugs. Third-party insurance coverage may not be available to patients for
any of our products.
The continuing efforts
of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government
and other third-party payors do not provide adequate coverage and reimbursement for any prescription product we bring to market,
doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement.
In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.
Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives
could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
If we obtain approval to commercialize
any approved products outside of the United States, a variety of risks associated with international operations could materially
adversely affect our business.
If TNX-102 SL or any
of our other product candidates are approved for commercialization outside of the United States, we intend to enter into agreements
with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject
to additional risks related to entering into international business relationships, including:
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different regulatory requirements for drug approvals;
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reduced protection for intellectual property rights, including trade secret and patent rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations
incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes,
hurricanes, floods and fires; and
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difficulty in importing and exporting clinical trial materials and study samples.
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We face the risk of product liability
claims and may not be able to obtain insurance.
Our business exposes
us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our
collaborators' drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical
trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability to
obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. While we currently
carry clinical trial insurance and product liability insurance, we cannot predict all of the possible harms or side effects that
may result and, therefore, the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities
we might incur. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval
for our drug candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for
any products approved for marketing. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential
product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business
and financial position. If we are sued for any injury allegedly caused by our or our collaborators' products, our liability could
exceed our total assets and our ability to pay the liability. A product liability claim or series of claims brought against us
would decrease our cash and could cause our stock price to fall.
We use hazardous chemicals in our
business. Potential claims relating to improper handling, storage or disposal of these chemicals could affect us and be time consuming
and costly.
Our research and development
processes and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. These
hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also produce hazardous
waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous
materials. While we attempt to comply with all environmental laws and regulations, including those relating to the outsourcing
of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination from or discharge
of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for any resulting damages
and any liability could materially adversely affect our business, financial condition and results of operations.
Compliance with environmental
laws and regulations may be expensive. Current or future environmental regulations may impair our research, development or production
efforts. We might have to pay civil damages in the event of an improper or unauthorized release of, or exposure of individuals
to, hazardous materials. We are not insured against these environmental risks.
If we enter into collaborations
with third parties, they might also work with hazardous materials in connection with our collaborations. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.
In addition, the federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business,
financial condition and results of operations.
Our insurance policies are expensive
and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities.
We carry insurance
for most categories of risk that our business may encounter, however, we may not have adequate levels of coverage. We currently
maintain general liability, clinical trial, key man, property, workers’ compensation, products liability and directors’
and officers’ insurance, along with an umbrella policy, which collectively costs approximately $200,000 per annum. We cannot
provide any assurances that we will be able to maintain existing insurance at current or adequate levels of coverage. Any significant
uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.
If we retain collaborative partners
and our partners do not satisfy their obligations, we will be unable to develop our partnered product candidates.
In the event we enter
into any collaborative agreements, we may not have day-to-day control over the activities of our collaborative partners with respect
to any of these product candidates. Any collaborative partner may not fulfill its obligations under these agreements. If a collaborative
partner fails to fulfill its obligations under an agreement with us, we may be unable to assume the development of the products
covered by that agreement or enter into alternative arrangements with a third party. In addition, we may encounter delays in the
commercialization of the product candidate that is the subject of the agreement. Accordingly, our ability to receive any revenue
from the product candidates covered by these agreements will be dependent on the efforts of our collaborative partner. We could
also become involved in disputes with a collaborative partner, which could lead to delays in or termination of our development
and commercialization programs and time-consuming and expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborators’ commitment to us and reduce the resources they devote to developing and commercializing our products.
Conflicts or disputes with our collaborators, and competition from them, could harm our relationships with our other collaborators,
restrict our ability to enter future collaboration agreements and delay the research, development or commercialization of our product
candidates. If any collaborative partner terminates or breaches its agreement, or otherwise fails to complete its obligations in
a timely manner, our chances of successfully developing or commercializing these product candidates would be materially and adversely
affected. We may not be able to enter into collaborative agreements with partners on terms favorable to us, or at all. Our inability
to enter into collaborative arrangements with collaborative partners, or our failure to maintain such arrangements, would limit
the number of product candidates that we could develop and ultimately, decrease our sources of any future revenues.
RISKS RELATED TO OUR STOCK
Our failure to meet the continued
listing requirements of The NASDAQ Capital Market could result in a de-listing of our common stock.
If we fail to satisfy
the continued listing requirements of The NASDAQ Capital Market, such as the corporate governance requirements or the minimum closing
bid price requirement, NASDAQ may take steps to de-list our common stock. Such a de-listing would likely have a negative effect
on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In
the event of a de-listing, we would take actions to restore our compliance with NASDAQ’s listing requirements, but we can
provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market
price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ minimum bid price requirement
or prevent future non-compliance with NASDAQ’s listing requirements.
The market price for our common stock
may be volatile, and your investment in our common stock could decline in value.
The stock market in
general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and pharmaceutical
companies, particularly companies like ours without product revenues and earnings, have been highly volatile and may continue to
be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular companies.
The following factors, in addition to other risk factors described in this section, may have a significant impact on the market
price of our common stock:
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announcements of technological innovations or new products by us or our competitors;
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announcement of FDA approval or disapproval of our products or other product-related actions;
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developments involving our discovery efforts and clinical trials;
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developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or
other litigation against us or our potential licensees;
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developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;
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announcements concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;
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public concerns as to the safety or efficacy of our products or our competitors’ products;
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changes in government regulation of the pharmaceutical or medical industry;
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changes in the reimbursement policies of third party insurance companies or government agencies;
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actual or anticipated fluctuations in our operating results;
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changes in financial estimates or recommendations by securities analysts;
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developments involving corporate collaborators, if any;
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changes in accounting principles; and
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the loss of any of our key scientific or management personnel.
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In the past, securities
class action litigation has often been brought against companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s
attention and resources, which could adversely affect our business, operating results and financial condition.
We do not anticipate paying dividends
on our common stock and, accordingly, shareholders must rely on stock appreciation for any return on their investment.
We have never declared
or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is
subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial
condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment
in our company if you require dividend income from your investment in our company. The success of your investment will likely depend
entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no
guarantee that our common stock will appreciate in value.
We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline.
Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate.
Due to the possibility
of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
The rights of the holders of common stock may be impaired
by the potential issuance of preferred stock.
Our articles of incorporation
give our board of directors the right to create new series of preferred stock. As a result, the board of directors may, without
stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely
affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right
to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The
possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention
to issue any shares of preferred stock or to create a series of preferred stock, we may issue such shares in the future.
Efforts to comply with recently enacted
changes in securities laws and regulations will increase our costs and require additional management resources, and we still may
fail to comply.
As directed by Section
404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on their
internal controls over financial reporting in their annual reports on Form 10-K. Effective January 1, 2015, we will no longer be
a smaller reporting company. As a result, for the first time, the independent registered public accounting firm auditing our financial
statements will be required to attest to the effectiveness of our internal controls over financial reporting for the year ending
December 31, 2014. If we are unable to conclude that we have effective internal controls over financial reporting or if our independent
registered public accounting firm is unable to provide us with a report as to the effectiveness of our internal controls over financial
reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in
the value of our securities.
Because certain of our stockholders
control a significant number of shares of our common stock, they may have effective control over actions requiring stockholder
approval.
As of July 31, 2014,
our directors, executive officers and principal stockholders, and their respective affiliates, beneficially own approximately 20.2%
of our outstanding shares of common stock. As a result, these stockholders, acting together, would have the ability to control
the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation
or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would have the ability to
control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of
our common stock by:
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delaying, deferring or preventing a change in corporate control;
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impeding a merger, consolidation, takeover or other business combination involving us; or
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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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If securities or industry analysts
do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our
stock price and trading volume could decline.
The trading market
for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our
business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases,
if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these
analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to decline.
A sale of a substantial number of
shares of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the
future.
Finance transactions
resulting in a large amount of newly issued shares that become readily tradable, or other events that cause current stockholders
to sell shares, could place downward pressure on the trading price of our stock. In addition, the lack of a robust resale market
may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time
to mitigate any adverse impact of the sales on the market price of our stock.
If our stockholders
sell, or the market perceives that our stockholders intend to sell for various reasons, including the ending of restriction on
resale, substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding
options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of our common stock
may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable
or appropriate. We may become involved in securities class action litigation that could divert management’s attention and
harm our business.
Our stockholders may experience significant
dilution as a result of the sale of securities offered by this prospectus.
To the extent that we
raise additional funds through the sale of securities offered by this prospectus, our stockholders may experience significant dilution.
Sale of additional equity and/or convertible securities at prices below certain levels will trigger anti-dilution provisions with
respect to certain securities we have previously sold. If additional funds are raised through a credit facility or the issuance
of preferred stock, lenders under the credit facility or holders of preferred stock would likely have rights that are senior to
the rights of holders of our common stock, and any credit facility or additional securities could contain covenants that would
restrict our operations.
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains
forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingency,
goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are
based on our current expectations and projections about future events and they are subject to risks and uncertainties known and
unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In some cases, you
can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,”
“estimates,” “plans,” “believes,” “seeks,” “may,” “should”,
“could” or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates,
assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking
statements are qualified in their entirety by reference to the factors discussed throughout this prospectus.
You should read this
prospectus and any accompanying prospectus supplement and the documents that we reference herein and therein and have filed as
exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual
future results may be materially different from what we expect. You should assume that the information appearing in this
prospectus and any accompanying prospectus supplement is accurate as of the date on the front cover of this prospectus or such
prospectus supplement only. Because the risk factors referred to above, as well as the risk factors referred to on page 4
of this prospectus and incorporated herein by reference, could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking
statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict
which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. We qualify all of the information presented in this prospectus and any accompanying prospectus supplement, and
particularly our forward-looking statements, by these cautionary statements.
USE OF PROCEEDS
Except as otherwise
provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities offered by
this prospectus for general corporate purposes, which may include working capital, capital expenditures, research and development
expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, the
financing of possible acquisitions or business expansions, and the repayment, refinancing, redemption or repurchase of future indebtedness
or capital stock.
The intended application
of proceeds from the sale of any particular offering of securities using this prospectus will be described in the accompanying
prospectus supplement relating to such offering. The precise amount and timing of the application of these proceeds will depend
on our funding requirements and the availability and costs of other funds.
THE SECURITIES WE MAY OFFER
The descriptions of
the securities contained in this prospectus, together with the applicable prospectus supplements, summarize all the material terms
and provisions of the various types of securities that we may offer. We will describe in the applicable prospectus supplement relating
to any securities the particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable
prospectus supplement, the terms of the securities may differ from the terms we have summarized below. We will also include in
the prospectus supplement information, where applicable, about material United States federal income tax considerations relating
to the securities, and the securities exchange, if any, on which the securities will be listed.
We may sell from time
to time, in one or more offerings:
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shares of our common stock;
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shares of our preferred stock;
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warrants to purchase any of the securities listed above; and/or
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units consisting of any of the securities listed above.
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The terms of any securities
we offer will be determined at the time of sale. We may issue securities that are exchangeable for or convertible into common stock
or any of the other securities that may be sold under this prospectus. When particular securities are offered, a supplement to
this prospectus will be filed with the SEC, which will describe the terms of the offering and sale of the offered securities.
DESCRIPTION OF CAPITAL STOCK
The
following is a summary of all material characteristics of our capital stock as set forth in our articles of incorporation and bylaws.
The summary does not purport to be complete and is qualified in its entirety by reference to our articles of incorporation and
bylaws, and to the provisions of the Nevada Business Corporation Act of the State of Nevada, as amended.
Common Stock
We are authorized to
issue up to 150,000,000 shares of our common stock, par value $0.001 per share. As of July 31, 2014, there were 10,590,106 shares
of our common stock issued and outstanding. The outstanding shares of our common stock are validly issued, fully paid and nonassessable.
Holders of our common
stock are entitled to one vote for each share on all matters submitted to a shareholder vote. Holders of our common stock do not
have cumulative voting rights. Therefore, holders of a majority of the shares of our common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of shareholders.
A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such
as liquidation, merger or an amendment to our articles of incorporation.
Holders of our common
stock are entitled to share in all dividends that our Board of Directors, in its discretion, declares from legally available funds.
In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in
all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over
our common stock. Our common stock has no pre-emptive, subscription or conversion rights and there are no redemption provisions
applicable to our common stock.
Preferred Stock
We are authorized to
issue up to 5,000,000 shares of preferred stock, par value $0.001 per share, none of which are currently outstanding. The shares
of preferred stock may be issued in series, and shall have such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted from time to
time by the board of directors. The board of directors is expressly vested with the authority to determine and fix in the resolution
or resolutions providing for the issuances of preferred stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such series to the full extent now or hereafter permitted by the laws
of the State of Nevada.
Transfer Agent and Registrar
The Transfer Agent
and Registrar for our common stock is vStock Transfer, LLC, 77 Spruce Street, Suite 201, Cedarhurst, NY 11516.
DESCRIPTION OF WARRANTS
The following description,
together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms
and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates.
While the terms summarized below will apply generally to any warrants that we may offer, we will describe the particular terms
of any series of warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement,
the terms of any warrants offered under that prospectus supplement may differ from the terms described below. If there are
differences between that prospectus supplement and this prospectus, the prospectus supplement will control. Thus, the statements
we make in this section may not apply to a particular series of warrants. Specific warrant agreements will contain additional
important terms and provisions and will be incorporated by reference as an exhibit to the registration statement which includes
this prospectus.
General
We may issue warrants
for the purchase of common stock and/or preferred stock in one or more series. We may issue warrants independently or together
with common stock and/or preferred stock, and the warrants may be attached to or separate from these securities.
We will evidence each
series of warrants by warrant certificates that we may issue under a separate agreement. We may enter into the warrant agreement
with a warrant agent. Each warrant agent may be a bank that we select which has its principal office in the United States and a
combined capital and surplus of at least $50,000,000. We may also choose to act as out own warrant agent. We will indicate
the name and address of any such warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
We will describe in
the applicable prospectus supplement the terms of the series of warrants, including:
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the offering price and aggregate number of warrants offered;
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the currency for which the warrants may be purchased;
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if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued
with each such security or each principal amount of such security;
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if applicable, the date on and after which the warrants and the related securities will be separately transferable;
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in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock,
as the case may be, purchasable upon the exercise of one warrant and the price at which these shares may be purchased upon such
exercise;
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the warrant agreement under which the warrants will be issued;
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the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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anti-dilution provisions of the warrants, if any;
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the terms of any rights to redeem or call the warrants;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the dates on which the right to exercise the warrants will commence and expire or, if the warrants are not continuously exercisable
during that period, the specific date or dates on which the warrants will be exercisable;
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the manner in which the warrant agreement and warrants may be modified;
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the identities of the warrant agent and any calculation or other agent for the warrants;
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federal income tax consequences of holding or exercising the warrants;
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the terms of the securities issuable upon exercise of the warrants;
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any securities exchange or quotation system on which the warrants or any securities deliverable upon exercise of the warrants
may be listed; and
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any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before exercising their
warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including
in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon
our liquidation, dissolution or winding up or to exercise voting rights, if any.
Exercise of Warrants
Each warrant will entitle
the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe
in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants
may exercise the warrants at any time up to 5:00 p.m. Eastern Time on the expiration date that we set forth in the applicable
prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders of the warrants
may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified
information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant certificate, and in the applicable prospectus supplement,
the information that the holder of the warrant will be required to deliver to the warrant agent.
Until the warrant is
properly exercised, no holder of any warrant will be entitled to any rights of a holder of the securities purchasable upon exercise
of the warrant.
Upon receipt of the
required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue
a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders
of the warrants may surrender securities as all or part of the exercise price for warrants.
Enforceability of Rights By Holders
of Warrants
Any warrant agent will
act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or
trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants.
A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal
action its right to exercise, and receive the securities purchasable upon exercise of, its warrants in accordance with their terms.
Warrant Agreement Will Not Be Qualified
Under Trust Indenture Act
No warrant agreement
will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Governing Law
Each warrant agreement
and any warrants issued under the warrant agreements will be governed by New York law.
Calculation Agent
Calculations relating
to warrants may be made by a calculation agent, an institution that we appoint as our agent for this purpose. The prospectus
supplement for a particular warrant will name the institution that we have appointed to act as the calculation agent for that warrant
as of the original issue date for that warrant. We may appoint a different institution to serve as calculation agent from time
to time after the original issue date without the consent or notification of the holders.
The calculation agent’s
determination of any amount of money payable or securities deliverable with respect to a warrant will be final and binding in the
absence of manifest error.
DESCRIPTION OF UNITS
We may issue units
comprised of one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that
the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights
and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities
included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
The applicable prospectus
supplement will describe:
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the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
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any unit agreement under which the units will be issued;
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any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the
units; and
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whether the units will be issued in fully registered or global form.
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The applicable prospectus
supplement will describe the terms of any units. The preceding description and any description of units in the applicable prospectus
supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to the unit agreement
and, if applicable, collateral arrangements and depositary arrangements relating to such units.
PLAN OF DISTRIBUTION
We may sell the securities
being offered pursuant to this prospectus through underwriters or dealers, through agents, or directly to one or more purchasers
or through a combination of these methods. The applicable prospectus supplement will describe the terms of the offering of
the securities, including:
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the name or names of any underwriters, if any, and if required, any dealers or agents;
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the purchase price of the securities and the proceeds we will receive from the sale;
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any underwriting discounts and other items constituting underwriters’ compensation;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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We may distribute the
securities from time to time in one or more transactions at:
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a fixed price or prices, which may be changed;
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market prices prevailing at the time of sale;
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prices related to such prevailing market prices; or
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Only underwriters named
in the prospectus supplement are underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in an offering, we will execute an underwriting agreement with such underwriters and will specify the name
of each underwriter and the terms of the transaction (including any underwriting discounts and other terms constituting compensation
of the underwriters and any dealers) in a prospectus supplement. The securities may be offered to
the public either through underwriting syndicates represented by managing underwriters or
directly by one or more investment banking firms or others, as designated. If an underwriting syndicate is used, the managing underwriter(s) will
be specified on the cover of the prospectus supplement. If underwriters are used in the sale, the offered securities will be acquired
by the underwriters for their own accounts and may be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined at the time of sale. Any public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Unless otherwise set forth
in the prospectus supplement, the obligations of the underwriters to purchase the offered securities will be subject to conditions
precedent and the underwriters will be obligated to purchase all of the offered securities if any are purchased.
We may grant to the
underwriters options to purchase additional securities to cover over-allotments, if any, at the public offering price, with additional
underwriting commissions or discounts, as may be set forth in a related prospectus supplement. The terms of any over-allotment
option will be set forth in the prospectus supplement for those securities.
If we use a dealer
in the sale of the securities being offered pursuant to this prospectus or any prospectus supplement, we will sell the securities
to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by
the dealer at the time of resale. The names of the dealers and the terms of the transaction will be specified in a prospectus
supplement.
We may sell the securities
directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities
and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states
otherwise, any agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents
or underwriters to solicit offers by institutional investors to purchase securities from us at the public offering price set forth
in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the
future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts
in the prospectus supplement.
In connection with
the sale of the securities, underwriters, dealers or agents may receive compensation from us or from purchasers of the securities
for whom they act as agents in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through
dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters
or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution
of the securities, and any institutional investors or others that purchase securities directly and then resell the securities,
may be deemed to be underwriters, and any discounts or commissions received by them from us and any profit on the resale of the
securities by them may be deemed to be underwriting discounts and commissions under the Securities Act.
We may provide agents
and underwriters with indemnification against particular civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make with respect to such liabilities. Agents and underwriters
may engage in transactions with, or perform services for, us in the ordinary course of business.
In addition, we may
enter into derivative transactions with third parties (including the writing of options), or sell securities not covered by this
prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection
with such a transaction, the third parties may, pursuant to this prospectus and the applicable prospectus supplement, sell securities
covered by this prospectus and the applicable prospectus supplement. If so, the third party may use securities borrowed from us
or others to settle such sales and may use securities received from us to close out any related short positions. We may also loan
or pledge securities covered by this prospectus and the applicable prospectus supplement to third parties, who may sell the loaned
securities or, in an event of default in the case of a pledge, sell the pledged securities pursuant to this prospectus and the
applicable prospectus supplement. The third party in such sale transactions will be an underwriter and will be identified in the
applicable prospectus supplement or in a post-effective amendment.
To facilitate an offering
of a series of securities, persons participating in the offering may engage in transactions that stabilize, maintain, or otherwise
affect the market price of the securities. This may include over-allotments or short sales of the securities, which involves the
sale by persons participating in the offering of more securities than have been sold to them by us. In those circumstances, such
persons would cover such over-allotments or short positions by purchasing in the open market or by exercising the over-allotment
option granted to those persons. In addition, those persons may stabilize or maintain the price of the securities by bidding for
or purchasing securities in the open market or by imposing penalty bids, whereby selling concessions allowed to underwriters or
dealers participating in any such offering may be reclaimed if securities sold by them are repurchased in connection with stabilization
transactions. The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time. We make
no representation or prediction as to the direction or magnitude of any effect that the transactions described above, if implemented,
may have on the price of our securities.
Any common stock sold
pursuant to a prospectus supplement will be eligible for quotation and trading on The NASDAQ Capital Market. Any underwriters to
whom securities are sold by us for public offering and sale may make a market in the securities, but such underwriters will not
be obligated to do so and may discontinue any market making at any time without notice.
In order to comply
with the securities laws of some states, if applicable, the securities offered pursuant to this prospectus will be sold in those
states only through registered or licensed brokers or dealers. In addition, in some states securities may not be sold unless they
have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and complied with.
LEGAL MATTERS
The validity of the
issuance of the securities offered hereby will be passed upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
The consolidated financial
statements of Tonix Pharmaceuticals Holding Corp. appearing in Tonix Pharmaceuticals Holding Corp.’s Annual Report (Form
10-K) for the year ended December 31, 2013, have been audited by EisnerAmper LLP, independent registered public accounting firm,
as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon such report given on the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes
a part of a registration statement on Form S-3 filed under the Securities Act. As permitted by the SEC’s rules,
this prospectus and any prospectus supplement, which form a part of the registration statement, do not contain all the information
that is included in the registration statement. You will find additional information about us in the registration statement.
Any statements made in this prospectus or any prospectus supplement concerning legal documents are not necessarily complete and
you should read the documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more
complete understanding of the document or matter.
We file annual, quarterly
and current reports, proxy statements and other information with the SEC. You may read, without charge, and copy the documents
we file at the SEC’s public reference rooms in Washington, D.C. at 100 F Street, NE, Room 1580, Washington, DC 20549.
You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public
at no cost from the SEC’s website at http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
We have filed a registration
statement on Form S-3 with the Securities and Exchange Commission under the Securities Act. This prospectus is part of the
registration statement but the registration statement includes and incorporates by reference additional information and exhibits.
The Securities and Exchange Commission permits us to “incorporate by reference” the information contained in documents
we file with the Securities and Exchange Commission, which means that we can disclose important information to you by referring
you to those documents rather than by including them in this prospectus. Information that is incorporated by reference is considered
to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file
later with the Securities and Exchange Commission will automatically update and supersede the information that is either contained,
or incorporated by reference, in this prospectus, and will be considered to be a part of this prospectus from the date those documents
are filed. We have filed with the Securities and Exchange Commission, and incorporate by reference in this prospectus:
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Annual Report on Form 10-K for the year ended December 31,
2013 filed on March 28, 2014;
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Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2014 filed on May 13, 2014;
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Current Reports on Form 8-K (excluding any reports
or portions thereof that are deemed to be furnished and not filed) filed on January 14, 2014, January 24, 2014, January 29, 2014,
January 30, 2014, February 14, 2014, March 19, 2014, March 21, 2014, April 1, 2014, June 3, 2014, June 10, 2014, June 19, 2014
and July 11, 2014; and
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The description of our common stock contained in our Form 8-A
filed on July 23, 2013.
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We also incorporate
by reference all additional documents that we file with the Securities and Exchange Commission under the terms of Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act that are made after the initial filing date of the registration statement of which
this prospectus is a part until the offering of the particular securities covered by a prospectus supplement or term sheet has
been completed. We are not, however, incorporating, in each case, any documents or information that we are deemed to furnish and
not file in accordance with Securities and Exchange Commission rules.
You may request, and
we will provide you with, a copy of these filings, at no cost, by contacting us at:
Leland Gershell
Chief Financial
Officer
Tonix Pharmaceuticals
Holding Corp.
509 Madison Avenue,
Suite 306
New York, New York
10022
Telephone (212)
980-9155
Units of
Each Unit Consisting of One Share of
Common Stock
and
One Warrant to Purchase of a Share of Common Stock
PROSPECTUS SUPPLEMENT
Dawson James Securities, Inc.
, 2016
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