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 in our Annual Report filed on Form 10-K for the year ended December
31, 2018. 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
Recurring losses and negative cash
flows from operations raise substantial doubt about our ability to continue as a going concern and we may not be able to continue
as a going concern.
Our recurring losses
from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.
Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of the common shares
of our stock and we may have a more difficult time obtaining financing.
We have prepared our
financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue
in existence.
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, 2019 and December 31, 2018, we had an accumulated
deficit of $204.2 million and $186.9 million, respectively. We reported a net loss of $17.3 million for the nine months ended September
30, 2019 and 2018. 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 2021 and any
partnering revenues that it may generate may not be sufficient to fund our ongoing operations. Any partnering revenues generated
by licensing activities may not be sufficient to fund ongoing operations. Further, our other product candidates are not expected
to be approved for several years and may not generate sufficient revenues from our licensing and commercialization efforts to
fund operations.
Presently,
with no further source of capital either via a financing or a collaboration, we project that we may run out of funds in 2020.
We currently do not have any additional source of capital secured. If we are unable to raise additional funds, we could be required
to reduce our spending plans, reduce our workforce, license one or more of our products or technologies that we would otherwise
seek to commercialize ourselves, sell all or some of our assets, cease operations or even declare bankruptcy. We will require
additional cash in order to maximize the commercial opportunity and continue clinical development of our product candidates. Alternatives
available to us to sustain our operations include collaborative agreements, equity financing, debt and other financing arrangements
with potential corporate partners and other sources. However, there can be no assurance that any such collaborative agreements
or other sources of funding will be available to us on favorable terms, if at all.
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 or indeed on any terms. In addition, from time to time, we may not be able to secure enough capital in a
timely enough manner which may cause the generation of a going-concern opinion from our auditors which can and may impair our
stock market valuation and also our ability to finance on favorable terms or indeed on any 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.
We
are highly dependent on the success of Iomab-B and the SIERRA trial and we many not able to complete the necessary clinical development
or our development efforts may not result in the data necessary to receive regulatory approval
Iomab-B,
which we licensed from the Fred Hutchinson Cancer Research Center, in June 2012 is our lead program to which we allocate a significant
portion of our resources. We are currently enrolling patients in the pivotal Phase 3 SIERRA trial (Study of Iomab-B in Elderly
Relapsed or Refractory AML), a 150-patient multi-center randomized trial that will compare outcomes of patients who receive Iomab-B
and a BMT to those patients receiving physician’s choice of salvage chemotherapy, defined as conventional care, as no standard
of care exists for this patient population. The SIERRA trial may be unsuccessful and fail to demonstrate a safety and efficacy
profile that is necessary to receive favorable regulatory approval. The trials DMC or Data Monitoring Committee may recommend
that the trial be stopped early for safety or efficacy concerns, which could prevent us from completing the SIERRA trial. Even
if Iomab-B receives favorable regulatory approval, we may not be successful in securing adequate reimbursement or establishing
successful commercial operations. Any or all of these factors could have a material adverse impact on our business and ability
to continue operations.
We
may be unable to establish sales, marketing and commercial supply capabilities
We
do not currently have, nor have we ever had, commercial sales and marketing capabilities. If any of our product candidates become
approved, we would have to build and establish these capabilities in order to commercialize our approved product candidates. The
process of establishing commercial capabilities will be expensive and time consuming. Even if we are successful in building sales
and marketing capabilities, we may not be successful in commercializing any of our product candidates. Any delays in commercialization
or failure to successfully commercialize any product candidate may have material adverse impacts on our business and ability to
continue operations.
Risks
Related to Regulation
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 radiation-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 radiation-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 drug candidates under our own sponsorship 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:
|
●
|
conditions
imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
|
|
●
|
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;
|
|
●
|
delays
in enrolling patients into clinical trials;
|
|
●
|
a
lower than anticipated retention rate of patients in clinical trials;
|
|
●
|
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;
|
|
|
|
|
●
|
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;
|
|
●
|
unfavorable
FDA or other foreign regulatory inspection and review of a clinical trial site or records of any clinical or preclinical investigation;
|
|
●
|
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;
|
|
●
|
a
finding that the trial participants are being exposed to unacceptable health risks;
|
|
●
|
the
placement by the FDA or a foreign regulatory authority of a clinical hold on a trial; or
|
|
●
|
delays
in obtaining regulatory agency authorization for the conduct of our clinical trials.
|
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:
|
●
|
failure
to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
|
|
●
|
inspection
of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of
a clinical hold;
|
|
●
|
varying
interpretation of data by the FDA or similar foreign regulatory authorities;
|
|
●
|
failure
to achieve primary or secondary endpoints or other failure to demonstrate efficacy;
|
|
●
|
unforeseen
safety issues; or
|
|
●
|
lack
of adequate funding to continue the clinical trial.
|
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
300 patients in need of a BMT. 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 are also evaluating a lower dose of the BC8 antibody and I-131 for lymphodepletion prior to CAR-T or
adoptive cell therapy. We are currently evaluating clinical trials that would use our construct for lymphodepletion. Our lintuzumab-Ac-225
product candidate is also being studied in several Phase 1 trials under our sponsorship and 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 regulatory pathway for our Actimab-MDS trial that consists of a dose-confirming Phase 1 trial that can be
followed by a randomized, controlled pivotal trial that could support a BLA filing. 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
We have dedicated research
and development activities towards improving Iomab-B’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. We have pending patents related to radioimmunoconjugate
composition, formulation administration, and methods of use in solid or liquid cancers. This matter includes composition, administration,
and methods of treatment for our products Iomab-B and Actimab-A. 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.
For our CD33 program,
lintuzumab-Ac225, we have pursued a broad strategy of key patent filings and anticipated regulatory protections in the US and abroad
to protect this asset and its use. Our final drug construct consists of the lintuzumab antibody labeled with the alpha radioisotope
Ac225. We have licensed issued patents that relate to the linker technology we use to conjugate the isotope to the antibody. We
also own issued and pending patents related to Ac225 isotope production methods and drug preparation methods. Furthermore, we have
pending patent applications covering methods of use in the treatment of disease, including therapeutic combinations, and for targeted
conditioning in preparation for cell therapy such as bone marrow transplant, which may provide protection to 2039. This approach,
we believe, provides important intellectual property protection given that key patents related to the humanized antibody, lintuzumab,
which we use in our CD33 program product candidates have expired. While it is possible that others may eventually use an antibody
with the same sequence, we believe that our pending patent portfolio will provide protection within critical areas of clinical
focus. In addition, we possess trade secrets and know-how related to the manufacturing and use of antibody radio-conjugates including
lintuzumab-Ac225. Any potentially competing product based on the lintuzumab antibody is also likely to require several years of
development before achieving our product candidate’s current status and may be subject to significant regulatory hurdles.
Nevertheless, the development of such a molecule remains a possibility and 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 and 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 it would be 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 trials including several investigator-initiated trials including AML, MDS and Multiple
Myeloma 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 lintzumab-Ac-225. Additionally, negative outcomes
including safety concerns, may result in the FDA discontinuing other trials utilizing lintuzumab-Ac-225.
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 currently source medical grade I-131 from
three suppliers including two leading 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 multiple 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 I-131 or obtain I-131 on terms that are acceptable to us.
Actinium-225
is a key component of our CD33 ARC program, 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. Initial preclinical and modelling results have indicated that the linear accelerator
sourced Ac-225 does not impact labelling efficiency and expected distribution. 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 are developing Ac-225 based
products. 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. In addition, we are aware of at least six other government and non-government entities globally including the U.S., Canada,
Russia, Belgium, France and Japan that have, or expect to have ability to supply Ac-225 or equipment for its production within
the timeframes relevant to first commercial approval of our Ac-225 ARC.
Our
contract for supply of this isotope from the DOE must be renewed yearly, and the current contract extends through the end of 2019.
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 any Ac-225
based drug candidates that we may develop and would materially harm our business.
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.
While we have manufactured medical grade Ac-225 of a purity compared to the cyclotron sourced material in the past, this activity
was terminated due to operating cost reasons and we currently do not have experience in manufacturing medical grade Ac-225 and
may not obtain the resources necessary to establish our own manufacturing capabilities in future. 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 and potential future suppliers of Ac-225 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:
|
●
|
the
size and nature of the patient population;
|
|
●
|
the
patient eligibility criteria defined in the protocol;
|
|
●
|
the
size of the study population required for analysis of the trial’s primary endpoints;
|
|
●
|
the
proximity of patients to trial sites;
|
|
●
|
the
design of the trial;
|
|
●
|
our
ability to recruit clinical trial investigators with the appropriate competencies and expertise;
|
|
●
|
competing
clinical trials for similar or alternate therapeutic treatments;
|
|
●
|
clinician’s
and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in
relation to other available therapies;
|
|
●
|
our
ability to obtain and maintain patient consents; and
|
|
●
|
the
risk that patients enrolled in clinical trials will not complete a clinical trial.
|
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.
The antibodies we use in our antibody
radiation-conjugate product candidates may be subject to generic competition.
We are not aware of
any existing or pending regulations or legislation that pertains to generic radiopharmaceutical products such as our antibody radiation-conjugate
product candidates. 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. Even if a
biosimilar gets approved for one of the antibodies that we use, the final constructs of our drug candidates consist of an antibody,
radioisotope and in some cases a linker. Therefore, we do not believe that the final drug product of our candidates can be subject
to competition from a biosimilar as outlined in BPCIA.
Our
product candidates may never achieve market acceptance.
Iomab-B,
CD33 ARC 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 and 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 ARC 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:
|
●
|
restrictions
on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory
product recalls;
|
|
●
|
fines,
warning letters or holds on clinical trials;
|
|
●
|
refusal
by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation
of license approvals;
|
|
●
|
product
seizure or detention, or refusal to permit the import or export of our product candidates; and
|
|
●
|
injunctions
or the imposition of civil or criminal penalties.
|
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 the components of our drug
product candidates including monoclonal antibodies, linkers and radioisotopes, as well as the final construct which comprises
our drug product candidates. We expect to continue to depend on third-party manufacturers for the foreseeable future. Any performance
failure on the part of our existing or future manufacturers could delay clinical development, cause us to suspend or terminate
development or delay or prohibit regulatory approval of our product candidates or commercialization of any approved products.
Further avenues of disruption to our clinical or eventual commercial supply may also occur due to the sale, acquisition, business
reprioritization, bankruptcy or other unforeseen circumstances that might occur at any of our suppliers or contract manufacturing
partners including an inability to come to terms on renewal of existing contracts or new contracts. With a view to maintaining
business continuity we are evaluating alternatives and second and even third sources of supply or manufacturing for our core suppliers
and manufacturing partners, however there can be no assurances that we will be able to identify such suppliers or partners and
assuming we did, that we would be able to enter into contracts that are on favorable terms or on terms that will enable sufficient
supply to ensure business continuity and support our growth plans.
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.
We depend on vendors with specialized operations, equipment and know-how to manufacture the respective
components of our drug candidates. We have entered into manufacturing and supply agreements with these third-parties and in some
instances, we have agreed that they be the exclusive manufacturer and supplier. If any of the third-parties we depend on encounter
difficulties in their operations, fail to comply with required regulations or breach their contractual obligations it may be difficult,
or we may be unable to identify suitable alternative third-party manufacturers. While we identify and evaluate third-party manufacturers
from time to time, even if we do identify suitable alternative third-parties, we may fail to reach agreement on contractual terms,
it may be prohibitively expensive and there can be no assurance that we can successfully complete technology transfer and development
work necessary or complete the necessary work in a timely manner. Any of which could prevent us from commencing manufacturing
with third-parties. which could cause delays or suspension of our clinical trials and pre-clinical work that may have a negative
impact on our business.
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 develop or 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 averse 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:
|
●
|
regulatory
authorities may withdraw their approval of the product;
|
|
●
|
regulatory
authorities may require the addition of labeling statements, such as warnings or contraindications;
|
|
●
|
we
may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of
the product;
|
|
●
|
we
may elect, or we may be required, to recall or withdraw product from the market;
|
|
●
|
we
could be sued and held liable for harm caused to patients; and
|
|
●
|
our
reputation may suffer.
|
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:
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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.
|
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 is considered a Penny Stock.
During
the first nine months of 2019, and for the years of 2018, 2017 and 2016, the price of our common stock has traded below $5.00
per share, and therefore is 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.
We
may be required to effectuate a reverse stock split to be able to maintain compliance with applicable listing requirements or
standards of the NYSE AMERICAN exchange or our common stock could get delisted.
If
our stock trades at a depressed valuation for an extended period of time, we may be required to effectuate a reverse stock split
to maintain compliance with NYSE American listing requirements, or we could be delisted from the exchange. In addition, we may
elect to seek approval for and if authorized, effectuate a reverse stock split to increase the price of our common stock so that
our stock is no longer considered a penny stock and to make our stock more marketable to institutional investors that cannot buy
stocks below certain prices.
In
order to effectuate a reverse split, we would be required to obtain shareholder approval at a meeting of shareholders. We would
also need the approval of the Financial Regulatory Authority (FINRA) to effectuate a stock split. There is no guarantee that we
would be successful in obtaining the necessary approval from FINRA or the votes required to reach a quorum to hold a meeting or
to authorize our Board of Directors to approve a reverse stock split. To conduct a meeting of shareholders we would have to file
and issue the required proxy information and materials, which could take a significant amount of time. It is possible that during
the proxy solicitation process our stock would be delisted before we could obtain the necessary authorization for our Board of
Directors to approve a reverse split to regain compliance with NYSE AMERICAN listing requirement.
If
we fail to maintain compliance with NYSE American listing requirements and our stock is delisted, the market price and liquidity
of our common stock could be adversely impacted. This may also reduce our ability to raise additional capital. Even if we are
successful in obtaining authorization and our Board of Directors approves a reverse stock split, there can be no assurance that
intuitional investors will buy shares of our common stock. There can be no assurance that our common stock can maintain its post-reverse
split price and it may be treated as a penny stock. In the event, that our common stock is delisted from the NYSE AMERICAN or
another national securities exchange, trading of our common stock could occur in the over-the-counter market or on an electronic
bulletin board established for unlisted securities such as the OTC Bulletin Board or Pink Sheets. This could result in adverse
impact on the market price and liquidity of our common stock, a reduction in coverage by security analysts and impair our ability
to raise additional capital, all of which could cause the price of our common stock to decline.
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:
|
●
|
actual
or anticipated variations in our operating results;
|
|
●
|
announcements
of developments by us or our competitors;
|
|
●
|
the
timing of IND and/or BLA approval, the completion and/or results of our clinical trials;
|
|
●
|
regulatory
actions regarding our products;
|
|
●
|
announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
●
|
adoption
of new accounting standards affecting our industry;
|
|
●
|
additions
or departures of key personnel;
|
|
●
|
introduction
of new products by us or our competitors;
|
|
●
|
sales
of our Common Stock or other securities in the open market; and
|
|
●
|
other
events or factors, many of which are beyond our control.
|
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:
|
●
|
provide
that the authorized number of directors may be changed by resolution of the board of directors;
|
|
|
|
|
●
|
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;
|
|
|
|
|
●
|
divide
the board of directors into three classes;
|
|
|
|
|
●
|
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;
|
In
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.
Our
ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Our
ability to utilize our federal net operating loss and tax credit carryforwards may be limited under Sections 382 and 383 of the
Internal Revenue Code of 1986, as amended, or the Code. The limitations apply if we experience an “ownership change”,
generally defined as a greater than 50 percentage point change in the ownership of our equity by certain stockholders over a rolling
three-year period. Similar provisions of state tax law may also apply. We have not assessed whether such an ownership change
has previously occurred. If we have experienced an ownership change at any time since our formation, we may already be subject
to limitations on our ability to utilize our existing net operating losses and other tax attributes to offset taxable income.
In addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change and,
consequently, the limitations under Sections 382 and 383 of the Code. As a result, if or when we earn net taxable income,
our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset such taxable income may
be subject to limitations, which could adversely affect our future cash flows.
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, 2018 and 2017 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.