Overview
RXi Pharmaceuticals Corporation (
RXi
,
we
,
our
or the
Company
) is a
clinical-stage RNAi company developing innovative therapeutics in dermatology and ophthalmology that address significant unmet medical needs. Our development programs are based on our proprietary self-delivering RNAi (sd-rxRNA
®
) platform and Samcyprone, a topical immunomodulator. Our clinical development programs include, but are not limited to, RXI-109, an sd-rxRNA, for the treatment of dermal and ocular
scarring, and Samcyprone for the treatment of such disorders as warts, alopecia areata, non-malignant skin tumors and cutaneous metastases of melanoma. In addition to these clinical programs, we have a pipeline of discovery and preclinical
product candidates in our core therapeutic areas, as well as in other areas of interest. The Companys pipeline, coupled with our extensive patent portfolio, provides for product and business development opportunities across a broad spectrum of
therapeutic areas.
Our Pipeline
Our
pipeline is focused on three areas: dermatology, ophthalmology and cosmetic product development. Our RNAi therapies are designed to silence, or down-regulate, the expression of a specific gene that may be over-expressed in a disease
condition and our immunotherapy agent treats diseases by inducing, enhancing or suppressing an immune response. The following is a summary of our current product candidates and their development status:
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Dermatology Franchise
RXI-109 Dermal Scarring
The Companys lead product candidate and first RNAi clinical product candidate, RXI-109, is a self-delivering RNAi compound (sd-rxRNA)
designed to reduce the expression of connective tissue growth factor (
CTGF
), a critical regulator of several biological pathways involved in fibrosis, including scar formation in the skin. RXI-109 is first being evaluated in
connection with the management of hypertrophic scars. Hypertrophic scars are abnormal scars that are raised above the normal skin surface and can be reddened or darker than the existing skin tone. RXI-109 commenced human clinical trials in 2012 and
is currently being evaluated in Phase 2 clinical trials to prevent or reduce dermal scarring following surgery or trauma.
The Company
conducted two Phase 1 clinical trials evaluating RXI-109 in a surgical setting. Both trials demonstrated the safety and tolerability of RXI-109 in ascending single and multi-doses, and also provided the first evidence of clinical activity in a
surgical setting. With the successful completion of the Phase 1 trials, the Company initiated its Phase 2 program for RXI-109 with Study 1301, a Phase 2a clinical trial evaluating the use of RXI-109 to prevent the recurrence of hypertrophic scars
following scar revision surgery, in November 2013. This was followed by a second Phase 2 clinical trial in April 2014, Study 1401, which evaluated the use of RXI-109 to prevent the recurrence of keloids, raised and reddened or darkened scars
resulting from increased collagen production, after surgical revision. Enrollment and dosing for both of these studies has been completed.
Preliminary data observations from Study 1301 were used in the design of the Companys third Phase 2 clinical trial in hypertrophic
scars, Study 1402, which commenced in July 2014. In October 2015, we reported that preliminary data from Study 1402 demonstrated that scars at revision sites were less visible after treatment with RXI-109 than untreated revision sites over the
course of three months in those same subjects. Based in part on this new information, two more cohorts were added to Study 1402 in November 2015. The Company expects early results and later read-outs for Study 1402 in 2016.
Scarring represents a high unmet medical need as there are currently no U.S. Food and Drug Administration (
FDA
) approved
therapies in the U.S. for the treatment and prevention of scars in the skin. Scar revision surgery is a common option, but often the scar recurs. If approved, RXI-109 could be a first-in-class RNAi treatment for the prevention or
reduction of post-surgical dermal scarring. Given the large number of surgical procedures, there is a significant market for a scar prevention therapeutic such as RXI-109.
Samcyprone
Warts
In December 2014, the Company broadened its clinical pipeline with an exclusive, global license to Samcyprone, our second clinical
candidate. Samcyprone is a proprietary topical formulation of diphenylcyclopropenone (
DPCP
), an immunomodulator that works by initiating a T-cell response. The use of Samcyprone allows sensitization using much lower
concentrations of DPCP than are used with existing compounded DPCP solutions, avoiding hyper-sensitization to subsequent challenge doses. Samcyprone is currently being developed for the treatment of skin disorders such as warts, alopecia
areata, non-malignant skin tumors and cutaneous metastases of melanoma. Further, in March 2015, the FDA granted Orphan Drug Designation to the Company for Samcyprone for the treatment of malignant melanoma stage IIb to IV.
The Company initiated its first Phase 2 clinical trial with Samcyprone, Study 1502, for the treatment of cutaneous warts in December
2015. The Company expects to fully enroll Study 1502 by the end of 2016 with early read-outs also expected in the second half of 2016.
Cutaneous warts are extremely common, being experienced by most people at some time during their lives. Although most warts will spontaneously
disappear without treatment, treatment of these lesions is sought for recalcitrant warts and to prevent recurrence. There are many different treatment modalities for warts, including physical destruction and immunomodulation. However, treatment of
warts is complicated by low success rates, prolonged duration of therapy and the potential for recurrence. There is a clear unmet need for new therapies for warts and if approved, Samcyprone could be a more effective and convenient treatment
than the currently available therapies.
Additional Dermatology Programs
In addition to our dermal scarring and wart programs, we continue to advance our preclinical and discovery programs with our sd-rxRNA
technology. The Company has selected collagenase (
MMP1
) and tyrosinase (
TYR
) as gene targets for our
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self-delivering platform. MMP1 is a matrix metalloproteinase involved in the breakdown of extracellular matrix. Reduction of MMP1 may be beneficial in the treatment of skin aging disorders,
arthritis, acne scarring, blistering skin disorders, corneal erosions, endometriosis and possible cancer metastasis. TYR is a key enzyme in the synthesis of melanin. Melanin is produced by melanocytes and is the pigment that gives human skin, hair
and eyes their color. The inhibition of TYR can play a key role in the management of diseases including cutaneous hyperpigmentation disorders such as lentigines (freckles, age spots and liver spots) and possibly melanoma. In addition to our cosmetic
program (described below), the Company is actively evaluating similar
sd-rxRNA
compounds that target MMP1 and TYR for possible therapeutic development.
Ophthalmology Franchise
RXI-109 Retinal Scarring
As in dermal scarring, CTGF is known to play a role in retinal scarring. RXI-109 can also be used to target CTGF in the eye, where it is known
to be involved in retinal scarring. Building on the work in our dermal clinical program, the Company filed a new investigational drug application (
IND
) in July 2015 for RXI-109 as a potential therapeutic for the scarring component
of retinal diseases in the eye, such as wet age-related macular degeneration (
AMD
). In November 2015, we initiated a Phase 1/2 clinical trial to evaluate the safety and clinical activity of RXI-109 in reducing the progression of
retinal scarring. Initial safety read-outs are expected in the second half of 2016.
Currently, there is no effective way to prevent the
formation or progression of retinal scars that may occur as a consequence of the number of debilitating ocular diseases. In advanced neo-vascular or wet-AMD, our first area of study, retinal scarring can result in continued vision loss even if the
patient is being treated with an anti-vascular endothelial growth factor (
VEGF
) therapy. RXI-109 has the potential to fill this unmet medical need by reducing this continuing damage to the retina and in doing so help preserve
these patients vision for a longer period of time.
Additional Ophthalmology Programs
In addition to the clinical trial for the use of RXI-109 as a potential therapeutic for retinal scarring, we are advancing other early-stage
ophthalmology programs. To date, preclinical studies have shown that CTGF protein levels are reduced in a dose-dependent manner in both the retina and cornea following an intravitreal injection of RXI-109 in monkeys. Scarring of the cornea resulting
from injury, disease or vision correction surgery can have a dramatic impact on vision. In some cases, a corneal transplant may be needed. CTGF expression levels have been found to be increased during corneal wound healing in rat corneas and in
human corneal fibroblasts, and it has been proposed that a reduction of CTGF may be an important step towards reducing corneal scarring. The Company is currently involved in a number of collaborations to develop a topical delivery for disorders of
the cornea.
The Company also continues its exploratory efforts to identify potential sd-rxRNA lead compounds and targets from the
RNAi-related assets acquired from OPKO Health Inc. (
OPKO
) in March 2013.
Cosmetic Franchise
RXis cosmetic development program is based on our proprietary sd-rxRNA technology. Cosmetics are compounds that affect the appearance of
the skin and make no preventative or therapeutic claims. These compounds may be developed more rapidly than therapeutics, therefore the path to market may be much shorter and less expensive.
In October 2015, we announced the selection of lead compounds targeting MMP1 and TYR for cosmetic development. RXI-185, an sd-rxRNA compound
targeting MMP1, and RXI-231, an sd-rxRNA compound targeting TYR, are being developed as cosmetic ingredients that may improve skin appearance. The Companys next steps include plans to complete functional and safety testing for both compounds,
as well as to develop a method for skin penetration that would be compatible with our compounds. Topical delivery can be enhanced in a number of ways and the Company is exploring these both internally and with a number of research collaborations.
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Market Opportunity
As there are currently no FDA-approved drugs to prevent scar formation, a therapeutic of this type could have great benefit for trauma and
surgical patients, particularly as a treatment during the surgical revision of existing unsatisfactory scars. There are over 42 million medical procedures in the U.S. each year that could potentially benefit from a therapeutic treatment that
could successfully reduce or prevent scarring; thus, the market potential is quite large. According to the American Society for Plastic Surgery, there are approximately 177,000 scar revision surgeries in the United States every year. In addition to
cosmetic and reconstructive surgeries, medical interventions which could incorporate an anti-scarring agent include treatment of scarring that results from trauma, surgery or burns (especially relating to raised or hypertrophic scarring or
contracture scarring), and surgical revision of existing unsatisfactory scars.
Overexpression of CTGF is implicated in dermal scarring,
subretinal fibrosis and other fibrotic diseases. Because of this, we believe that RXI-109 or other CTGF-targeting RNAi compounds may be able to treat the fibrotic component of numerous indications. These indications are as wide ranging as acute
spinal injury, endometriosis, organ fibrosis including liver and pulmonary fibrosis, cutaneous scleroderma and vascular restenosis, in addition to numerous ocular diseases that result in retinal scarring. If the current clinical trials of RXI-109
produce successful results, we may explore opportunities in these additional indications that can be accessed by local administration, starting with intradermal or intravitreal injection. Although the Company does not intend to develop systemic uses
of RXI-109 at this time, the Company is open to business development and out-licensing opportunities for those applications.
DPCP, the
active ingredient in Samcyprone, is a small molecule that has been used since the late 1970s to stimulate regrowth of hair in patients with alopecia areata. Recent publications have supported its use as an immunomodulator for the treatment of
alopecia areata, warts and cutaneous metastases of malignant melanoma, a combined market potential of over an estimated $1 billion. Although it has been used by physicians for several decades, it has never been reviewed or approved by a regulatory
authority as a drug. DPCP is a new chemical entity under a U.S. IND. If FDA approval is granted, Samcyprone, RXis proprietary formulation of DPCP, is expected to achieve market exclusivity.
Introduction to RNAi
RNAi is a naturally
occurring phenomenon where short, double-stranded RNA molecules interfere with the expression of targeted genes. The discovery of RNAi is regarded as a significant advancement in the scientific community, as evidenced by the 2006 Nobel Prize in
Medicine awarded to the co-discoverers of RNAi, including Dr. Craig Mello, one of the founders of RXi and the Chairman of our Scientific Advisory Board.
RNAi offers a novel approach to the drug development process because RNAi compounds can potentially be designed to target any one of the
thousands of human genes, many of which are undruggable by other modalities. The specificity of RNAi is achieved by an intrinsic, well-understood biological mechanism based on designing the sequence of an RNAi compound to match the
sequence of the targeted gene. The sequence of the entire human genome is now known, and the mRNA coding sequence for many proteins is already available. Supported by numerous gene-silencing reports and our own research, we believe that this
sequence information can be used to design RNAi compounds to interfere with the expression of almost any specific gene.
Our RNAi Therapeutic Platform
The first design of RNAi compounds to be pursued for the development of human therapeutics were short, double-stranded RNAs that
included at least one overhanging single-stranded region and limited modifications, known as small-interfering RNA, or siRNA, which we will also refer to as classic siRNA.
We believe that classic siRNAs have drawbacks that may limit the usefulness of those agents as human therapeutics, and that we may be able to
utilize the technologies we have licensed and developed internally to optimize RNAi compounds for use as human therapeutic agents. It is the combination of the length, the nucleotide sequence and the configuration of chemical modifications that are
important for effective RNAi therapeutics.
Drug delivery has been the primary challenge in developing RNAi therapeutics since its initial
discovery. One conventional solution to the delivery problem involves encapsulation into a lipid-based particle, such as a liposome, to improve circulation time and cellular uptake. Scientists at RXi have used an alternative approach to delivery in
which drug-like properties were built into the RNAi compound itself. These novel compounds are termed self-delivering RNAi compounds or sd-rxRNA.
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sd-rxRNAs are hybrid oligonucleotide compounds that the Company believes combine the beneficial
properties of both conventional RNAi and antisense technologies. Traditional, single-stranded antisense compounds have favorable tissue distribution and cellular uptake properties. However, they do not have the intracellular potency that is a
hallmark of double-stranded RNAi compounds. Conversely, the duplex structure and hydrophilic character of traditional RNAi compounds results in poor tissue distribution and cellular uptake. In an attempt to combine the best properties of both
technologies, sd-rxRNA have a single-stranded phosphorothioate region, a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical modifications. The combination of these features allows sd-rxRNA to achieve efficient
spontaneous cellular uptake and potent, long-lasting intracellular activity.
We believe that our next generation sd-rxRNA compounds offer
significant advantages over classic siRNA used by other companies developing RNAi therapeutics, highlighted by the following characteristics:
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Potent RNAi activity in the absence of a delivery vehicle;
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More resistant to nuclease degradation;
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Potentially more specific for the target gene; and
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More reliable at blocking immune side effects than classic siRNA.
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Our Route of Administration
The route by which an RNAi therapeutic is brought into contact with the body depends on the intended organ or tissue to be treated. Delivery
routes can be simplified into two major categories: (1) local (when a drug is delivered directly to the tissue of interest); and (2) systemic (when a drug accesses the tissue of interest through the circulatory system). Local delivery may
avoid some hurdles associated with systemic approaches such as rapid clearance from circulation and inefficient tissue extravasation (crossing the endothelial barrier from the blood stream). However, the local delivery approach can only be applied
to a limited number of organs or tissues (
e.g.
, skin, eye, lung and potentially the central nervous system).
The key to
therapeutic success with RNAi lies in delivering intact RNAi compounds to the target tissue and the interior of the target cells. To accomplish this, we have developed a comprehensive platform that includes chemically synthesized RNAi compounds that
are optimized for stability and efficacy and combine delivery at the site of action with a local delivery approach.
Our sd-rxRNA
molecules have unique properties that improve tissue and cell uptake. We have studied sd-rxRNA molecules in animal models for dermal and ocular delivery. Direct administration of sd-rxRNA via intradermal injection with no additional delivery vehicle
to the skin or to the eye demonstrates that target gene silencing can be measured after local administration. The dose levels required for these direct-injection methods are small and suitable for clinical development. The Company has a number of
clinical trials currently ongoing with RXI-109, an sd-rxRNA compound, for local delivery in the skin and the eye. Other target tissues that are potentially accessible for local delivery using sd-rxRNA compounds include the lung, the central nervous
system, mucosal tissues and sites of inflammation and tumor (direct administration).
The built-in drug-like properties of sd-rxRNAs,
including an extended circulation time and better tissue distribution, may make them amenable for system delivery. Target tissues that are potentially accessible using sd-rxRNA compounds by systemic delivery include kidney, fat, heart, lung, sites
of inflammation, tumors and vascular endothelium. Further optimization efforts are required to expand this technology to systemic applications.
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Introduction to Immunomodulators
Immunotherapy is the treatment of disease by inducing, enhancing or suppressing an immune response. Active agents in immunotherapy are
collectively called immunomodulators. They are a diverse array of recombinant, synthetic and natural preparations that help to regulate or normalize the immune system.
Our Immunomodulator Therapeutic Pipeline
Samcyprone, licensed by the Company in 2014, is a proprietary topical formulation of DPCP. DPCP has been used for decades as a treatment
to stimulate hair re-growth in patients with alopecia areata and more recently as a treatment for recalcitrant wart removal and as an aid in the reduction of cutaneous metastases of melanoma. As it is currently used, a doctor must prescribe DPCP to
be formulated by a compounding facility, generally in acetone. There are no standardized methods of formulation or procedures for use. Because it works by causing an immune response, the level of response can vary greatly from person to person.
Moreover, some pharmacies will not even compound it, even if it is prescribed.
The Companys formulation of DPCP, called
Samcyprone, works by initiating a T-cell response. T-cells or T lymphocytes are a type of white blood cell that play a key role in cell-mediated immunity. The use of Samcyprone will allow for lower sensitizing and challenge doses than in
current use and should result in an improved safety margin and a more consistent immune response.
There will be several advantages to
using an FDA regulated formulation like the one we are developing. First, the amount of DPCP used in our own ointment formulation will be lower than that generally used in acetone formulation. This should result in reduced side effects that happen
due to accidental over-sensitization when a higher than necessary concentration is used. Second, we are developing an optimized dosing regimen so that a standardized response can be expected. And third, the ointment formulation will be easier to
prescribe and to use than an acetone formulation, allowing for ease of application at the appropriate site on the skin.
The mechanism of
action of Samcyprone is linked to DPCPs ability to alter the expression of multiple genes involved in the immune response. Research with Samcyprone may also allow us to discover specific targets and develop new sd-rxRNA compounds
for the potential treatment of immunological disorders that are relevant to the skin, as well as various systemic diseases.
Intellectual Property
We protect our proprietary information by means of United States and foreign patents, trademarks and copyrights. In addition, we rely
upon trade secret protection and contractual arrangements to protect certain of our proprietary information and products. We have pending patent applications that relate to potential drug targets, compounds we are developing to modulate those
targets, methods of making or using those compounds and proprietary elements of our drug discovery platform.
Much of our technology and
many of our processes depend upon the knowledge, experience and skills of key scientific and technical personnel. To protect our rights to our proprietary know-how and technology, we require all employees, as well as our consultants and advisors
when feasible, to enter into confidentiality agreements that require disclosure and assignment to us of ideas, developments, discoveries and inventions made by these employees, consultants and advisors in the course of their service to us, and we
vigorously defend that position with partners, as well as with employees who leave the Company.
We have also obtained rights to various
patents and patent applications under licenses with third parties, which require us to pay royalties, milestone payments, or both. The degree of patent protection for biotechnology products and processes, including ours, remains uncertain, both in
the United States and in other important markets, because the scope of protection depends on decisions of patent offices, courts and lawmakers in these countries. There is no certainty that our existing patents or others, if obtained, will afford us
substantial protection or commercial benefit. Similarly, there is no assurance that our pending patent applications or patent applications licensed from third parties will ultimately be granted as patents or that those patents that have been issued
or are issued in the future will stand if they are challenged in court. We assess our license agreements on an ongoing basis, and may from time to time terminate licenses to technology that we do not intend to employ in our technology platforms, or
in our product discovery or development activities.
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Patents and Patent Applications
We are actively prosecuting twenty-eight patent families covering our compounds and technologies, including RXI-109 and Samcyprone. A
combined summary of these patents and patent applications is set forth below in the following table:
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Pending
Applications
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Issued
Patents
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United States
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19
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28
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Canada
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6
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1
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Europe
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8
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31
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Japan
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4
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5
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Other Markets
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10
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8
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Patents and Patent Applications Relating to RNAi
Our portfolio includes 72 issued patents, thirteen of which cover our self-delivering RNAi platform. These thirteen patents broadly cover both
the composition and methods of use of our self-delivering platform technology and uses of our sd-rxRNAs targeting CTGF for the treatment of fibrotic disorders, including RXI-109 for the treatment of dermal and ocular fibrosis. These patents are
scheduled to expire between 2029 and 2031. Furthermore, there are 44 patent applications, encompassing what we believe to be important new RNAi compounds and their use as therapeutics and/or cosmetics, chemical modifications of RNAi compounds that
improve the compounds suitability for therapeutic uses (including delivery) and compounds directed to specific targets (
i.e.
, that address specific disease states).
The patents and any patents that may issue from these pending patent applications will, if issued, be set to expire between 2022 and 2035, not
including any patent term extensions that may be afforded under the Federal Food, Drug, and Cosmetic Act (and the equivalent provisions in foreign jurisdictions) for any delays incurred during the regulatory approval process relating to human drug
products (or processes for making or using human drug products).
Patent and Patent Applications Relating to Samcyprone
The Samcyprone portfolio includes one issued patent and three patent applications. The patent and patent applications cover both the
compositions and methods of use of Samcyprone for the treatment of warts, human papilloma virus (HPV) skin infections, skin cancer (including melanoma) and immunocompromised patients.
The patent and any patents that may issue from the pending applications will be set to expire between 2019 and 2031, not including any patent
term extensions that may be afforded under the Federal Food, Drug, and Cosmetic Act (and the equivalent provisions in foreign jurisdictions) for any delays incurred during the regulatory approval process relating to human drug products (or processed
for making or using human drug products).
Intellectual Property License Agreements
We have secured exclusive and non-exclusive rights to develop therapeutics by licensing key RNAi technologies, Samcyprone and patent
rights from third parties. These rights relate to chemistry and configuration of compounds, delivery technologies of compounds to cells and therapeutic targets. As we continue to develop our own proprietary compounds, we continue to evaluate both
our in-licensed portfolio as well as the field for new technologies that could be in-licensed to further enhance our intellectual property portfolio and unique position in the RNAi and immunotherapy space.
Advirna.
In September 2011, we entered into agreements with Advirna, LLC (
Advirna
) pursuant to which Advirna
assigned to us its existing patent and technology rights related to sd-rxRNA technology in exchange for our agreement to issue 5% of the Companys fully-diluted shares, pay an annual maintenance fee of $100,000 and pay a one-time milestone
payment of $350,000 upon the issuance of the first patent with valid claims covering the assigned technology. The common shares of the Company were issued to Advirna in 2012 and the one-time milestone payment was paid in 2014. Additionally, we will
be required to pay a 1% royalty to Advirna on any license revenue received by us with respect to future licensing of the assigned Advirna patent and technology rights. We also granted back to Advirna a license under the assigned patent and
technology rights for fields of use outside human therapeutics and diagnostics.
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Our rights under the Advirna agreement will expire upon the later of: (i) the expiration of
the last-to-expire of the patent rights (as defined therein) or (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance with the provisions of the agreement.
We may terminate the Advirna agreement at any time upon 90 days written notice to Advirna, and Advirna may terminate the agreement upon
90 days prior written notice in the event that we cease using commercially reasonable efforts to research, develop, license or otherwise commercialize the patent rights or royalty-bearing products (as defined therein), provided
that we may refute such claim within such 90-day period by showing budgeted expenditures for the research, development, licensing or other commercialization consistent with other technologies of similar stage of development and commercial potential
as the patent rights or royalty-bearing products. Further, either party at any time may provide to the other party written notice of a material breach of the agreement. If the other party fails to cure the identified breach within 90 days after the
date of the notice, the aggrieved party may terminate the agreement by written notice to the party in breach.
Hapten
. In December
2014, the Company entered into an Assignment and License Agreement with Hapten Pharmaceuticals, LLC (
Hapten
) under which Hapten agreed, effective at a closing that was subject to the satisfaction of certain closing conditions
which occurred in February 2015, to sell and assign to us certain patent rights and related assets and rights, including an investigational new drug application and clinical data, for Haptens Samcyprone products for therapeutic and
prophylactic use. Under the Assignment and License Agreement and upon the closing, Hapten received a one-time upfront cash payment of $100,000 and we issued to Hapten 200,000 shares of Company common stock. Pursuant to the Assignment and License
Agreement, Hapten will be entitled to receive: (i) future milestone payments tied to the achievement of certain clinical and commercial objectives (all of which payments may be made at our option in cash or through the issuance of common stock)
and (ii) escalating royalties based on product sales by us and any sublicensees.
We have certain customary diligence obligations
under the Assignment and License Agreement requiring us to use commercially reasonable efforts to develop and commercialize one or more products covered by the Assignment and License Agreement, which obligations, if not performed, could result in
rights assigned or licensed to us reverting back to Hapten.
In addition to the license agreements listed above, the Company has entered
into and may enter into other license agreements that may benefit us as we develop our RNAi and Samcyprone pipelines.
Other
Strategic Agreements
OPKO
. In March 2013, the Company entered into an Asset Purchase Agreement with OPKO, in which we acquired
substantially all of its RNAi-related assets, which included patents and patent applications, licenses, clinical and preclinical data and other related assets. In exchange for the assets that we purchased from OPKO, we issued 1,666,666 shares of our
common stock and agreed to pay, if applicable: (i) up to $50 million in development and commercialization milestones for the successful development and commercialization of each Qualified Drug (as defined therein) and
(ii) royalty payments equal to: (a) a mid-single-digit percentage of Net Sales (as defined therein) with respect to each Qualified Drug sold for an ophthalmologic use during the applicable Royalty Period (as defined
therein) and (b) a low-single-digit percentage of Net Sales with respect to each Qualified Drug sold for a non-ophthalmologic use during the applicable Royalty Period.
We have certain customary diligence obligations under the Asset Purchase Agreement requiring us to use commercially reasonable efforts to
develop and commercialize one or more products covered by the Asset Purchase Agreement, which obligations, if not performed, could result in assets transferred and rights assigned or licensed to us reverting back to OPKO.
MirImmune
. In March 2015, RXi granted an exclusive license to MirImmune, Inc. (
MirImmune
) to utilize the
Companys novel and proprietary sd-rxRNA technology for MirImmunes use in developing
ex-vivo
cell-based cancer immunotherapies. Under the terms of the agreement, MirImmune will be responsible for all research, development,
manufacturing, regulatory and
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commercialization activities for the licensed products. MirImmune will develop
ex-vivo
cell-based therapeutics utilizing our sd-rxRNA technology to target immune inhibitory pathways
(checkpoints) which are responsible for limiting the efficacy of cancer immunotherapies. The Company is eligible to receive an annual licensing fee, clinical milestone payments and royalties on sales from MirImmune. Further, upon the achievement of
gating milestones, the Company will have the right to acquire a double-digit equity stake in MirImmune.
The Company does not expect to
realize any significant milestone payments or royalties under this agreement in the near term. However, if successful, this collaboration has the potential to result in novel, more effective and patient friendly cancer treatments that could
contribute to developments in personalized medicine.
Research and Development
To date, our research programs have primarily focused on developing technology necessary to make RNAi compounds available by local
administration for diseases for which we intend to develop an RNAi therapeutic, identifying and testing RNAi compounds against therapeutically relevant targets in the fields of dermatology and ophthalmology and identifying lead product candidates
and moving those product candidates into the clinic. Since we commenced operations, research and development has comprised a significant proportion of our total operating expenses and is expected to comprise the majority of our spending for the
foreseeable future.
There are risks in any new field of drug discovery that preclude certainty regarding the successful development of a
product. We cannot reasonably estimate or know the nature, timing and costs of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from, any product candidate. Our inability
to make these estimates results from the uncertainty of numerous factors, including but not limited to:
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Our ability to advance product candidates into preclinical research and clinical trials;
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The scope and rate of progress of our preclinical program and other research and development activities;
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The scope, rate of progress and cost of any clinical trials we commence;
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The cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;
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Clinical trial results;
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The terms and timing of any collaborative, licensing and other arrangements that we may establish;
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The cost and timing of regulatory approvals;
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The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop;
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The cost and timing of establishing sales, marketing and distribution capabilities;
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The effect of competing technological and market developments; and
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The effect of government regulation and insurance industry efforts to control healthcare costs through reimbursement policy and other cost management strategies.
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Failure to complete any stage of the development of our product candidates in a timely manner could have a material adverse effect on our
operations, financial position and liquidity.
Research and Development Expenses
Research and development expenses consist of compensation-related costs for our employees dedicated to research and development activities,
fees related to our Scientific Advisory Board members, expenses related to our ongoing research and development efforts primarily related to our clinical trials, drug manufacturing, outside contract services, licensing and patent fees and laboratory
supplies and services for our research programs.
Total research and development expenses for the years ended December 31, 2015 and 2014
was $6,925,000 and $5,680,000, respectively.
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Competition
We believe that numerous companies are investigating or plan to investigate a variety of proposed anti-scarring therapies in clinical trials or
are working in the RNAi area generally. Many other companies are pursuing non-RNAi-based therapies for one or more fibrotic disease indications, including ocular scarring or other indications that we may seek to pursue. The companies include large
and small pharmaceuticals, chemical and biotechnology companies, as well as universities, government agencies and other private and public research organizations.
We believe that other companies currently developing anti-scarring therapies, both dermal and ocular, include CoDa Therapeutics, Inc.,
Sirnaomics, Inc., FirstString Research, Inc., Promedior, Inc., FibroGen, Inc., MiRagen Therapeutics, Inc., Ophthotech Corporation, Vascular BioSciences, Allergan plc, and Suneva Medical, Inc.
We believe that other companies working in the RNAi area, generally, include Alnylam Pharmaceuticals, Inc., Benitec Limited, Silence
Therapeutics plc, Quark Pharmaceuticals, Inc., Arbutus Biopharma, Arrowhead Research Corporation, Dicerna Pharmaceuticals, Inc., Sylentis, S.A. and Roche Innovation Center Copenhagen A/S, as well as a number of large pharmaceutical companies.
We do not believe that there are any companies developing treatments directly competing with Samcyprone for warts or for alopecia areata
or cutaneous metastases of malignant melanoma. However, there are several existing treatments for each condition with which Samcyprone could potentially compete. Current topical medicinal treatments for warts include salicylic acid, off label
use of Imiquimod and Picato
®
and the most common ablative treatments include removal through medical procedures, such as cryotherapy, surgery or chemical peels. There currently are no
FDA-approved treatments specifically for alopecia areata and the most common treatments used by medical professionals include cortisone injections or pills, topical ointments, such as minoxidil or anthralin, and topical immunotherapy with the use of
chemicals such as DPCP or dinitrochlorobenzene. Finally, common treatment therapies for cutaneous metastases of malignant melanoma include cryotherapy, photodynamic therapy, laser therapy, chemotherapy and immunotherapy, such as the use of
Imiquimod.
Government Regulation
The United States and many other countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage,
record-keeping, advertising, promotion, export, marketing and distribution of drugs and biologic products. The FDA regulates pharmaceutical and biologic products under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other
federal statutes and regulations.
To obtain approval of our future product candidates from the FDA, we must, among other requirements,
submit data supporting safety and efficacy for the intended indication as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive laboratory tests and preclinical and
clinical trials. The collection of these data, as well as the preparation of applications for review by the FDA involve significant time and expense. The FDA also may require post-marketing testing to monitor the safety and efficacy of approved
products or place conditions on any approvals that could restrict the therapeutic claims and commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we
encounter problems at any time following initial marketing of our products.
The first stage of the FDA approval process for a new
biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data and other information
submitted to the FDA in an IND application, must become effective before human clinical trials may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and animal studies to assess the
efficacy and safety of the product candidate.
After the IND becomes effective, a company may commence human clinical trials. These are
typically conducted in three sequential phases, but the phases may overlap. Phase 1 trials consist of testing the product candidate in a small number of patients or healthy volunteers, primarily for safety at one or more doses. Phase 2 trials, in
addition to safety, evaluate the efficacy of the product candidate in a patient population somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for safety and
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clinical efficacy in an expanded population at multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of the Institutional Review Board
(
IRB
) at the institutions participating in the trials, prior to commencement of each clinical trial.
To obtain FDA
marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing, together with, among other things, detailed information on the manufacture and composition of the product candidate, in the form of a new
drug application (an
NDA
), or, in the case of a biologic, a biologics license application (a
BLA
).
The amount of time taken by the FDA for approval of an NDA or BLA will depend upon a number of factors, including whether the product
candidate has received priority review, the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question and the workload at the FDA.
The FDA may, in some cases, confer upon an investigational product the status of a fast track product. A fast track product is defined as a
new drug or biologic intended for the treatment of a serious or life threatening condition that demonstrates the potential to address unmet medical needs for this condition. The FDA can base approval of an NDA or BLA for a fast track product on an
effect on a surrogate endpoint, or on another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data suggests that a fast track product may be effective, the FDA may initiate review of entire
sections of a marketing application for a fast track product before the sponsor completes the application.
We anticipate that our
products will be manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the
manufacturing facilities are in compliance with the FDAs current good manufacturing practices (
cGMP
), which are regulations that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also
must comply with the FDAs general biological product standards. Our manufacturers also will be subject to regulation under the Occupational Safety and Health Act, the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act
and the Resource Conservation and Recovery Act and other applicable environmental statutes. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the cGMP. Our manufacturers
will have to continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing or recall or seizure of product. Adverse patient
experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not
maintained or if problems concerning safety or efficacy of the product occur following approval.
The labeling, advertising, promotion,
marketing and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission requirements which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and
educational activities, promotional activities involving the internet, and direct-to-consumer advertising. We also will be subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of hazardous
materials, including chemicals and radioactive and biological materials. In addition, we will be subject to various laws and regulations governing laboratory practices and the experimental use of animals. In each of these areas, as above, the FDA
has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of product approvals, seize or recall products and deny or withdraw approvals.
We will also be subject to a variety of regulations governing clinical trials and sales of our products outside the United States. Whether or
not FDA approval has been obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained prior to the commencement of marketing the product in those countries. The approval
process varies from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the European Union, Canada and Australia, regulatory requirements and approval processes are similar, in principle,
to those in the United States.
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Environmental Compliance
Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials,
chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste products. We are also subject to numerous
environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. The cost of compliance with these laws and regulations
could be significant and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements.
Employees
As of March 15, 2016, we had
sixteen full-time employees, ten of whom were engaged in research and development, and six of whom were engaged in management, administration and finance. None of our employees are represented by a labor union or covered by a collective bargaining
agreement, nor have we experienced any work stoppages.
Corporate Information
RXi was incorporated in the state of Delaware in 2011. Our executive offices are located at 257 Simarano Drive, Suite 101, Marlborough, MA
01752, and our telephone number is (508) 767-3861.
Investor Information
The Companys website address is
http://www.rxipharma.com
. We make available on our website, free of charge, copies of our annual
reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as
reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the Securities and Exchange Commission (the
SEC
).
You may read and copy any materials the Company files with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC
20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding RXi and
other issuers that file electronically with the SEC. The SECs website address is
http://www.sec.gov
.
Risks Relating to Our Business and Industry
We are dependent on the success of our lead drug candidates, which may not receive regulatory approval or be successfully commercialized.
RXI-109, our lead product candidate and first RNAi-based product candidate, is designed to reduce the expression of CTGF, a
critical regulator of several biological pathways involved in fibrosis. Samcyprone, our second clinical product candidate, is a proprietary topical formulation of diphenylcyclopropenone (
DPCP
), an immunomodulator that works
by initiating a T-cell response. We began the clinical program to reduce the formation of hypertrophic scars with RXI-109 in June 2012, and are currently conducting a Phase 2 clinical trial for RXI-109 in this indication and a Phase 1/2 clinical
trial in retinal scarring. We initiated our Phase 2 clinical trial for the treatment of cutaneous warts with Samcyprone in December 2015. The U.S. Food and Drug Administration (
FDA
) may require additional information from
the Company regarding our current or planned trials at any time, and such information may be costly to provide or cause potentially significant delays in development. There is no assurance that we will be able to successfully develop RXI-109,
Samcyprone or any other product candidate.
We have no commercial products and currently generate no revenue from commercial sales
or collaborations and may never be able to develop marketable products. The FDA or similar foreign governmental agencies must approve our products in development before they can be marketed. The process for obtaining FDA approval is both
time-consuming and costly, with no certainty of a successful outcome. Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive preclinical tests and successful clinical trials to demonstrate the safety and
efficacy of our product candidates in humans. For example, although the results of our Phase 1 clinical trials and preliminary results of our Phase 2 clinical trials of RXI-109 are promising, additional clinical trials will be required to establish
the safety and efficacy of RXI-109. While DPCP has been used by physicians for decades, we
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have not yet shown safety or efficacy in humans for Samcyprone or for any of our other product candidates. A failure of any preclinical study or clinical trial can occur at any stage of
testing. The results of preclinical and initial clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. Preliminary observations made in early stages of clinical trials
with small numbers of subjects are inherently uncertain. Investors are cautioned that initial clinical trial results are not necessarily indicative of results that will be obtained when full data sets are analyzed or in subsequent clinical trials.
A number of different factors could prevent us from obtaining regulatory approval or commercializing our product candidates on a
timely basis, or at all.
We, the FDA or other applicable regulatory authorities, or an Institutional Review Board
(
IRB
) may suspend clinical trials of a drug candidate at any time for various reasons, including if we or they believe the subjects participating in such trials are being exposed to unacceptable health risks. Among other reasons,
adverse side effects of a drug candidate on subjects in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug candidate for any or all indications of
use.
Clinical trials of a new drug candidate require the enrollment of a sufficient number of subjects, including subjects who are
suffering from the disease or condition the drug candidate is intended to treat and who meet other eligibility criteria. Rates of subject enrollment are affected by many factors, and delays in subject enrollment can result in increased costs and
longer development times.
Clinical trials also require the review and oversight of IRBs, which approve and continually review clinical
investigations and protect the rights and welfare of human subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or
information derived from a clinical investigation not subject to initial and continuing IRB review and approval.
Numerous factors could
affect the timing, cost or outcome of our drug development efforts, including the following:
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Delays in filing or acceptance of initial drug applications for our product candidates;
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Difficulty in securing centers to conduct clinical trials;
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Conditions imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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Problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;
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Difficulty in enrolling subjects in conformity with required protocols or projected timelines;
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Third-party contractors failing to comply with regulatory requirements or to meet their contractual obligations to us in a timely manner;
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Our drug candidates having unexpected and different chemical and pharmacological properties in humans than in laboratory testing and interacting with human biological systems in unforeseen, ineffective or harmful ways;
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The need to suspend or terminate clinical trials if the participants are being exposed to unacceptable health risks;
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Insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical trials;
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Effects of our drug candidates not being the desired effects or including undesirable side effects or the drug candidates having other unexpected characteristics;
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The cost of our clinical trials being greater than we anticipate;
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Negative or inconclusive results from our clinical trials or the clinical trials of others for similar drug candidates or inability to generate statistically significant data confirming the efficacy of the product being
tested;
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Changes in the FDAs requirements for testing during the course of that testing;
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Reallocation of our limited financial and other resources to other clinical programs; and
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Adverse results obtained by other companies developing similar drugs.
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It is possible that
none of the product candidates that we may attempt to develop will obtain the appropriate regulatory approvals necessary to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses
for which we may market the product. The time required to obtain FDA and other approvals is unpredictable, but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis we
perform of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material
adverse effect on our ability to generate revenue from the particular drug candidate.
We also are subject to numerous foreign regulatory
requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described
above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of the United States.
The approach we are taking to discover and develop novel therapeutics using RNAi is unproven and may never lead to marketable products.
RNA interference is a relatively new scientific discovery. Our RNAi technologies have been subject to only limited clinical
testing. To date, no company has received regulatory approval to market therapeutics utilizing RNAi, and a number of clinical trials of RNAi technologies by other companies have been unsuccessful. The scientific evidence to support the feasibility
of developing drugs based on these discoveries is both preliminary and limited. To successfully develop RNAi-based products, we must resolve a number of issues, including stabilizing the RNAi material and delivering it into target cells in the human
body. We may spend large amounts of money trying to resolve these issues and may never succeed in doing so. In addition, any compounds that we develop may not demonstrate in subjects the chemical and pharmacological properties ascribed to them in
laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or even harmful ways.
Samcyprone represents a novel approach, topical immunotherapy, to the treatment of skin disorders that presents development
challenges to us and may never lead to marketable products.
Although DPCP, the active ingredient in Samcyprone
, has been used by physicians for several decades to stimulate regrowth of hair in patients with alopecia areata and to clear common warts, it has never been reviewed or approved by a regulatory
authority as a drug. Other immunomodulatory compounds, such as Imiquimod and Picato
®
, have been approved for topical use in other indications by the FDA. Our formulation of DPCP,
Samcyprone, has been subject to only limited clinical testing. Further testing may show that Samcyprone
may interact with human biological systems in unforeseen or ineffective ways. In
addition, to successfully develop Samcyprone we must resolve a number of development challenges, including developing a consistent process for the safe administration of the product and establishing a consistent manufacturing process in line
with the good manufacturing practice regulations. We may spend significant amounts of money to resolve these development challenges and to obtain regulatory approval for Samcyprone and may never succeed in doing so.
The FDA could impose a unique regulatory regime for our therapeutics.
The substances we intend to develop may represent a new class of drug, and the FDA has not yet established any definitive policies, practices
or guidelines in relation to these drugs. While we expect any product candidates that we develop will be regulated as a new drug under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other products we may develop
as biologics under the Public Health Service Act. The lack of policies, practices or guidelines may hinder or slow review by the FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining
requirements that we may not have anticipated.
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Even if we receive regulatory approval to market our product candidates, our product
candidates may not be accepted commercially, which may prevent us from becoming profitable.
The product candidates that we are
developing are based on new technologies and therapeutic approaches. For example, RNAi products may be more expensive to manufacture than traditional small molecule drugs, which may make them more costly than competing small molecule drugs.
Additionally, RNAi products do not readily cross the so-called blood brain barrier, are rapidly eliminated from circulating blood and, for various applications, are likely to require injection or implantation, which will make them less convenient to
administer than drugs administered orally. Key participants in the pharmaceutical marketplace, such as physicians, medical professionals working in large reference laboratories, public health laboratories and hospitals, third-party payors and
consumers may not accept products intended to improve therapeutic results based on our technologies. As a result, it may be more difficult for us to convince the medical community and third-party payors to accept and use our products or to provide
favorable reimbursement. If medical professionals working with large reference laboratories, public health laboratories and hospitals choose not to adopt and use our technologies, our products may not achieve broader market acceptance.
Additionally, although we expect that we will have intellectual property protection for our technology, certain governments may elect to deny
patent protection for drugs targeting diseases with high unmet medical need (e.g., as in the case of HIV) and allow in their country internationally unauthorized generic competition. If this were to happen, our commercial prospects for developing
any such drugs would be substantially diminished in these countries.
We are subject to significant competition and may not be able
to compete successfully.
We believe that numerous companies are investigating or plan to investigate a variety of proposed
anti-scarring therapies in clinical trials or are working in the RNAi area generally. Many other companies are pursuing non-RNAi-based therapies for one or more fibrotic disease indications, including ocular scarring or other indications that we may
seek to pursue. The companies include large and small pharmaceuticals, chemical and biotechnology companies, as well as universities, government agencies and other private and public research organizations.
We do not believe that there are any companies developing treatments directly competing with Samcyprone for warts, or for alopecia
areata or cutaneous metastases of malignant melanoma. However, there are several treatments for each condition with which Samcyprone could potentially compete. For example, current topical medicinal treatments for common warts include
salicylic acid, off label use of Imiquimod and Picato
®
and the most common ablative treatments include removal through medical procedures, such as cryotherapy, surgery or chemical peels.
Most of these competitors have substantially greater research and development capabilities and financial, scientific, technical,
manufacturing, marketing, distribution and other resources than we have, and we may not be able to successfully compete with them. In addition, even if we are successful in developing our product candidates, in order to compete successfully we may
need to be first to market or to demonstrate that our products are superior to therapies based on different technologies. A number of our competitors have already commenced clinical testing of product candidates and may be more advanced than we are
in the process of developing products. If we are not first to market or are unable to demonstrate superiority, any products for which we are able to obtain approval may not be successful.
We are dependent on technologies we license, and if we lose the right to license such technologies or fail to license new technologies
in the future, our ability to develop new products would be harmed.
Many patents in the fields we are pursuing have already been
exclusively licensed to third parties, including our competitors. If any of our existing licenses are terminated, the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate
additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.
We may be unable to
protect our intellectual property rights licensed from other parties; our intellectual property rights may be inadequate to prevent third parties from using our technologies or developing competing products; and we may need to license additional
intellectual property from others.
Therapeutic applications of gene silencing technologies, formulations, delivery methods and
other technologies that we license from third parties are claimed in a number of pending patent applications, but there is no assurance that these applications will result
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in any issued patents or that those patents would withstand possible legal challenges or protect our technologies from competition. The United States Patent and Trademark Office and patent
granting authorities in other countries have upheld stringent standards for the RNAi patents that have been prosecuted so far. Consequently, pending patents that we have licensed and those that we own may continue to experience long and difficult
prosecution challenges and may ultimately issue with much narrower claims than those in the pending applications. Third parties may hold or seek to obtain additional patents that could make it more difficult or impossible for us to develop products
based on our technologies without obtaining a license to such patents, which licenses may not be available on attractive terms, or at all.
In addition, others may challenge the patents or patent applications that we currently license or may license in the future or that we own
and, as a result, these patents could be narrowed, invalidated or rendered unenforceable, which would negatively affect our ability to exclude others from using the technologies described in these patents. There is no assurance that these patent or
other pending applications or issued patents we license or that we own will withstand possible legal challenges. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United
States. Any patents issued to us or our licensors may not provide us with any competitive advantages, and there is no assurance that the patents of others will not have an adverse effect on our ability to do business or to continue to use our
technologies freely. Our efforts to enforce and maintain our intellectual property rights may not be successful and may result in substantial costs and diversion of management time. Even if our rights are valid, enforceable and broad in scope,
competitors may develop products based on technology that is not covered by our licenses or patents or patent applications that we own.
There is no guarantee that future licenses will be available from third parties for our product candidates on timely or satisfactory terms, or
at all. To the extent that we are required and are able to obtain multiple licenses from third parties to develop or commercialize a product candidate, the aggregate licensing fees and milestones and royalty payments made to these parties may
materially reduce our economic returns or even cause us to abandon development or commercialization of a product candidate.
Our success
depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.
The applications
based on RNAi technologies claim many different methods, compositions and processes relating to the discovery, development, delivery and commercialization of RNAi therapeutics. Because this field is so new, very few of these patent applications have
been fully processed by government patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to whom and with what claims. Although we are not aware of any blocking patents or other proprietary
rights, it is likely that there will be significant litigation and other proceedings, such as interference and opposition proceedings in various patent offices, relating to patent rights in the RNAi field. It is possible that we may become a party
to such proceedings.
We may not be able to obtain sufficient financing and may not be able to develop our product candidates.
We believe that our existing cash, cash equivalents and short-term investments and funding available under our equity line with
Lincoln Park Capital Fund, LLC will likely be sufficient to fund our currently planned operations through the first quarter of fiscal 2017. However, in the future, we may need to incur debt or issue equity in order to fund our planned expenditures
as well as to make acquisitions and other investments. We cannot assure you that debt or equity financing will be available to us on acceptable terms or at all. If we cannot, or are limited in the ability to, incur debt, issue equity or enter into
strategic collaborations, we may be unable to fund the discovery and development of our product candidates, address gaps in our product offerings or improve our technology.
We anticipate that we will need to raise substantial amounts of money to fund a variety of future activities integral to the development of
our business, which may include but are not limited to the following:
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To conduct research and development to successfully develop our RNAi and immunotherapy technologies;
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To obtain regulatory approval for our products;
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To file and prosecute patent applications and to defend and assess patents to protect our technologies;
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To retain qualified employees, particularly in light of intense competition for qualified scientists;
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To manufacture products ourselves or through third parties;
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To market our products, either through building our own sales and distribution capabilities or relying on third parties; and
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To acquire new technologies, licenses or products.
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We cannot assure you that any needed
financing will be available to us on acceptable terms or at all. If we cannot obtain additional financing in the future, our operations may be restricted and we may ultimately be unable to continue to develop and potentially commercialize our
product candidates.
Future financing may be obtained through, and future development efforts may be paid for by, the issuance of
debt or equity, which may have an adverse effect on our stockholders or may otherwise adversely affect our business.
If we raise
funds through the issuance of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders of our common stock in the event of a liquidation. In such event, there is a
possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise funds through the issuance of additional equity, whether through private placements or public
offerings, such an issuance would dilute your ownership in us.
The terms of debt securities may also impose restrictions on our
operations, which may include limiting our ability to incur additional indebtedness, to pay dividends on or repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to
satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control.
We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain
profitability, and may lead to uncertainty as to our ability to continue as a going concern.
We expend substantial funds to
develop our RNAi and immunotherapy technologies, and additional substantial funds will be required for further research and development, including preclinical testing and clinical trials of any product candidates, and to manufacture and market any
products that are approved for commercial sale. Because the successful development of our products is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may
not be able to generate enough revenue, even if we are able to commercialize any of our product candidates, to become profitable.
If we
are unable to achieve or sustain profitability or to secure additional financing, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to
continue as a going concern may result in our common stockholders losing their entire investment. There is no guarantee that we will become profitable or secure additional financing. Our financial statements contemplate that we will continue as a
going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our
expansion plans, increased expenses, potential acquisitions or other events will all affect our ability to continue as a going concern.
We will rely upon third parties for the manufacture of our clinical product candidates.
We do not have the facilities or expertise to manufacture supplies of any of our potential product candidates for clinical trials.
Accordingly, we depend on a limited number of manufacturers to obtain supplies and we will need to either develop, contract for, or otherwise arrange for the necessary manufacturers for these supplies. If for any reason we are unable to obtain the
supplies for our potential product candidates, we would have to seek to obtain it from another major manufacturer. There is no assurance that we will be able to timely secure needed supply arrangements on satisfactory terms, or at all. Our failure
to secure these arrangements as needed could have a material adverse effect on our ability to complete the development of our product candidates or, if we obtain regulatory approval for our product candidates, to commercialize them.
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We may not be able to establish or maintain the third-party relationships that are
necessary to develop or potentially commercialize some or all of our product candidates.
We expect to depend on collaborators,
partners, licensees, clinical research organizations and other third parties to support our discovery efforts, to formulate product candidates, to manufacture our product candidates and to conduct clinical trials for some or all of our product
candidates. We cannot guarantee that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and other third parties on favorable terms, if at all.
Our ability to successfully negotiate such agreements will depend on, among other things, potential partners evaluation of the superiority of our technology over competing technologies, the quality of the preclinical and clinical data that we
have generated and the perceived risks specific to developing our product candidates. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or
commercialize our product candidates. We cannot necessarily control the amount or timing of resources that our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot
guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion. We may not be able to readily terminate any such agreements with contract partners even if such contract partners do not fulfill their
obligations to us.
We are subject to potential liabilities from clinical testing and future product liability claims.
If any of our future products are alleged to be defective, they may expose us to claims for personal injury by subjects in clinical trials of
our products or as a result of our distribution agreement with Ethicor Ltd. If our products are approved by the FDA, users may claim that such products caused unintended adverse effects. We will seek to obtain clinical trial insurance for clinical
trials that we conduct, as well as liability insurance for any products that we market. There is no assurance that we will be able to obtain insurance in the amounts we seek, or at all. We anticipate that licensees who develop our products will
carry liability insurance covering the clinical testing and marketing of those products. There is no assurance, however, that any insurance maintained by us or our licensees will prove adequate in the event of a claim against us. Even if claims
asserted against us are unsuccessful, they may divert managements attention from our operations and we may have to incur substantial costs to defend such claims.
Any drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform
initiatives, which could have a material adverse effect on our business.
If approved, we intend to sell our products to
physicians, plastic surgeons and dermatologists, as well as hospitals, oncologists and clinics that receive reimbursement for the healthcare services they provide to their patients from third-party payors, such as Medicare, Medicaid and other
domestic and international government programs, private insurance plans and managed care programs. Most third-party payors may deny reimbursement if they determine that a medical product was not used in accordance with cost-effective treatment
methods, as determined by the third-party payor, was used for an unapproved indication or if they believe the cost of the product outweighs its benefits. Third-party payors also may refuse to reimburse for experimental procedures and devices.
Furthermore, because our programs are still in development, we are unable at this time to determine their cost-effectiveness and the level or method of reimbursement for them. Increasingly, the third-party payors who reimburse patients are requiring
that drug companies provide them with predetermined discounts from list prices, and are challenging the prices charged for medical products. If the price we are able to charge for any products we develop is inadequate in light of our development and
other costs, our profitability could be adversely affected.
We currently expect that any drugs we develop may need to be administered
under the supervision of a physician. Under currently applicable law, drugs that are not usually self-administered may be eligible for coverage by the Medicare program if:
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They are incidental to a physicians services;
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They are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standard of medical practice;
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They are not excluded as immunizations; and
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They have been approved by the FDA.
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Insurers may refuse to provide insurance coverage for newly approved drugs, or insurance coverage
may be delayed or be more limited than the purpose for which the drugs are approved by the FDA. Moreover, eligibility for insurance coverage does not imply that any drug will be reimbursed in all cases or at a rate that covers our costs, including
research, development, manufacture, sale and distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement may be based on payments for other services and may
reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently
restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. Our inability to
promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for new drugs that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to develop
products and our overall financial condition.
Additionally, third-party payors are increasingly attempting to contain healthcare costs by
limiting both coverage and the level of reimbursement for medical products and services. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the
demand for and price levels of our products. If our customers are not reimbursed for our products, they may reduce or discontinue purchases of our products, which could have a material adverse effect on our business, financial condition and results
of operations.
Comprehensive healthcare reform legislation, which became law in 2010, could adversely affect our business and financial
condition. Among other provisions, the legislation provides that a biosimilar product may be approved by the FDA on the basis of analytical tests and certain clinical studies demonstrating that such product is highly similar to an
existing, approved product and that switching between an existing product and the biosimilar product will not result in diminished safety or efficacy. This abbreviated regulatory approval process may result in increased competition if we are able to
bring a product to market. The legislation also includes more stringent compliance programs for companies in various sectors of the life sciences industry with which we may need to comply and enhanced penalties for non-compliance with the new
healthcare regulations. Complying with new regulations may divert management resources, and inadvertent failure to comply with new regulations may result in penalties being imposed on us.
Some states and localities have established drug importation programs for their citizens, and federal drug import legislation has been
introduced in Congress. The Medicare Prescription Drug Plan legislation, which became law in 2003, required the Secretary of Health and Human Services to promulgate regulations for drug reimportation from Canada into the United States under some
circumstances, including when the drugs are sold at a lower price than in the United States. The Secretary, however, retained the discretion not to implement a drug reimportation plan if the Secretary finds that the benefits do not outweigh the
costs, and has so far declined to approve a reimportation plan. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the
reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.
Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with
continuing U.S. and foreign regulations, we could lose our approvals to market drugs and our business would be materially and adversely affected.
Following regulatory approval of any drugs we may develop, we will remain subject to continuing regulatory review, including the review of
adverse drug experiences and clinical results that are reported after our drug products are made available to patients. This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and
manufacturing facilities we use to make any of our drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in
restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and
submission of safety and other post-market information for all of our product candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or
withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.
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If we fail to attract, hire and retain qualified personnel, we may not be able to design,
develop, market or sell our products or successfully manage our business.
Our business prospects are dependent on our management
team and all of our employees. The loss of any of our key employees, including Drs. Cauwenbergh and Pavco, who serve as our Chief Executive Officer and our Chief Development Officer, respectively, or our inability to identify, attract, retain and
integrate additional qualified key personnel, could make it difficult for us to manage our business successfully and achieve our business objectives.
Competition for skilled research, product development, regulatory and technical personnel is intense, and we may not be able to recruit and
retain the personnel we need. The loss of the services of any key research, product development, regulatory and technical personnel, or our inability to hire new personnel with the requisite skills, could restrict our ability to develop our product
candidates.
Risks Relating to Our Common Stock
The price of our common stock has been and may continue to be volatile.
The stock markets, in general, and the markets for drug delivery and pharmaceutical company stocks, in particular, have experienced extreme
volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the limited trading volume of our stock may
contribute to its volatility.
In the past, following periods of volatility in the market price of a particular companys securities,
litigation has often been brought against that company. If litigation of this type is brought against us, it could be extremely expensive and divert managements attention and the Companys resources.
We may not be able to regain compliance with the continued listing requirements of The Nasdaq Capital Market.
On May 7, 2015, we received written notice (the
Notification Letter
) from the Nasdaq Stock Market
(
Nasdaq
) notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires
listed securities to maintain a minimum bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.
Based on the closing bid price of our common stock for the 30 consecutive business days prior to the date of the Notification Letter, we no longer meet the minimum bid price requirement. The Notification Letter provided an initial 180-day period to
regain compliance, which was extended for a second 180-day period on November 4, 2015. As a result of the extension, we have until May 2, 2016 to regain compliance by maintaining a closing bid price of at least $1.00 per share for a minimum of 10
consecutive business days. In the event that we do not regain compliance by that date, Nasdaq may commence delisting proceedings and our common stock will trade, if at all, on the over-the counter market, such as the OTC Bulletin Board or OTCQX
market, which could adversely impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock; limiting our ability to issue additional
securities in the future; and limiting our ability to fund our operations.
We have issued preferred stock in the past and possibly
may issue more preferred stock in the future, and the terms of the preferred stock may reduce the value of our common stock.
We
are authorized to issue up to 10,000,000 shares of preferred stock in one or more series. Our Board of Directors may determine the terms of future preferred stock offerings without further action by our stockholders. The issuance of our preferred
stock could affect your rights or reduce the value of our outstanding common stock. In particular, rights granted to holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights
and restrictions on our ability to merge with or sell our assets to a third party.
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We may acquire other businesses or form joint ventures that may be unsuccessful and could
dilute your ownership interest in the Company.
As part of our business strategy, we may pursue future acquisitions of other
complementary businesses and technology licensing arrangements. We also may pursue strategic alliances. We have no experience with respect to acquiring other companies and limited experience with respect to the formation of collaborations, strategic
alliances and joint ventures. We may not be able to integrate such acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. We also could experience adverse effects on our reported results of
operations from acquisition related charges, amortization of acquired technology and other intangibles and impairment charges relating to write-offs of goodwill and other intangible assets from time to time following the acquisition. Integration of
an acquired company requires management resources that otherwise would be available for ongoing development of our existing business. We may not realize the anticipated benefits of any acquisition, technology license or strategic alliance.
To finance future acquisitions, we may choose to issue shares of our common stock or preferred stock as consideration, which would dilute your
ownership interest in us. Alternatively, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may
result in dilution to our stockholders. Any future acquisitions by us also could result in large and immediate write-offs, the incurrence of contingent liabilities or amortization of expenses related to acquired intangible assets, any of which could
harm our operating results.
We do not anticipate paying cash dividends in the foreseeable future.
Our business requires significant funding. We currently plan to invest all available funds and future earnings in the development and growth
of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain for the foreseeable future.
Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of the
Company or changes in our management and, as a result, depress the trading price of our common stock.
Our certificate of
incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of the Company or changes in our management that the stockholders of the Company may deem advantageous. These provisions:
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Authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;
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Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
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Provide that the Board of Directors is expressly authorized to adopt, alter or repeal our bylaws; and
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Establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
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Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to
negotiate with our Board of Directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management team by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation
Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner.
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