ITEM
1A. RISK FACTORS
In
analyzing our company, you should consider carefully the following risk factors, together with all of the other information included
in this Quarterly Report on Form 10-Q. Factors that could cause or contribute to differences in our actual results include
those discussed in the following subsection, as well as those discussed above in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report on Form 10-K. Each of
the following risk factors, either alone or taken together, could adversely affect our business, operating results and financial
condition, as well as adversely affect the value of an investment in our company. The risks and uncertainties described below
are not the only ones we face. Additional risks not currently known to us or other factors not perceived by us to present significant
risks to our business at this time also may impair our business operations.
Risks
Related to Our Business
We
are a clinical-stage company and have generated no revenue from commercial sales to date.
We
are a clinical-stage biopharmaceutical company with a limited operating history. We have no products approved for commercial sale
and have not generated any revenue from product sales to date. We will encounter risks and difficulties frequently experienced
by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer.
We
have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.
We
are not profitable and have incurred losses in each period since our inception. As of September 30, 2018, we had an accumulated
deficit of $180.5 million. For the nine months ended September 30, 2018, we reported a net loss of $17.3 million. For the years
ended December 31, 2017 and 2016, we reported a net loss of $26.6 million and $24.3 million, respectively. We expect to continue
to operate at a net loss as we continue our research and development efforts, continue to conduct clinical trials and develop
manufacturing, sales, marketing and distribution capabilities. There can be no assurance that the products under development by
us will be approved for sale in the United States or elsewhere. Furthermore, there can be no assurance that if such products are
approved they will be successfully commercialized, which would have an adverse effect on our business prospects, financial condition
and results of operation.
If
we fail to obtain additional financing, we will be unable to continue or complete our product development and you will likely
lose your entire investment.
We
do not currently have sufficient funding for the completion of development nor commercialization of our product candidates and
we will need to continue to seek capital from time to time to continue development of our product candidates and to acquire and
develop other product candidates. Our first product candidate is not expected to be commercialized, if approved, until at least
2019 and any partnering revenues that it may generate may not be sufficient to fund our ongoing operations. Our cash balance as
of September 30, 2018 was $14.8 million. During the year ended December 31, 2017, we raised total net proceeds of approximately
$18.8 million from the sale of our common stock and warrants. In March 2018, we raised $13.8 million through the sale of units
comprised of shares of common stock and two warrant tranches.
On October 18, 2018, the Company and Lincoln Park Capital
Fund, LLC entered into a purchase agreement. Pursuant to the agreement, Park Capital Fund, LLC purchased 3,376,554 shares of our
common stock, at a price of $0.74 per share, for a total gross purchase price of $2,500,000. Through November 8, 2018, the Company
elected to sell to Park Capital Fund, LLC 1,000,000 shares and received $705,000.
Our
business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial
additional funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary
products, business or technologies or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory
environment or a change in preferred cancer treatment modalities. However, we may not be able to secure funding when we need it
or on favorable terms.
To
raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into
or exchangeable for our common stock. We cannot assure you that we will be able to sell shares or other securities in any other
offering at a price per share that is equal to or greater than the price per share paid by investors, and investors purchasing
shares or other securities in the future could have rights superior to existing stockholders.
If
we cannot raise adequate funds to satisfy our capital requirements, we will have to delay, scale back or eliminate our research
and development activities, clinical studies or future operations. We may also be required to obtain funds through arrangements
with collaborators, which arrangements may require us to relinquish rights to certain technologies or products that we otherwise
would not consider relinquishing, including rights to future product candidates or certain major geographic markets. We may further
have to license our technology to others. This could result in sharing revenues which we might otherwise have retained for ourselves.
Any of these actions may harm our business, financial condition and results of operations.
The
amount of funding we will need depends on many factors, including the progress, timing and scope of our product development programs;
the progress, timing and scope of our preclinical studies and clinical trials; the time and cost necessary to obtain regulatory
approvals; the time and cost necessary to further develop manufacturing processes and arrange for contract manufacturing; our
ability to enter into and maintain collaborative, licensing and other commercial relationships; and our partners’ commitment
of time and resources to the development and commercialization of our products.
We
have limited access to the capital markets and even if we can raise additional funding, we may be required to do so on terms that
are dilutive to you.
We
have limited access to the capital markets to raise funds. The capital markets have been unpredictable in the recent past for
radioisotope and other oncology companies and unprofitable companies such as ours. In addition, it is generally difficult for
development-stage companies to raise capital under current market conditions. The amount of capital that a company such as ours
is able to raise often depends on variables that are beyond our control. As a result, we may not be able to secure financing on
terms attractive to us, or at all. If we are able to consummate a financing arrangement, the amount raised may not be sufficient
to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our technology
licenses, results of operations, financial condition and our continued viability will be materially adversely affected.
The
FDA or comparable foreign regulatory authorities may disagree with our regulatory plans and we may fail to obtain regulatory approval
of our product candidates.
Our
products are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities.
The process of seeking regulatory approval to market an antibody radio-conjugate product is expensive and time-consuming, and,
notwithstanding the effort and expense incurred, approval is never guaranteed. If we are not successful in obtaining timely approval
of our products from the FDA, we may never be able to generate significant revenue and may be forced to cease operations. In particular,
the FDA permits commercial distribution of a new antibody radio-conjugate product only after a Biologics License Application (BLA)
for the product has received FDA approval. The BLA process is costly, lengthy and inherently uncertain. Any BLA filed by us will
have to be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and
labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the product for its intended use. The
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or
more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent
on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include
the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing
scenarios could materially harm the commercial prospects for our product candidates.
The
approval process in the United States and in other countries could result in unexpected and significant costs for us and consume
management’s time and other resources. The FDA and other foreign regulatory agencies could ask us to supplement our submissions,
collect non-clinical data, conduct additional clinical trials or engage in other time-consuming actions, or it could simply deny
our applications. In addition, even if we obtain approval to market our products in the United States or in other countries, the
approval could be revoked, or other restrictions imposed if post-market data demonstrates safety issues or lack of effectiveness.
We cannot predict with certainty how, or when, the FDA or other regulatory authorities will act. If we are unable to obtain the
necessary regulatory approvals, our financial condition and cash flow may be materially adversely affected, and our ability to
grow domestically and internationally may be limited. Additionally, even if we obtain approval, regulatory authorities may approve
any of our product candidates for fewer or more limited indications that we request. The Company’s products may not be approved
for the specific indications that are most necessary or desirable for successful commercialization or profitability.
We
have not demonstrated that any of our products are safe and effective for any indication.
We
currently have two product candidates in clinical development. In December 2015, the FDA cleared our IND filing for Iomab-B, and
we are currently enrolling patients in a randomized, controlled, pivotal, Phase 3 clinical trial. Assuming the trial meets its
endpoints, it will form the basis for a BLA. Additionally, there are physician IND trials at the FHCRC that have been conducted
or are currently ongoing at FHCRC with Iomab-B and the BC8 antibody we licensed. We have multiple clinical trials ongoing for
our lintuzuamab-Ac-225 drug candidate under our own sponsorship including a Phase 2 clinical trial and multiple investigator initiated
trials ongoing.
We
may encounter substantial delays in our clinical trials or may not be able to conduct our trials on the timelines we expect.
We
cannot predict whether we will encounter problems with any of our ongoing or planned clinical trials that will cause us or regulatory
authorities to delay, suspend, or discontinue clinical trials or to delay the analysis of data from ongoing clinical trials. Any
of the following could delay or disrupt the clinical development of our product candidates and potentially cause our product candidates
to fail to receive regulatory approval:
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conditions imposed
on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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delays in receiving,
or the inability to obtain, required approvals from institutional review boards (IRBs) or other reviewing entities at clinical
sites selected for participation in our clinical trials;
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delays in enrolling
patients into clinical trials;
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a lower than anticipated
retention rate of patients in clinical trials;
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the need to repeat
or discontinue clinical trials as a result of inconclusive or negative results or unforeseen complications in testing or because
the results of later trials may not confirm positive results from earlier preclinical studies or clinical trials;
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inadequate supply,
delays in distribution, deficient quality of, or inability to purchase or manufacture drug product, comparator drugs or other
materials necessary to conduct our clinical trials;
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unfavorable FDA
or other foreign regulatory inspection and review of a clinical trial site or records of any clinical or preclinical investigation;
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serious and unexpected
drug-related side effects experienced by participants in our clinical trials, which may occur even if they were not observed
in earlier trials or only observed in a limited number of participants;
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a finding that the
trial participants are being exposed to unacceptable health risks;
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the placement by
the FDA or a foreign regulatory authority of a clinical hold on a trial; or
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delays in obtaining
regulatory agency authorization for the conduct of our clinical trials.
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We
may suspend, or the FDA or other applicable regulatory authorities may require us to suspend, clinical trials of a product candidate
at any time if we or they believe the patients participating in such clinical trials, or in independent third party clinical trials
for drugs based on similar technologies, are being exposed to unacceptable health risks or for other reasons.
Further,
individuals involved with our clinical trials may serve as consultants to us from time to time and receive stock options or cash
compensation in connection with such services. If these relationships and any related compensation to the clinical investigator
carrying out the study result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship
may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be
questioned and the utility of the clinical trial itself may be jeopardized. The delay, suspension or discontinuation of any of
our clinical trials, or a delay in the analysis of clinical data for our product candidates, for any of the foregoing reasons,
could adversely affect our efforts to obtain regulatory approval for and to commercialize our product candidates, increase our
operating expenses and have a material adverse effect on our financial results.
Clinical
trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may
be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring
board, or DSMB (Data Safety Monitoring Board)/DMC (Data Monitoring Committee), overseeing the clinical trial at issue, or other
regulatory authorities due to a number of factors, including:
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failure to conduct
the clinical trial in accordance with regulatory requirements or our clinical protocols;
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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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varying interpretation
of data by the FDA or similar foreign regulatory authorities;
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failure to achieve
primary or secondary endpoints or other failure to demonstrate efficacy;
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unforeseen safety
issues; or
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lack of adequate
funding to continue the clinical trial.
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Modifications
to our product candidates may require federal approvals.
The
BLA application is the vehicle through which the company may formally propose that the FDA approve a new pharmaceutical for sale
and marketing in the United States. Once a particular product candidate receives FDA approval, expanded uses or uses in new indications
of our products may require additional human clinical trials and new regulatory approvals, including additional IND and BLA submissions
and premarket approvals before we can begin clinical development, and/or prior to marketing and sales. If the FDA requires new
approvals for a particular use or indication, we may be required to conduct additional clinical studies, which would require additional
expenditures and harm our operating results. If the products are already being used for these new indications, we may also be
subject to significant enforcement actions.
Conducting
clinical trials and obtaining approvals is a time-consuming process, and delays in obtaining required future approvals could adversely
affect our ability to introduce new or enhanced products in a timely manner, which in turn would have an adverse effect on our
business prospects, financial condition and results of operation.
The
FDA or comparable foreign regulatory authorities may disagree with our regulatory plans, and we may fail to obtain regulatory
approval of our product candidates.
In
June 2012, we acquired rights to BC8 (Iomab), a clinical stage monoclonal antibody with safety and efficacy data in more than
500 patients in need of HSCT. Iomab-B is our product candidate that links I-131 to the BC8 antibody that is being studied in an
ongoing Phase 3 pivotal trial. Product candidates utilizing this antibody would require BLA approval before they can be marketed
in the United States. We have ongoing a Phase 2 portion of our multi-center Phase 1/2 Actimab-A clinical trial for our product
candidate consisting of the anti-CD33 antibody lintuzumab linked with the isotope Ac-225 in AML. Our lintuzumab-Ac-225 product
candidate is also being studied in several investigator initiated trials in patients with AML, myelodysplastic syndrome and multiple
myeloma. . Product candidates utilizing the lintuzumab antibody would require BLA approval before they can be marketed in the
United States. We are in the early stages of evaluating other product candidates consisting of conjugates of Ac-225 with human
or humanized antibodies for pre-clinical and clinical development in other types of cancer. The FDA may not approve these products
for the indications that are necessary or desirable for successful commercialization. The FDA may fail to approve any BLA we submit
for new product candidates or for new intended uses or indications for approved products or future product candidates. Failure
to obtain FDA approval for our products in the proposed indications would have a material adverse effect on our business prospects,
financial condition and results of operations.
Clinical
trials necessary to support approval of our product candidates are time-consuming and expensive.
Initiating
and completing clinical trials necessary to support FDA approval of a BLA for Iomab-B, CD33 program candidates, and other product
candidates, is a time-consuming and expensive process, and the outcome is inherently uncertain. Moreover, the results of early
clinical trials are not necessarily predictive of future results, and any product candidate we advance into clinical trials may
not have favorable results in later clinical trials. We have worked with the FDA to develop a clinical trial designed to test
the safety and efficacy of Iomab-B in patients with relapsed or refractory AML who are age 55 and above prior to a BMT. This trial
is designed to support a BLA filing for marketing approval by the FDA, pending results from the trial. We have also worked with
the FDA to develop a clinical trial designed to test the initial safety and efficacy of Actimab-A in newly diagnosed AML patients
over the age of 60. Subsequent to the completion of the Phase 1 portion of the Phase 1/2 clinical trial we submitted protocol
amendments to the FDA in August of 2016, which were agreed upon in September of 2016. The Phase 2 portion of the trial is now
underway with the purpose of examining the use of Actimab-A in AML patients who are not eligible for approved forms of treatment
with curative intent. The trial is not designed to support marketing approval for the product candidate, and one or more additional
trials will have to be conducted in the future before we file a BLA. In addition, there can be no assurance that the data generated
during the trial will meet our chosen safety and effectiveness endpoints or otherwise produce results that will eventually support
the filing or approval of a BLA. Even if the data from this trial are favorable, these data may not be predictive of the results
of any future clinical trials.
Our
clinical trials may fail to demonstrate adequately the efficacy and safety of our product candidates, which would prevent or delay
regulatory approval and commercialization.
Even
if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims
or that the FDA or foreign authorities will agree with our conclusions regarding them. Success in pre-clinical studies and early
clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will
replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product
candidates are safe and effective for the proposed indicated uses. If FDA concludes that the clinical trials for Iomab-B, lintzumab-Ac-225,
or any other product candidate for which we might seek approval, have failed to demonstrate safety and effectiveness, we would
not receive FDA approval to market that product candidate in the United States for the indications sought. In addition, such an
outcome could cause us to abandon the product candidate and might delay development of others. Any delay or termination of our
clinical trials will delay or preclude the filing of any submissions with the FDA and, ultimately, our ability to commercialize
our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse
side effects that are not currently part of a product candidate’s profile.
The
intellectual property related to antibodies we have licensed has expired or likely expired
The
humanized antibody, lintuzumab, which we use in our CD33 program product candidates was licensed from Facet Biotech Corporation,
a wholly-owned subsidiary of AbbVie Laboratories. The key patents related to this antibody have expired. It is generally possible
that others may be eventually able to use an antibody with the same sequence, and we will then need to rely on additional patent
protection covering alpha particle drug products comprising Ac-225. Our final drug construct consists of the lintuzumab antibody
labeled with the isotope Ac-225. We have licensed issued patents that relate to the linker technology we use to conjugate the
isotope to the antibody and own issued and pending patents related to isotope production methods and drug preparation methods.
In addition, we possess trade secrets and know how related to the manufacturing and use of isotopes. Any competing product based
on the lintuzumab antibody is likely to require several years of development before achieving our product candidate’s current
status and may be subject to significant regulatory hurdles but is nevertheless a possibility that could negatively impact our
business in the future. Neither the antibody portion nor the composition of matter as a whole for the conjugated Iomab-B product
candidate is covered by the claims of any issued patent. Accordingly, there are no patents that would prevent others from using
an antibody with the same antibody sequence in any drug product. We have dedicated research and development activities towards
improving the product’s stability to enhance commercial usefulness of the product and now have a proprietary formulation
for which IP is pending. We have and may continue to file patents related to Iomab-B that can provide barriers to entry but there
is no certainty that these patents will be granted or such granting thereof will adequately prevent others from seeking to replicate
and use the BC8 antibody or the construct. Any competing product based on the antibody used in Iomab-B is likely to require several
years of development before achieving our product candidate’s current status and may be subject to significant regulatory
hurdles but is nevertheless a possibility that could negatively impact our business in the future.
The
indications for which we are developing our product candidates for are orphan drug designations, which are disease indications
that affect fewer than 200,000 patients in the United States and less than 5 in 10,000 patients in the European Union (“EU”).
We have received orphan drug designation for Iomab-B and our lintuzumab-CD33 ARC for patients with AML in both the United States
and the EU. As a result, if our products are to be approved they may receive 7 years 10 years of market exclusivity in the US
and EU, respectively. In addition, our product candidates are biologics combined with radioisotopes. The Hatch-Waxman Act requires
that a manufacturer of generic drugs, which for a biologic drug is called a biosimilar, requires that the manufacturer demonstrate
bioequivalence. We believe that due to the nature of radioisotopes having half-lives combined with the complexities of biologic
drugs would make it difficult for a manufacturer to demonstrate bioequivalence of our product candidates.
Our
CD33 program clinical trials are testing the same drug construct
Our
CD33 program is comprised of several clinical trial including our Phase 2 Actimab-A trial in AML and several investigator initiated
trials that are studying the same drug construct consisting of lintuzumab-Ac-225. Negative results from any of these trials could
negatively impact our ability to enroll or complete our other trials studying Ac-225 labeled lintuzumab.
We
may be unable to obtain a sufficient supply of isotopes to support clinical development or at commercial scale.
Iodine-131
is a key component of our Iomab-B drug candidate. We source medical grade I-131 produced by two premier global manufacturers.
Currently, there is sufficient supply of I-131 to advance our ongoing SIERRA clinical trial, support additional trials we may
undertake utilizing I-131 and for commercialization of Iomab-B. We continually evaluate I-131 manufacturers and suppliers and
intend to have at a minimum of three qualified suppliers prior to the commercial launch of Iomab-B. While we consider I-131 to
be commoditized and obtainable through several suppliers, there can be no guarantee that we will be able to secure a third I-131
supplier or obtain on it terms that are acceptable to us.
Actinium-225
is a key component of Actimab-A, Actimab-M, our AWE platform and other drug candidates that we might consider for development
with the Ac-225 payload. There are adequate quantities of Ac-225 available today to meet our current needs via our present supplier,
the Department of Energy, or DOE. The current Ac-225 currently supplied to Actinium’s clinical trials from the DOE is derived
from the natural decay of thorium-229 from so-called ‘thorium-cows’ and is able to produce sufficient quantities that
are several multiples of the amount of Ac-225 we require to supply our clinical programs through to early commercialization phase.
The DOE is also producing Ac-225 from a recently developed alternative route for Ac-225 production via a linear accelerator that
is currently being evaluated by Actinium. Per representations made by the Department of Energy the capacity of Ac-225 from this
route is expected to be sufficient to supply all of Actinium’s pipeline and commercial Ac-225 needs and support new program
expansion by not just Actinium but also other companies that have development. Additional routes of Ac-225 production are being
pursued by the DOE including the generation of new thorium cows and production via a cyclotron. The cyclotron production method
for Ac-225 production leverages Actinium’s proprietary technology and know-how and presents an additional path towards production
of high-quality Ac-225 that would be able to satisfy commercial needs.
Our
contract for supply of this isotope from the DOE must be renewed yearly, and the current contract extends through the end of 2018.
While we expect this contract will be renewed at the end of its term as it has since 2009, there can be no assurance that the
DOE will renew the contract or that change its policies that allow for the sale of isotope to us. Failure to acquire sufficient
quantities of medical grade Ac-225 would make it impossible to effectively complete clinical trials and to commercialize Actimab-A,
Actimab-M and any other Ac-225 based drug candidates that we may develop and would materially harm our business. We are also aware
of and have ongoing discussions with seven to eight other entities in Canada, the EU, Japan and Russia that have several Ac-225
production programs ongoing or planned that could represent additional sources of Ac-225 within the next two to five years, a
commercially relevant timeframe.
Our
ability to conduct clinical trials to advance our ARC drug candidates is dependent on our ability to obtain the radioisotopes
I-131, Ac-225 and other isotopes we may choose to utilize in the future. Currently, we are dependent on third party manufacturers
and suppliers for our isotopes. These suppliers may not perform their contracted services or may breach or terminate their agreements
with us. Our suppliers are subject to regulations and standards that are overseen by regulatory and government agencies and we
have no control over our suppliers’ compliance to these standards. Failure to comply with regulations and standards may
result in their inability to supply isotope could result in delays in our clinical trials, which could have a negative impact
on our business. We have developed intellectual property, know-how and trade secrets related to the manufacturing process of Ac-225.
We do not have experience in manufacturing medical grade Ac-225 and may not obtain the resources necessary to establish our own
manufacturing capabilities. Our inability to build out and establish our own manufacturing facilities would require us to continue
to rely on third party suppliers as we currently do. However, based on our current third-party suppliers we expect to have adequate
isotope supply to support our current ongoing clinical trials, current AWE program activities and commercialization should our
drug candidates receive approval.
If
we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise
adversely affected.
The
timely completion of clinical trials in accordance with their protocols depends on our ability to enroll a sufficient number of
patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials
for a variety of reasons, including:
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the size and nature
of the patient population;
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the patient eligibility
criteria defined in the protocol;
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the size of the
study population required for analysis of the trial’s primary endpoints;
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the proximity of
patients to trial sites;
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the design of the
trial;
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our ability to recruit
clinical trial investigators with the appropriate competencies and expertise;
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competing clinical
trials for similar or alternate therapeutic treatments;
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clinician’s,
trial site staff’s and patients’ perceptions as to the potential advantages and side effects of the product candidate
being studied in relation to other available therapies;
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our ability to obtain
and maintain patient consents; and
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the risk that patients
enrolled in clinical trials will not complete a clinical trial.
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In
addition, refractory patients, which several of our trials are enrolling, participating in clinical trials are seriously and often
terminally ill and therefore may not complete the clinical trial due to reasons including comorbid conditions or occurrence of
adverse medical events related or unrelated to the investigational products, or death. Even if we are able to enroll a sufficient
number of patients in our clinical trials, delays in patient enrollment will result in increased costs or affect the timing of
our planned trials, which could adversely affect our ability to advance the development of our product candidates.
FDA
may take actions that would prolong, delay, suspend, or terminate clinical trials of our product candidates, which may delay or
prevent us from commercializing our product candidates on a timely basis.
There
can be no assurance that the data generated in our clinical trials will be acceptable to FDA or that if future modifications during
the trial are necessary, that any such modifications will be acceptable to FDA. Certain modifications to a clinical trial protocol
made during the course of the clinical trial have to be submitted to the FDA. This could result in the delay or halt of a clinical
trial while the modification is evaluated. In addition, depending on the quantity and nature of the changes made, FDA could take
the position that some or all of the data generated by the clinical trial is not usable because the same protocol was not used
throughout the trial. This might require the enrollment of additional subjects, which could result in the extension of the clinical
trial and the FDA delaying approval of a product candidate. If the FDA believes that its prior approval is required for a particular
modification, it can delay or halt a clinical trial while it evaluates additional information regarding the change.
Any
delay or termination of our current or future clinical trials as a result of the risks summarized above, including delays in obtaining
or maintaining required approvals from IRBs, delays in patient enrollment, the failure of patients to continue to participate
in a clinical trial, and delays or termination of clinical trials as a result of protocol modifications or adverse events during
the trials, may cause an increase in costs and delays in the filing of any submissions with the FDA, delay the approval and commercialization
of our product candidates or result in the failure of the clinical trial, which could adversely affect our business, operating
results and prospects. Lengthy delays in the completion of our Actimab-A clinical trials would adversely affect our business and
prospects and could cause us to cease operations.
Risks
Related to Third Parties
We
rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties
or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize
our product candidates.
We
do not have the ability to independently conduct our pre-clinical and clinical trials for our product candidates and we must rely
on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories
to conduct such trials. Our reliance on these third parties for clinical development activities results in reduced control over
these activities. Moreover, the FDA requires us to comply with regulations and standards, commonly referred to as GCPs (good clinical
practices), for conducting, recording and reporting the results of clinical trials to assure that data and reported results are
credible and accurate and that the trial participants are adequately protected. Our reliance on third parties does not relieve
us of these responsibilities and requirements. If we or any of our third-party contractors fail to comply with applicable GCPs,
the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities
may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon
inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies
with GCP regulations. In addition, our clinical trials must be conducted with product produced under current good manufacturing
practice, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would
delay the regulatory approval process.
If
our consultants, contract research organizations and other similar entities with which we are working do not successfully carry
out their contractual duties, meet expected deadlines, or comply with applicable regulations, we may be required to replace them.
Although we believe that there are a number of other third-party contractors we could engage to continue these activities, we
may not be able to enter into arrangements with alternative third-party contractors or to do so on commercially reasonable terms,
which may result in a delay of our planned clinical trials and delayed development of our product candidates.
In
addition, our third-party contractors are not our employees, and except for remedies available to us under our agreements with
such third-party contractors, we cannot control whether or not they devote sufficient time and resources to our programs. If these
third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or
if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory
requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended
or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our product candidates
on a timely basis, if at all, and our business, operating results and prospects would be adversely affected.
Our
product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
Our
product candidates are regulated by the FDA as biologic products and we intend to seek approval for these products pursuant to
the BLA pathway. The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for the
approval of biosimilar and interchangeable biologic products. The abbreviated regulatory pathway establishes legal authority for
the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable”
based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved
by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted
and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it
is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a
material adverse effect on the future commercial prospects for our biologic products.
Our
product candidates may never achieve market acceptance.
Iomab-B,
CD33 program candidates and future product candidates that we may develop may never gain market acceptance among physicians, patients
and the medical community. The degree of market acceptance of any of our products will depend on a number of factors, including
the actual and perceived effectiveness and reliability of the product; the results of any long-term clinical trials relating to
use of the product; the availability, relative cost and perceived advantages and disadvantages of alternative technologies; the
degree to which treatments using the product are approved for reimbursement by public and private insurers; the strength of our
marketing abilities, distribution infrastructure; and the level of education and awareness among physicians and hospitals concerning
the product.
We
believe that oncologists and other physicians will not widely adopt a product candidate unless they determine, based on experience,
clinical data, and published peer-reviewed journal articles, that the use of that product candidate provides an effective alternative
to other means of treating specific cancers. Patient studies or clinical experience may indicate that treatment with our product
candidates does not provide patients with sufficient benefits in extension of life or quality of life. We believe that recommendations
and support for the use of each product candidate from influential physicians will be essential for widespread market acceptance.
Our product candidates are still in the development stage and it is premature to attempt to gain support from physicians at this
time. We can provide no assurance that such support will ever be obtained. If our product candidates do not receive such support
from these physicians and from long-term data, physicians may not use or continue to use, and hospitals may not purchase or continue
to purchase, them.
Failure
of Iomab-B, CD33 program candidates or any of our other product candidates to significantly penetrate current or new markets would
negatively impact our business financial condition and results of operations
.
Even
if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued
regulatory review.
Any
regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of
the product candidate. The FDA may also require a risk evaluation and mitigation strategy in order to approve our product candidates,
which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use,
such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable
foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution,
adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be
subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing
information and reports, registration, as well as continued compliance with cGMPs and cGCPs for any clinical trials that we conduct
post-approval. In addition, the FDA could require us to conduct another study to obtain additional safety or biomarker information.
Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity
or frequency, or with our third-party suppliers or manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions on
the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory
product recalls;
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fines, warning letters
or holds on clinical trials;
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refusal by the FDA
to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license
approvals;
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product seizure
or detention, or refusal to permit the import or export of our product candidates; and
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injunctions or the
imposition of civil or criminal penalties.
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The
FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent
of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we
are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve
or sustain profitability.
Coverage
and reimbursement may be limited or unavailable in certain market segments for our product candidates which could limit our sales
of our product candidates, if approved.
The
commercial success of our product candidates in both domestic and international markets will be substantially dependent on whether
third-party coverage and reimbursement is available for patients that use our products. However, the availability of insurance
coverage and reimbursement for newly approved cancer therapies is uncertain, and therefore, third-party coverage may be particularly
difficult to obtain even if our products are approved by the FDA as safe and efficacious. Patients using existing approved therapies
are generally reimbursed all or part of the product cost by Medicare or other third-party payors. Medicare, Medicaid, health maintenance
organizations and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and
the level of reimbursement of new drugs, and, as a result, they may not cover or provide adequate payment for these products.
Submission of applications for reimbursement approval generally does not occur prior to the filing of a BLA for that product and
may not be granted until many months after BLA approval. In order to obtain coverage and reimbursement for these products, we
or our commercialization partners may have to agree to a net sales price lower than the net sales price we might charge in other
sales channels. The continuing efforts of government and third-party payors to contain or reduce the costs of healthcare may limit
our revenue. Initial dependence on the commercial success of our products may make our revenues particularly susceptible to any
cost containment or reduction efforts.
We
may be subject to claims that our third-party service providers, consultants or current or former employees have wrongfully used
or disclosed confidential information of third parties.
We
have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously
employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or
our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in
defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
We
depend on third-party manufacturers to produce our pre-clinical and clinical trial drug supplies.
We
do not currently operate manufacturing facilities for pre-clinical or clinical production of any of our product candidates. We
rely on third-party manufacturers to supply, store, and distribute pre-clinical and clinical supply of our product candidates,
and plan to continue to do so for the foreseeable future. Any performance failure on the part of our existing or future manufacturers
could delay clinical development or regulatory approval of our product candidates or commercialization of any approved products.
We are currently manufacturing the antibody lintuzumab, which is a component of several of our drug candidates that are currently
in clinical trials. At this time, we are undertaking release testing of a new batch of lintuzumab antibody. If we are unable to
successfully release the manufactured batch of the lintuzumab antibody in a timely fashion, we may encounter delays in our clinical
trials. Inability to secure continued clinical supply of lintuzumab antibody may impact our competitive position with these drug
candidates as manufacturing another batch would require additional resources and time.
Our
product candidates require precise, high-quality manufacturing. Failure by our contract manufacturer to achieve and maintain high
manufacturing standards could result in patient injury or death, product recalls or withdrawals, delays or failures in testing
or delivery, cost overruns, or other problems that could seriously hurt our business. Contract manufacturers may encounter difficulties
involving production yields, quality control, and quality assurance. These manufacturers are subject to ongoing periodic and unannounced
inspections by the FDA and corresponding state and foreign agencies to ensure strict compliance with cGMPs and other applicable
government regulations and corresponding foreign standards; we do not have control over third-party manufacturers’ compliance
with these regulations and standards.
Furthermore,
these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulty, mechanical shut downs,
employee strikes, or any other unforeseeable acts that may delay or limit production. Our inability to adequately establish, supervise
and conduct (either ourselves or through third parties) all aspects of the formulation and manufacturing processes, and the inability
of third-party manufacturers to consistently supply quality product when required would have a material adverse effect on our
ability to commercialize our products. We have faced delays and risks associated with reliance on key third party manufacturers
in the past and may be faced with such delays and risks in the future. Any future manufacturing interruptions or related supply
issues could have an adverse effect on our company, including delays in clinical trials.
If
we are successful in obtaining marketing approval from the FDA and/or other regulatory agencies for any of our product candidates,
we anticipate continued reliance on third-party manufacturers.
To
date, our product candidates have been manufactured in small quantities for preclinical and clinical testing by third-party manufacturers.
If the FDA or other regulatory agencies approve any of our product candidates for commercial sale, we expect that we would continue
to rely, at least initially, on third-party specialized manufacturers to produce commercial quantities of approved products. These
manufacturers may not be able to successfully increase the manufacturing capacity for any approved product in a timely or economic
manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review
and approve. If third party manufacturers are unable to successfully increase the manufacturing capacity for a product candidate,
or we are unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed
or there may be a shortage in supply, which in turn could have a material adverse effect on our business.
In
addition, the facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA
pursuant to inspections that will be conducted after we submit a BLA to the FDA. We do not control the manufacturing process of,
and are completely dependent on, our contract manufacturing partners for compliance with cGMPs. If our contract manufacturers
cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA
or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities.
If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates
or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
We
may have conflicts with our partners that could delay or prevent the development or commercialization of our product candidates.
We
may have conflicts with our partners, such as conflicts concerning the interpretation of preclinical or clinical data, the achievement
of milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership
of intellectual property developed during our collaboration. If any conflicts arise with any of our partners, such partner may
act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each
of which could delay or prevent the development or commercialization of our product candidates, and in turn prevent us from generating
revenues: unwillingness on the part of a partner to pay us milestone payments or royalties we believe are due under a collaboration;
uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent
us from entering into additional collaborations; unwillingness by the partner to cooperate in the development or manufacture of
the product, including providing us with product data or materials; unwillingness on the part of a partner to keep us informed
regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those
activities; initiating litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts
by either party to terminate the agreement.
We
face significant competition from other biotechnology and pharmaceutical companies.
Our
product candidates face, and will continue to face, intense competition from large pharmaceutical companies, as well as academic
and research institutions. We compete in an industry that is characterized by (i) rapid technological change, (ii) evolving industry
standards, (iii) emerging competition and (iv) new product introductions. Our competitors have existing products and technologies
that will compete with our product candidates and technologies and may develop and commercialize additional products and technologies
that will compete with our product candidates and technologies. Because several competing companies and institutions have greater
financial resources than us, they may be able to (i) provide broader services and product lines, (ii) make greater investments
in research and development, or R&D, and (iii) carry on broader R&D initiatives. Our competitors also have greater development
capabilities than we do and have substantially greater experience in undertaking preclinical and clinical testing of product candidates,
obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products. They also have greater name recognition
and better access to customers than us.
Our
product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent
their regulatory approval, limit their commercial potential, or result in significant negative consequences
Undesirable
side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign
authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the
trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and
prospects significantly. Even if any of our product candidates receives marketing approval, as greater numbers of patients use
a product following its approval, an increase in the incidence of side effects or the incidence of other post-approval problems
that were not seen or anticipated during pre-approval clinical trials could result in a number of potentially significant negative
consequences, including:
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regulatory authorities may withdraw their approval
of the product;
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regulatory authorities may require the addition
of labeling statements, such as warnings or contraindications;
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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 elect, or we may be required, to recall
or withdraw product from the market;
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we could be sued and held liable for harm caused
to patients; and
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our reputation may suffer.
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Any
of these events could substantially increase the costs and expenses of developing, commercializing and marketing any such product
candidates or could harm or prevent sales of any approved products.
Risks
Related to Our Intellectual Property
We
depend upon securing and protecting critical intellectual property.
We
are dependent on obtaining and maintaining patents, trade secrets, copyright and trademark protection of our technologies in the
United States and other jurisdictions, as well as successfully enforcing this intellectual property and defending this intellectual
property against third-party challenges. The degree of future protection of our proprietary rights is uncertain for product candidates
that are currently in the early stages of development because we cannot predict which of these product candidates will ultimately
reach the commercial market or whether the commercial versions of these product candidates will incorporate proprietary technologies.
Our
patent position is highly uncertain and involves complex legal and factual questions.
Accordingly,
we cannot predict the breadth of claims that may be allowed or enforced under our patents or in third-party patents. For example,
we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and
issued patents; we or our licensors might not have been the first to file patent applications for these inventions; others may
independently develop similar or alternative technologies or duplicate any of our technologies; it is possible that none of our
pending patent applications or the pending patent applications of our licensors will result in issued patents; our issued patents
and issued patents of our licensors may not provide a basis for commercially viable technologies, or may not provide us with any
competitive advantages, or may be challenged and invalidated by third parties; and, we may not develop additional proprietary
technologies that are patentable.
As
a result, our owned and licensed patents may not be valid, and we may not be able to obtain and enforce patents and to maintain
trade secret protection for the full commercial extent of our technology. The extent to which we are unable to do so could materially
harm our business.
We
or our licensors have applied for and will continue to apply for patents for certain products. Such applications may not result
in the issuance of any patents, and any patents now held or that may be issued may not provide us with adequate protection from
competition. Furthermore, it is possible that patents issued or licensed to us may be challenged successfully. In that event,
if we have a preferred competitive position because of such patents, such preferred position would be lost. If we are unable to
secure or to continue to maintain a preferred position, we could become subject to competition from the sale of generic products.
Failure to receive, inability to protect, or expiration of our patents for medical use, manufacture, conjugation and labeling
of Ac-225, the antibodies that we license from third parties, or subsequent related filings, would adversely affect our business
and operations.
Patents
issued or licensed to us may be infringed by the products or processes of others. The cost of enforcing our patent rights against
infringers, if such enforcement is required, could be significant, and we do not currently have the financial resources to fund
such litigation. Further, such litigation can go on for years and the time demands could interfere with our normal operations.
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical
industry. We may become a party to patent litigation and other proceedings. The cost to us of any patent litigation, even if resolved
in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation more effectively
than we can because of their substantially greater financial resources. Litigation may also absorb significant management time.
Unpatented
trade secrets, improvements, confidential know-how and continuing technological innovation are important to our scientific and
commercial success. Although we attempt to and will continue to attempt to protect our proprietary information through reliance
on trade secret laws and the use of confidentiality agreements with our partners, collaborators, employees and consultants and
other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in any event,
others may develop independently, or obtain access to, the same or similar information.
Certain
of our patent rights are licensed to us by third parties. If we fail to comply with the terms of these license agreements, our
rights to those patents may be terminated, and we will be unable to conduct our business.
If
we are found to be infringing on patents or trade secrets owned by others, we may be forced to cease or alter our product development
efforts, obtain a license to continue the development or sale of our products, and/or pay damages.
Our
manufacturing processes and potential products may violate proprietary rights of patents that have been or may be granted to competitors,
universities or others, or the trade secrets of those persons and entities. As the pharmaceutical industry expands and more patents
are issued, the risk increases that our processes and potential products may give rise to claims that they infringe the patents
or trade secrets of others. These other persons could bring legal actions against us claiming damages and seeking to enjoin clinical
testing, manufacturing and marketing of the affected product or process. If any of these actions are successful, in addition to
any potential liability for damages, we could be required to obtain a license in order to continue to conduct clinical tests,
manufacture or market the affected product or use the affected process. Required licenses may not be available on acceptable terms,
if at all, and the results of litigation are uncertain. If we become involved in litigation or other proceedings, it could consume
a substantial portion of our financial resources and the efforts of our personnel.
Our
ability to protect and enforce our patents does not guarantee that we will secure the right to commercialize our patents.
A
patent is a limited monopoly right conferred upon an inventor, and his successors in title, in return for the making and disclosing
of a new and non-obvious invention. This monopoly is of limited duration but, while in force, allows the patent holder to prevent
others from making and/or using its invention. While a patent gives the holder this right to exclude others, it is not a license
to commercialize the invention where other permissions may be required for commercialization to occur. For example, a drug cannot
be marketed without the appropriate authorization from the FDA, regardless of the existence of a patent covering the product.
Further, the invention, even if patented itself, cannot be commercialized if it infringes the valid patent rights of another party.
We
rely on confidentiality agreements to protect our trade secrets. If these agreements are breached by our employees or other parties,
our trade secrets may become known to our competitors.
We
rely on trade secrets that we seek to protect through confidentiality agreements with our employees and other parties. If these
agreements are breached, our competitors may obtain and use our trade secrets to gain a competitive advantage over us. We may
not have any remedies against our competitors and any remedies that may be available to us may not be adequate to protect our
business or compensate us for the damaging disclosure. In addition, we may have to expend resources to protect our interests from
possible infringement by others.
The
use of hazardous materials, including radioactive and biological materials, in our research and development efforts imposes certain
compliance costs on us and may subject us to liability for claims arising from the use or misuse of these materials.
Our
research, development and manufacturing activities involve the controlled use of hazardous materials, including chemicals, radioactive
and biological materials, such as radioactive isotopes. We are subject to federal, state, local and foreign environmental laws
and regulations governing, among other matters, the handling, storage, use and disposal of these materials and some waste products.
We cannot completely eliminate the risk of contamination or injury from these materials and we could be held liable for any damages
that result, which could exceed our financial resources. We currently maintain insurance coverage for injuries resulting from
the hazardous materials we use; however, future claims may exceed the amount of our coverage. Also, we do not have insurance coverage
for pollution cleanup and removal. Currently the costs of complying with such federal, state, local and foreign environmental
regulations are not significant, and consist primarily of waste disposal expenses. However, they could become expensive, and current
or future environmental laws or regulations may impair our research, development, production and commercialization efforts.
We
may undertake international operations, which will subject us to risks inherent with operations outside of the United States.
Although
we do not have any international operations at this time, we intend to seek market clearances in foreign markets that we believe
will generate significant opportunities. However, even with the cooperating of a commercialization partner, conducting drug development
in foreign countries involves inherent risks, including, but not limited to difficulties in staffing, funding and managing foreign
operations; unexpected changes in regulatory requirements; export restrictions; tariffs and other trade barriers; difficulties
in protecting, acquiring, enforcing and litigating intellectual property rights; fluctuations in currency exchange rates; and
potentially adverse tax consequences.
If
we were to experience any of the difficulties listed above, or any other difficulties, any international development activities
and our overall financial condition may suffer and cause us to reduce or discontinue our international development and registration
efforts.
We
are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel,
we may not be able to successfully implement our business strategy.
Our
future operations and successes depend in large part upon the continued service of key members of our senior management team whom
we are highly dependent upon to manage our business. If any member of our current senior management terminates his employment
with us and we are unable to find a suitable replacement quickly, the departure could have a material adverse effect on our business.
Our
future success also depends on our ability to identify, attract, hire or engage, retain and motivate other well-qualified managerial,
technical, clinical and regulatory personnel. There can be no assurance that such professionals will be available in the market,
or that we will be able to retain existing professionals or meet or continue to meet their compensation requirements. Furthermore,
the cost base in relation to such compensation, which may include equity compensation, may increase significantly, which could
have a material adverse effect on us. Failure to establish and maintain an effective management team and workforce could adversely
affect our ability to operate, grow and manage our business.
We
may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information
privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If
we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations
may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These
laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may be subject to
patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect
our ability to operate include:
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the federal Anti-Kickback
Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying
remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable
under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and
criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors
that are false or fraudulent;
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the federal Health
Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit executing
a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
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HIPAA, as amended
by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain
requirements relating to the privacy, security, and transmission of individually identifiable health information;
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the federal physician
sunshine requirements under PPACA, which require certain manufacturers of drugs, devices, biologics, and medical supplies
to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers
of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by
physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations;
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state law equivalents
of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed
by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government,
or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that
require drug manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.
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Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some
of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform
legislation has strengthened these laws. For example, the PPACA, among other things, amends the intent requirement of the federal
anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute
or specific intent to violate it to have committed a violation. Moreover, the PPACA provides that the government may assert that
a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the False Claims Act.
If
our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply
to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in
government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations,
any of which could adversely affect our ability to operate our business and our results of operations.
Recent
federal legislation will increase pressure to reduce prices of pharmaceutical products paid for by Medicare, which could materially
adversely affect our revenue, if any, and our results of operations.
In
the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the MMA, changed the
way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the
elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition,
this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. As a result
of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to
reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the scope of coverage and
the price that we receive for any approved products and could harm our business. While the MMA applies only to drug benefits for
Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement
rates, and any reduction in reimbursement that results from the MMA may cause a similar reduction in payments from private payors.
This legislation may pose an even greater risk to our drug candidates as a significant portion of the target patient population
for our drug candidates would likely be over 65 years of age and, therefore, many such patients will be covered by Medicare.
In
March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation
Act, or collectively, the PPACA, became law in the United States. The goal of the PPACA is to reduce the cost of healthcare and
substantially change the way healthcare is financed by both governmental and private insurers. While we cannot predict what impact
on federal reimbursement policies this legislation will have in general or on our business specifically, the PPACA may result
in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of our drug candidates,
if approved, or any of our future products. In 2012, members of the U.S. Congress and some state legislatures sought to overturn
certain provisions of the PPACA including those concerning the mandatory purchase of insurance. However, on June 28, 2012, the
United States Supreme Court upheld the constitutionality of these provisions. Members of the U.S. Congress have since proposed
a number of legislative initiatives, including possible repeal of the PPACA. We cannot predict the outcome or impact of current
proposals or whether new proposals will be made or adopted, when they may be adopted or what impact they may have on us if they
are adopted. These challenges add to the uncertainty of the legislative changes as part of ACA. Changes that may affect our business
include those governing enrollment in federal healthcare programs, reimbursement changes, fraud and abuse and enforcement. These
changes will impact existing government healthcare programs and will result in the development of new programs, including Medicare
payment for performance initiatives and improvements to the physician quality reporting system and feedback program.
Managing
our growth as we expand operations may strain our resources.
We
expect to need to grow rapidly in order to support additional, larger, and potentially international, pivotal clinical trials
of our product candidates, which will place a significant strain on our financial, managerial and operational resources. In order
to achieve and manage growth effectively, we must continue to improve and expand our operational and financial management capabilities.
Moreover, we will need to increase staffing and to train, motivate and manage our employees. All of these activities will increase
our expenses and may require us to raise additional capital sooner than expected. Failure to manage growth effectively could materially
harm our business, financial condition or results of operations.
We
may expand our business through the acquisition of rights to new product candidates that could disrupt our business, harm our
financial condition and may also dilute current stockholders’ ownership interests in our company.
Our
business strategy includes expanding our products and capabilities, and we may seek acquisitions of product candidates, antibodies
or technologies to do so. Acquisitions involve numerous risks, including substantial cash expenditures; potentially dilutive issuance
of equity securities; incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify
at the time of acquisition; difficulties in assimilating acquired technologies or the operations of the acquired companies; diverting
our management’s attention away from other business concerns; risks of entering markets in which we have limited or no direct
experience; and the potential loss of our key employees or key employees of the acquired companies.
We
can make no assurances that any acquisition will result in short-term or long-term benefits to us. We may incorrectly judge the
value or worth of an acquired product, company or business. In addition, our future success would depend in part on our ability
to manage the rapid growth associated with some of these acquisitions. We cannot assure that we will be able to make the combination
of our business with that of acquired products, businesses or companies work or be successful. Furthermore, the development or
expansion of our business or any acquired products, business or companies may require a substantial capital investment by us.
We may not have these necessary funds or they might not be available to us on acceptable terms or at all. We may also seek to
raise funds by selling shares of our preferred or common stock, which could dilute each current stockholder’s ownership
interest in the Company.
Risks
Related to Ownership of Our Common Stock
The
sale of securities by us in any equity or debt financing could result in dilution to our existing stockholders and have a material
adverse effect on our earnings.
We
have financed our operations primarily through sales of stock and warrants. It is likely that during the next twelve months we
will seek to raise additional capital through the sales of stock and warrants in order to expand our level of operations to continue
our research and development efforts.
Any
sale of common stock by us in a future offering could result in dilution to our existing stockholders as a direct result of our
issuance of additional shares of our capital stock. In addition, our business strategy may include expansion through internal
growth or by establishing strategic relationships with targeted customers and vendors. In order to do so, or to finance the cost
of our other activities, we may issue additional equity securities that could dilute our stockholders’ stock ownership.
We may also assume additional debt and incur impairment losses related to goodwill and other tangible assets if we acquire another
company and this could negatively impact our earnings and results of operations.
Our
Common Stock has been considered a Penny Stock.
During
2018 to date, 2017, 2016 and most of 2015, the price of our common stock has traded below $5.00 per share, and therefore has been
treated as a penny stock. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.
The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the
level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities,
which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of
broker-dealers to sell our common stock and may affect your ability to resell our common stock.
Our
common stock is subject to price volatility which could lead to losses by stockholders and potential costly security litigation.
The
trading volume of our common stock has been and may continue to be extremely limited and sporadic. We expect the market price
of our common stock to fluctuate substantially due to a variety of factors, including market perception of our ability to achieve
our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes
in general conditions in the economy and the financial markets or other developments affecting our competitors or us. This volatility
has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock.
The
trading price of our Common Stock may be highly volatile and could fluctuate in response to factors such as:
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actual or anticipated variations in our operating
results;
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announcements of developments by us or our competitors;
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the timing of IND and/or BLA approval, the completion
and/or results of our clinical trials;
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regulatory actions regarding our products;
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announcements by
us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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adoption of new accounting standards affecting
our industry;
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additions or departures of key personnel;
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introduction of new products by us or our competitors;
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sales of our Common Stock or other securities
in the open market; and
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other events or factors, many of which are beyond
our control.
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The
stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market
price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation
initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention
and our resources, which could harm our business and financial condition.
We
do not intend to pay dividends on our common stock, so any returns will be determined by the value of our common stock.
We
have never declared or paid any cash dividends on our common stock. For the foreseeable future, it is expected that earnings,
if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to
holders of our common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation
in its value. There is no guarantee that our common stock will appreciate in value.
Certain
provisions of our Certificate of Incorporation and Bylaws and Delaware law make it more difficult for a third party to acquire
us and make a takeover more difficult to complete, even if such a transaction were in our stockholders’ interest.
Provisions
of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in
our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their
shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions
could adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws:
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provide that the
authorized number of directors may be changed by resolution of the board of directors;
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provide
that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative
vote of a majority of directors then in office, even if less than a quorum;
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divide the board
of directors into three classes;
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provide
that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as
directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as
to the form and content of a stockholder’s notice;
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addition, we are governed by Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware
corporation from engaging in a “business combination” with an “interested stockholder” for a period of
three years after the date of the transaction in which the person became an interested stockholder, unless the business combination
is approved in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting
in a financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and
associates, owns, or within three years, did own, 15% or more of the corporation’s outstanding voting stock. These provisions
may have the effect of delaying, deferring or preventing a change in our control.
Compliance
with the reporting requirements of federal securities laws can be expensive.
We
are subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance
obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with
the Securities and Exchange Commission and furnishing audited reports to stockholders are substantial. In addition, we will incur
substantial expenses in connection with the preparation of registration statements and related documents with respect any offerings
of our common stock.
Failure
to establish and maintain adequate finance infrastructure and accounting systems and controls could impair our ability to comply
with the financial reporting and internal controls requirements for publicly traded companies.
As
a public company, we operate in an increasingly demanding regulatory environment, including with respect to more complex accounting
rules. Company responsibilities required by the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, include establishing
and maintaining corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures.
Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial
fraud.
Our
compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting expense and expend significant
management efforts. We complied with Section 404 at December 31, 2017 and 2016 and while our testing did not reveal any material
weaknesses in our internal controls, subsequent testing by our independent registered public accounting firm may reveal material
weaknesses in our internal controls that we would be required to remediate in a timely manner so as to be able to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act each year. If we are not able to comply with the requirements of Section
404 of the Sarbanes-Oxley Act in a timely manner each year, we could be subject to sanctions or investigations by the SEC, NYSE
American or other regulatory authorities which would require additional financial and management resources and could adversely
affect the market price of our common stock. Furthermore, if we cannot provide reliable financial reports or prevent fraud, our
business and results of operations could be harmed and investors could lose confidence in our reported financial information.