Item 1. Business
Overview
We are an oncology company
focused on the clinical development of novel therapies for cancer. Our common stock is listed on the Nasdaq Capital Market under the symbol MEIP.
Our business purpose is the development of drugs for the treatment of cancer. Our portfolio of drug candidates includes Pracinostat, an oral
histone deacetylase (HDAC) inhibitor being developed in combination with azacitidine for the treatment of patients with newly diagnosed acute myeloid leukemia (AML) who are
³
75
years of age or unfit for intensive chemotherapy and high-risk myelodysplastic syndrome (MDS). In August 2016, we entered into an exclusive worldwide license, development and commercialization agreement with Helsinn Healthcare SA
(Helsinn) for Pracinostat in AML and other potential indications. Our clinical development portfolio also includes ME-401, an oral inhibitor of phosphatidylinositide 3-kinase (PI3K) delta being developed for B-cell
malignancies, and ME-344, a mitochondrial inhibitor that has shown evidence of clinical activity in refractory solid tumors. We own exclusive worldwide rights to ME-401 and ME-344.
Clinical Development Programs
HDAC Inhibitor Drug
Candidate: Pracinostat
Pracinostat is an orally available inhibitor of a group of enzymes called histone deacetylases, or HDACs. HDACs
belong to a larger set of proteins collectively known as epigenetic regulators that can alter gene expression by chemically modifying deoxyribonucleic acid (DNA) or its associated chromosomal proteins. Abnormal activity of these
regulators is believed to play an important role in cancer and other diseases.
Pracinostat has been tested in multiple Phase I and Phase
II clinical trials in advanced hematologic malignancies and solid tumor indications. The results of these studies suggest that Pracinostat has potential best-in-class pharmacokinetic properties when compared to other oral HDAC inhibitors, with side
effects often associated with drugs of this class, the most frequent of which are fatigue and myelosuppression.
Pracinostat has
demonstrated clinical evidence of single-agent activity in patients with AML and myelofibrosis. In a Phase I dose-escalation trial in patients with advanced hematologic malignancies, 14% of the evaluable AML patients (two out of 14) achieved a
complete remission (CR), with the responses enduring for more than 206 and 362 days, respectively. These results were presented at the American Society of Hematology (ASH) Annual Meeting in December 2010. In a Phase II
clinical trial in intermediate or high-risk myelofibrosis, 36% of patients (eight out of 22) demonstrated a clinical response from Pracinostat treatment, with 9% of patients (two out of 22) having a clinical improvement (anemia response) and 27%
(six out of 22) experiencing some reduction in splenomegaly. These results were published in the September 2012 issue of
Leukemia Research
.
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Pracinostat has also shown evidence of synergistic activity when used in combination with the
hypomethylating agent, azacitidine. Results from a pilot study in patients with advanced MDS presented at the ASH Annual Meeting in December 2012 showed an overall response rate of 89% (eight out of nine). The combination of Pracinostat and
azacitidine was generally well-tolerated in the study; the most frequent side effects were nausea and fatigue.
In June 2013, we initiated
a randomized, double-blind, placebo-controlled Phase II clinical study of Pracinostat in combination with azacitidine in intermediate-2 or high-risk patients with previously untreated MDS. The study enrolled 102 evaluable patients, randomized
one-to-one, at 19 sites in the U.S. In March 2015, we announced top-line data from the study, which showed that the addition of Pracinostat to azacitidine failed to improve the overall CR rate, the studys primary endpoint, compared to
azacitidine alone. There were no new toxicities observed in the study; however fatigue, gastrointestinal toxicities and myelosuppression occurred more frequently in the combination group and resulted in a higher rate of drug discontinuations
compared to azacitidine alone, predominantly within the first two cycles of treatment. Exploratory analysis of patients able to tolerate Pracinostat plus azacitidine for at least four cycles suggest superior activity of the combination compared to
azacitidine alone, with hazard ratios for overall survival (0.59) and duration of response (0.48) both favoring the Pracinostat plus azacitidine arm. These data were presented at the ASH Annual Meeting in December 2015.
In February 2014, the U.S. Food & Drug Administration (FDA) granted orphan drug designation to Pracinostat for the treatment
of AML. The designation provides orphan status to drugs defined by the FDA as those intended for the safe and effective treatment, diagnosis or prevention of rare diseases that affect fewer than 200,000 people in the U.S. Orphan designation
qualifies us for certain development incentives, including tax credits for qualified clinical testing, prescription drug user fee exemptions and seven-year marketing exclusivity upon FDA approval. We also intend to seek orphan drug designation in
the U.S. and Europe for Pracinostat in combination with azacitidine for the treatment of AML.
In November 2014, we completed enrollment
in our open-label Phase II study of Pracinostat in combination with azacitidine in elderly patients with newly diagnosed AML. The study enrolled a total of 50 patients at 15 clinical sites in the U.S. The median age in the study was 76 years.
Patients received 60 mg of Pracinostat orally three times a week for three weeks followed by one week of rest and 75 mg/m2 of azacitidine via subcutaneous injection or intravenous infusion for the first seven days of each 28-day cycle.
Results from this study were presented at the ASH Annual Meeting in December 2015. According to the oral presentation by principal
investigator Dr. Guillermo Garcia-Manero, MD Anderson Cancer Center, 28 of the 50 patients in the study (56%) achieved the primary endpoint of CR plus complete response with incomplete blood count recovery (CRi) plus morphologic
leukemia-free state (MLFS), including 21 patients (42%) who achieved a CR. Notably, 19 of the 21 patients who achieved a CR were still alive with a 100% one-year survival rate among all CR patients, indicating a correlation between CR
and survival with this low-intensity therapy.
Median overall survival for all 50 patients in the study was reached at 19.1 months. These
data compare favorably to a recent international Phase III study of azacitidine (AZA-001; Dombret H et al. Blood. 2015 May 18), which showed a median overall survival of 10.4 months with azacitidine alone and a CR rate of 19.5% in a similar patient
population. Median survival among patients with high-risk cytogenetics in this study (n=21) was 13.3 months, more than double the median survival of the high-risk population in the AZA-001 study (6.4 months).
The combination of Pracinostat and azacitidine was generally well tolerated in the study, with no unexpected toxicities. The most common grade
3/4 treatment-emergent adverse events reported in >10% of all patients included febrile neutropenia, thrombocytopenia, anemia and fatigue.
In August 2016, we announced that the FDA granted Breakthrough Therapy Designation for Pracinostat in combination with azacitidine for the
treatment of patients with newly diagnosed AML who are
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75 years of age or unfit for intensive chemotherapy. In addition, agreement has been reached with the FDA on the proposed Phase III study design.
According to the FDA, Breakthrough Therapy Designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The criteria for Breakthrough Therapy Designation require preliminary clinical evidence
that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy. A Breakthrough Therapy Designation has all the benefits of the fast track program together with more intensive
guidance on an efficient drug development program and an organizational commitment involving senior managers.
In August 2016, we entered
into an exclusive license, development and commercialization agreement with Helsinn, a Swiss pharmaceutical corporation, for Pracinostat in AML and other potential indications. Under the terms of the agreement, Helsinn is granted a worldwide
exclusive license to develop, manufacture and commercialize Pracinostat, and is responsible for funding its global development and commercialization. As compensation for such grant of rights, we will receive near-term payments of $20 million,
including a $15 million upfront payment and a $5 million payment upon the earlier to occur of (i) dosing of the first patient in the upcoming Phase III study of Pracinostat in newly diagnosed AML patients unfit to receive induction therapy, or (ii)
March 1, 2017. In addition, we will be eligible to receive up to $444 million in potential regulatory and sales-based milestones, along with royalty payments on the net sales of Pracinostat.
As part of the license, development and commercialization agreement, we will also collaborate with Helsinn to explore an optimal dosing
regimen of Pracinostat in combination with azacitidine for the treatment of high risk MDS. This clinical study is anticipated to commence in the first half of 2017.
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PI3-Kinase Delta Drug Candidate: ME-401
In September 2013, we acquired exclusive worldwide rights to ME-401 from Pathway Therapeutics, Inc. for an undisclosed upfront cash payment
with no future milestone or royalty obligations. Data from pre-clinical studies show ME-401 to be a potent and selective oral inhibitor of PI3K delta, a molecular target that plays a critical role in the proliferation and survival of certain
hematologic cancer cells. ME-401 has a distinct chemical structure from certain other PI3K delta inhibitors, including idelalisib (marketed as Zydelig
®
). Data presented at the ASH Annual
Meeting in December 2012 demonstrated that ME-401 has superior pre-clinical activity compared to idelalisib.
Data from a first-in-human,
single ascending dose clinical study of ME-401 in healthy subjects demonstrated on-target activity at very low plasma concentrations. In addition, the pharmacokinetic results suggest that ME-401 has the potential for a superior pharmacokinetic and
pharmacodynamic profile and an improved therapeutic window compared to idelalisib, with a half-life that supports once-daily dosing. These results were presented at the American Association for Cancer Research (AACR) Annual Meeting in
April 2016. In March 2016, the FDA approved our Investigational New Drug Application (IND) for ME-401 in B-cell malignancies. We expect to dose the first patient in a Phase Ib dose-escalation study of ME-401 in patients with recurrent
chronic lymphocytic leukemia (CLL) or follicular non-Hodgkins lymphoma (fNHL) in the third quarter of calendar year 2016.
Mitochondrial Inhibitor Drug Candidate: ME-344
ME-344 is our isoflavone-derived mitochondrial inhibitor drug candidate. In preclinical studies, ME-344 has been shown to cause cell death in
multiple human tumor cell lines, including ovarian cancer stem cells, by interfering with mitochondrial energy generation.
Results from
our first-in-human, single-agent Phase I clinical trial of ME-344 in patients with refractory solid tumors were published in the April 1, 2015 issue of
Cancer
. The results indicated that eight of 21 evaluable patients (38%) treated with
ME-344 achieved stable disease or better, including five who experienced progression-free survival that was at least twice the duration of their last prior treatment before entry into the study. In addition, one of these patients, a heavily
pre-treated patient with small cell lung cancer, achieved a confirmed partial response and remained on study for two years. ME-344 was generally well tolerated at doses equal to or less than 10 mg/kg delivered on a weekly schedule for extended
durations. Treatment-related adverse events included nausea, dizziness and fatigue. Dose limiting toxicities were observed at both the 15 mg/kg and 20 mg/kg dose levels, consisting primarily of Grade 3 peripheral neuropathy.
In May 2015, we announced new pre-clinical data from a collaboration with the Spanish National Cancer Research Centre in Madrid showing
mitochondria-specific effects of ME-344 in cancer cells, including substantially enhanced anti-tumor activity when combined with agents that inhibit the activity of vascular endothelial growth factor (VEGF). These new data demonstrate
that the anti-cancer effects when combining ME-344 with a VEGF inhibitor are due to an inhibition of both mitochondrial and glycolytic metabolism. An investigator-sponsored study of ME-344 in combination with the VEGF inhibitor bevacizumab (marketed
as Avastin
®
) in human epidermal growth factor receptor 2 (HER2)-negative breast cancer opened for enrollment in August 2016.
Scientific Overview
Epigenetics Program
HDACs play a key role in epigenetic regulation of gene expression by regulating chromatin structure. Acetylation of positively charged lysine
residues present in histone proteins by the histone acetyltransferase (HATs) reduces the affinity between histones and negatively charged DNA, resulting in the opening of the chromatin structure. This makes it easier for the
transcriptional machinery to access the DNA, enhancing RNA transcription. Conversely, deacetylation by the HDACs closes the chromatin structure leading to a repression of gene transcription. In normal cells, HDACs and HATs together control histone
acetylation levels to maintain a balance. In diseases such as cancer, this regulation can be disturbed. HDAC inhibitors cause accumulation of acetylated histones, enhance transcription and result in changes of a variety of cellular responses
including differentiation, proliferation, migration, survival and response to metabolic and hypoxic stress. In general, tumor cells are more susceptible than normal cells to the anti-proliferative and pro-apoptotic effects of HDAC inhibitors.
There are currently three HDAC inhibitors, one oral and two injectable, approved by the FDA for the treatment of T-cell lymphoma and a
fourth HDAC (oral) approved for multiple myeloma. Other HDAC inhibitors are being evaluated in clinical trials as single agents and in combination with chemotherapy for various hematologic diseases, including AML, MDS and myelofibrosis, as well as
for solid tumors.
Pracinostat
Pracinostat is an orally available, potent HDAC inhibitor with potentially improved physicochemical, pharmaceutical and pharmacokinetic
properties when compared to other compounds of this class, including increased bioavailability and increased half-life.
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Pracinostat has been tested in more than 300 patients in multiple Phase I and Phase II clinical
trials and found to be generally well tolerated with manageable side effects often associated with drugs of this class, including fatigue, myelosuppresion and gastrointestinal toxicity. Results from a Phase I dose-escalation study, presented at the
ASH Annual Meeting in December 2010, demonstrated clinical evidence of single-agent activity in patients with AML, including two CRs. In addition, data from a Phase II clinical trial of Pracinostat showed single-agent activity in patients with
intermediate or high-risk myelofibrosis. These results were published in the September 2012 issue of
Leukemia Research
.
Pracinostat has also shown evidence of activity when used in combination with a wide range of therapies in clinical and pre-clinical studies.
Pre-clinical data published in the May 2012 issue of
Blood Cancer Journal
demonstrated synergistic activity when Pracinostat was combined with Pacritinib, an experimental JAK2 inhibitor. In addition to the Phase II clinical studies in AML and
MDS as described under Clinical Development Programs above, Pracinostat is currently being evaluated in a Phase II study in combination with ruxolitinib (marketed as Jakafi® and Jakavi®) in patients with myelofibrosis. The goal
of this study is to learn if Pracinostat, when given in combination with ruxolitinib, can help to control myelofibrosis. The study, sponsored by the M.D. Anderson Cancer Center, began enrollment in early calendar year 2015.
Signaling Program
ME-401
The PI3K/AKT/mTOR pathway is an important signaling pathway for many cellular functions such as cell survival, cell cycle progression and
cellular growth. PI3Ks are a family of enzymes within this pathway that have been shown to play a critical role in the proliferation and survival of certain cancer cells. There are several isoforms of PI3K that are expressed in different types of
cells. The PI3K delta isoform is believed to be important for survival of certain B-cell leukemias and lymphomas.
In pre-clinical
studies, ME-401 has been found to be a potent and selective oral inhibitor of PI3K delta, with a distinct chemical structure and evidence of improved pre-clinical activity compared to the approved PI3K delta-selective inhibitor, idelalisib. In
March 2016, the FDA approved our IND for ME-401 in B-cell malignancies.
Cancer Metabolism Program
Our Company was originally formed to develop novel cancer therapeutics based on a group of compounds known as isoflavones. More than 400 new
chemical structures were created based on the central design of these naturally occurring plant isoflavones. We believe that some of these synthetic compounds, including our drug candidate ME-344, interact with specific enzyme targets, resulting in
the inhibition of tumor cell metabolism, a function critical for the survival of cancer cells.
ME-344
ME-344 is the active metabolite of a first generation compound, named NV-128. The proposed target for NV-128 and ME-344 is found in the
tumor cell mitochondria, the specialized area in the cell that produces energy in the form of adenosine triphosphate (ATP). When these compounds interact with their target, a rapid reduction in ATP occurs, which leads to a cascade of
biochemical events within the cell and ultimately to cell death. One outcome that is believed to be critical for cell death induction by ME-344 is the disruption of both mammalian target of rapamycin (mTOR1 and mTOR2) pathways. In cancer cells,
the mTOR protein is involved in enhancing tumor growth and may be associated with resistance to chemotherapeutic drugs. Inhibition of both mTOR pathways appears to shut down many of the cellular survival pathways of cancer cells.
ME-344 has demonstrated broad activity against a panel of human cancer cell lines both as a single agent and as a chemosensitizing
agent. Results from laboratory research studies conducted in collaboration with the Department of Obstetrics, Gynecology, and Reproductive Sciences at the Yale School of Medicine demonstrate that NV-128 and ME-344 are active against
chemotherapy-resistant ovarian tumor stem cells. In April 2011, at the AACR Annual Meeting, researchers from the Yale School of Medicine presented pre-clinical data demonstrating the ability of NV-128 to induce mitochondrial instability, ultimately
leading to cell death in chemotherapy-resistant ovarian cancer stem cells. This cell death was associated with the activation of the MEK/ERK pathway leading to mitochondrial depolarization and DNA fragmentation. The study further characterized
the mechanism of action of NV-128 and demonstrated that NV-128 also promotes a state of cellular starvation, resulting in the activation of the AMP kinase pathway, leading to inhibition of both mTOR pathways and the induction of destructive
autophagy. In April 2013, new data were presented at the AACR Annual Meeting showing the ability of ME-344 to decrease tumor burden and delay recurrence in a pre-clinical
in vivo
model of recurrent epithelial ovarian cancer.
In a paper published in the February 2015 issue of the
American Journal of Cancer Research
, our collaborators at the MIMR-PHI Institute
of Medical Research in Melbourne identified mitochondrial oxidative phosphorylation complex I as a direct molecular target of ME-344, with the inhibition of this complex causing an immediate reduction of mitochondrial oxygen consumption. This
finding provides new understanding of how ME-344 induces cell death by disrupting mitochondrial metabolism.
To gain further insight into
its mechanism of action, researchers at the Medical University of South Carolina in Charleston compared the activity of ME-344 in sensitive and naturally resistant lung cancer cell lines. In a dose dependent manner, ME-344 caused instantaneous and
pronounced inhibition of oxygen consumption rates in drug-sensitive lung cancer cells, but significantly less in drug-resistant cells. Drug resistance correlated with higher glycolytic metabolism in these cells. These findings were published in the
August 2016 issue of
The Journal Of Pharmacology And Experimental Therapeutics
.
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In addition, using a well-characterized spontaneous breast tumor model, researchers at the
Spanish National Cancer Research Centre in Madrid found that chronic treatment with the small molecule VEGFr nintedanib significantly diminished tumor cell glycolysis, however the growing tumor shifted to reliance on mitochondrial metabolism as its
primary energy source. Subsequently, tumors primed by treatment with nintedanib showed substantially enhanced sensitivity to the mitochondrial inhibitor ME-344, with synergistic anti-tumor activity. These findings were published in the June 2016
issue of
Cell Reports
.
Competition
The marketplace for our drug candidates is highly competitive. A number of other companies have products or drug candidates in various stages
of pre-clinical or clinical development that are intended for the same therapeutic indications for which our drug candidates are being developed. Some of these potential competing drugs are further advanced in development than our drug candidates
and may be commercialized sooner. Even if we are successful in developing effective drugs, our drug candidates may not compete successfully with products produced by our competitors.
Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research
institutions. In addition, companies active in different but related fields represent substantial competition for us. Many of our competitors developing oncology drugs have significantly greater capital resources, larger research and development
staffs and facilities, and greater experience in drug development, regulation, manufacturing, and marketing than we do. They compete with us in recruiting eligible patients to participate in clinical studies and in attracting development and/or
commercialization partners. They also license technologies that are competitive with our technologies. As a result, our competitors may be able to more easily develop technologies and products that would render our technologies or our drug
candidates obsolete or non-competitive.
Intellectual Property
We own, by assignment, worldwide rights to each of our current drug candidates. Our intellectual property portfolio includes approximately 17
issued U.S. patents, 130 issued foreign patents, nine pending U.S. patent applications and 39 pending foreign applications.
We have
acquired, by assignment, patents and patent applications from S*Bio relating to a family of heterocyclic compounds, which include Pracinostat, that inhibit histone deacetylases. The U.S. Patent and Trademark Office (USPTO) has issued
five patents covering a number of these heterocyclic-based compounds, including Pracinostat, and their composition of matter, pharmaceutical compositions, and methods of use to treat proliferative diseases. The composition of matter claims
covering Pracinostat are projected to expire in May 2028, not including patent term extension. On August 5, 2016, the Company entered into an exclusive license, development and commercialization agreement with Helsinn. The agreement has a
term (the Term) commencing on the effective date and continuing, on a country-by-country basis, until the later of the date (i) of expiration of the applicable patents in such country, (ii) of expiration of regulatory
exclusivity in such country or (iii) that is 15 years after the first commercial sale in such country. With respect to certain defined Tier 2 countries, the Term is solely based on 15 years from first commercial sale. During
the Term, the Company granted to Helsinn an exclusive (subject to certain retained rights to perform obligations under the agreement), sublicenseable, payment-bearing, license under and to certain patents and know-how controlled by the Company to
develop, manufacture and commercialize Pracinostat and any pharmaceutical product containing Pracinostat for all human and animal indications.
We have acquired, by assignment, patents and patent applications from Novogen, our former majority shareholder, which relate to a large
family of isoflavonoid compounds, including ME-344. The USPTO has issued three patents covering ME-344, including its composition of matter, pharmaceutical compositions and methods of use to treat cancer. The composition of matter claims covering
ME-344 are expected to expire in March 2027, not including patent term extension.
We have acquired by assignment worldwide rights to
ME-401 and other related compounds from Pathway Therapeutics, Inc. The USPTO has issued two patents covering the composition of matter and pharmaceutical compositions of ME-401 which are projected to expire in January 2031 and December 2032,
not including any patent term extension. There are currently one U.S. and 19 foreign applications for ME-401 and related compounds pending.
Our success depends in large part on our ability to protect our proprietary technologies, compounds and information, and to operate without
infringing the proprietary rights of third parties. We rely on a combination of patent, trade secret, copyright, and trademark laws, as well as confidentiality, licensing and other agreements, to establish and protect our proprietary rights. We seek
patent protection for our key inventions, including drug candidates we identify, routes for chemical synthesis and pharmaceutical formulations. There is no assurance that any of our pending patent applications will issue, or that any of our patents
will be enforceable or will cover a drug or other commercially significant product or method. In addition, we regularly review our patent portfolio to identify patents and patent applications that we deem to have relatively low value to our ongoing
business operations for potential abandonment. There is also no assurance that we will correctly identify which of our patents and patent applications should be maintained and which should be abandoned. The term of most of our other current patents
commenced, and most of our future patents, if any, will commence, on the date of issuance and terminate 20 years from the earliest effective filing date of the patent application. Because any marketing and regulatory approval for a drug often occurs
several years after the related patent application is filed, the resulting market exclusivity afforded by any patent on our drug candidates and technologies will likely be substantially less than 20 years.
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As most patent applications in the U.S. are maintained as confidential until published by the
U.S. Patent and Trademark Office at 18 months from filing for all cases filed after November 29, 2000, or at issue, for cases filed prior to November 29, 2000, we cannot be certain that we, S*Bio, Novogen or Pathway Therapeutics, Inc. were the first
to make the inventions covered by the patents and applications referred to above. Additionally, publication of discoveries in the scientific or patent literature often lags behind the actual discoveries. Moreover, pursuant to the terms of the
Uruguay Round Agreements Act, patents filed on or after June 8, 1995 have a term of twenty years from the date of such filing except for provisional applications, irrespective of the period of time it may take for such patent to ultimately
issue. This may shorten the period of patent protection afforded to therapeutic uses of Pracinostat, ME-401 or ME-344, as patent applications in the biopharmaceutical sector often take considerable time to issue. However, in some countries the
patent term may be extended.
In order to protect the confidentiality of our technology, including trade secrets and know-how and other
proprietary technical and business information, we require all of our consultants, advisors and collaborators to enter into agreements that prohibit the use or disclosure of information that is deemed confidential. These agreements also oblige our
consultants, advisors and collaborators to assign to us, or negotiate a license to developments, discoveries and inventions made by such persons in connection with their work relating to our products. We cannot be sure that confidentiality will be
maintained by those from whom we have acquired technology or disclosure prevented by these agreements. We also cannot be sure that our proprietary information or intellectual property will be protected by these agreements or that others will not
independently develop substantially equivalent proprietary information or intellectual property.
The pharmaceutical industry is highly
competitive and patents may have been applied for by, and issued to, other parties relating to products competitive with Pracinostat, ME-401 or ME-344. Use of these compounds and any other drug candidates may give rise to claims that they infringe
the patents or proprietary rights of other parties, existing now and in the future. An adverse claim could subject us to significant liabilities to such other parties and/or require disputed rights to be licensed from such other parties. We cannot
be sure that any license required under any such patents or proprietary rights would be made available on terms acceptable to us, if at all. If we do not obtain such licenses, we may encounter delays in product market introductions, or may find that
the development, manufacture or sale of products requiring such licenses may be precluded.
Research and Development
The objective of our research and development program is the generation of data sufficient to achieve regulatory approval of our drug
candidates in one or more dosage forms in major markets such as the U.S., to develop commercially attractive attributes, and/or to allow us to enter into a development and/or commercial relationship with another party. The data are generated by our
pre-clinical studies and clinical trial programs.
The key aspects of our research and development program are to provide more complete
characterization of the following:
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the relevant molecular targets of action of our drug candidates;
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the relative therapeutic benefits and indications for use of our drug candidates as a monotherapy or as part of combinational therapy with other agents;
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the most appropriate therapeutic indications and dosage forms for Pracinostat, ME-401 and ME-344.
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Our research and development expenses include clinical and preclinical study fees, personnel costs, and manufacturing costs. Research and
development expenses were $13.4 million, $23.8 million, and $19.3 million for the years ended June 30, 2016, 2015 and 2014, respectively.
Government
Regulation
U.S. Regulatory Requirements
The FDA, and comparable regulatory agencies in other countries, regulate and impose substantial requirements upon the research, development,
pre-clinical and clinical testing, labeling, manufacture, quality control, storage, approval, advertising, promotion, marketing, distribution and export of pharmaceutical products including biologics, as well as significant reporting and
record-keeping obligations. State governments may also impose obligations in these areas.
In the U.S., pharmaceutical products are
regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (FDCA) and other laws, including in the case of biologics, the Public Health Service Act. We believe, but cannot be certain, that our products will be regulated as drugs
by the FDA. The process required by the FDA before drugs may be marketed in the U.S. generally involves the following:
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pre-clinical laboratory evaluations, including formulation and stability testing, and animal tests performed under the FDAs Good Laboratory Practices regulations to assess pharmacological activity and toxicity
potential;
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submission and approval of an IND, including results of pre-clinical tests, manufacturing information, and protocols for clinical tests, which must become effective before clinical trials may begin in the U.S.;
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obtaining approval of Institutional Review Boards (IRB), to administer the products to human subjects in clinical trials;
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adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for the products intended use;
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development of manufacturing processes which conform to FDA current Good Manufacturing Practices (cGMP), as confirmed by FDA inspection;
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submission of results for pre-clinical and clinical studies, and chemistry, manufacture and control information on the product to the FDA in a New Drug Approval Application (NDA); and
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FDA review and approval of a NDA, prior to any commercial sale or shipment of a product.
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testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain that any approval will be granted on a timely basis, if at all.
The results of the pre-clinical studies, together with initial specified manufacturing information, the proposed clinical trial protocol, and
information about the participating investigators are submitted to the FDA as part of an IND, which must become effective before we may begin human clinical trials in the U.S. Additionally, an independent IRB must review and approve each study
protocol and oversee conduct of the trial. An IND becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises concerns or questions about the conduct of the trials as outlined in the IND and imposes a
clinical hold. If the FDA imposes a clinical hold, the IND sponsor must resolve the FDAs concerns before clinical trials can begin. Pre-clinical tests and studies can take several years to complete, and there is no guarantee that an IND we
submit based on such tests and studies will become effective within any specific time period, if at all.
Human clinical trials are
typically conducted in three sequential phases that may overlap.
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Phase I:
The drug is initially introduced into healthy human subjects or patients and tested for safety and dosage tolerance. Absorption, metabolism, distribution, and excretion testing is generally performed at
this stage.
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Phase II:
The drug is studied in controlled, exploratory therapeutic trials in a limited number of subjects with the disease or medical condition for which the new drug is intended to be used in order to identify
possible adverse effects and safety risks, to determine the preliminary or potential efficacy of the product for specific targeted diseases or medical conditions, and to determine dosage tolerance and the optimal effective dose.
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Phase III:
When Phase II studies demonstrate that a specific dosage range of the drug is likely to be effective and the drug has an acceptable safety profile, controlled, large-scale therapeutic Phase III trials
are undertaken at multiple study sites to demonstrate clinical efficacy and to further test for safety in an expanded patient population.
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We cannot be certain that we will successfully complete clinical testing of our products within any specific time period, if at
all. Furthermore, the FDA, the IRB or we may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.
Results of pre-clinical studies and clinical trials, as well as detailed information about the manufacturing process, quality control methods,
and product composition, among other things, are submitted to the FDA as part of a NDA seeking approval to market and commercially distribute the product on the basis of a determination that the product is safe and effective for its intended use.
Before approving a NDA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless cGMP compliance is satisfactory. If applicable regulatory criteria are not satisfied, the FDA may deny the NDA
or require additional testing or information. As a condition of approval, the FDA also may require post-marketing testing or surveillance to monitor the products safety or efficacy. Even after a NDA is approved, the FDA may impose additional
obligations or restrictions (such as labeling changes, or clinical post-marketing requirements), or even suspend or withdraw a product approval on the basis of data that arise after the product reaches the market, or if compliance with regulatory
standards is not maintained. We cannot be certain that any NDA we submit will be approved by the FDA on a timely basis, if at all. Also, any such approval may limit the indicated uses for which the product may be marketed. Any refusal to approve,
delay in approval, suspension or withdrawal of approval, or restrictions on indicated uses could have a material adverse impact on our business prospects.
Each NDA must be accompanied by a user fee, pursuant to the requirements of the Prescription Drug User Fee Act (PDUFA), and
its amendments. According to the FDAs fee schedule, effective on October 1, 2015 the user fee for an application requiring clinical data, such as a NDA, is $2,374,200. PDUFA also imposes an annual product fee for prescription drugs and
biologics ($114,450), and an annual establishment fee ($585,200) on facilities used to manufacture prescription drugs and biologics. The FDA adjusts the PDUFA user fees on an annual basis. Effective on October 1, 2016, the user fee for an
application requiring clinical data, such as a NDA, will decrease to $2,038,100, the annual product fee for prescription drugs and biologics will decrease to $97,750, and the annual establishment fee on facilities used to manufacture prescription
drugs and biologics will increase to $512,200. A written request can be submitted for a waiver for the application fee for the first human drug application that is filed by a small business, but there are no waivers for product or establishment
fees. We are not at the stage of development with our products where we are subject to these fees, but they are significant expenditures that may be incurred in the future and must be paid at the time of application submissions to the FDA.
Satisfaction of FDA requirements typically takes several years. The
actual time required varies substantially, based upon the type, complexity, and novelty of the pharmaceutical product, among other things. Government regulation imposes costly and time-consuming requirements and restrictions throughout the product
life cycle and may delay product marketing for a considerable period of time, limit product marketing, or prevent marketing altogether. Success in pre-clinical or early stage clinical trials does not ensure success in later stage clinical trials.
Data obtained from pre-clinical and clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit, or prevent marketing approval. Even if a product receives marketing approval, the approval
is limited to specific clinical indications. Further, even after marketing approval is obtained, the discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from
the market.
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After product approval, there are continuing significant regulatory requirements imposed by the
FDA, including record-keeping requirements, obligations to report adverse side effects in patients using the products, and restrictions on advertising and promotional activities. Quality control and manufacturing procedures must continue to conform
to cGMPs, and the FDA periodically inspects facilities to assess cGMP compliance. Additionally, post-approval changes in ingredient composition, manufacturing processes or facilities, product labeling, or other areas may require submission of a NDA
Supplement to the FDA for review and approval. New indications will require additional clinical studies and submission of a NDA Supplement. Failure to comply with FDA regulatory requirements may result in an enforcement action by the FDA, including
Warning Letters, product recalls, suspension or revocation of product approval, seizure of product to prevent distribution, impositions of injunctions prohibiting product manufacture or distribution, and civil and criminal penalties. Maintaining
compliance is costly and time-consuming. We cannot be certain that we, or our present or future suppliers or third-party manufacturers, will be able to comply with all FDA regulatory requirements, and potential consequences of noncompliance could
have a material adverse impact on our business prospects.
The FDAs policies may change, and additional governmental regulations may
be enacted that could delay, limit, or prevent regulatory approval of our products or affect our ability to manufacture, market, or distribute our products after approval. Moreover, increased attention to the containment of healthcare costs in the
U.S. and in foreign markets could result in new government regulations that could have a material adverse effect on our business. Our ability to commercialize future products will depend in part on the extent to which coverage and reimbursement for
the products will be available from government and health administration authorities, private health insurers, and other third-party payers. European Union member states and U.S. government and other third-party payers increasingly are attempting to
contain healthcare costs by consideration of new laws and regulations limiting both coverage and the level of reimbursement for new drugs. Our failure to obtain coverage, an adequate level of reimbursement, or acceptable prices for our future
products could diminish any revenues we may be able to generate. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or abroad.
Our activities also may be subject to state laws and regulations that affect our ability to develop and sell our products. We are also
subject to numerous federal, state, and local laws relating to such matters as safe working conditions, clinical, laboratory, and manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially
hazardous substances. We may incur significant costs to comply with such laws and regulations now or in the future, and the failure to comply may have a material adverse impact on our business prospects.
The FDCA includes provisions designed to facilitate the development and expedite the review of drugs and biological products intended for
treatment of serious or life-threatening conditions that demonstrate the potential to address unmet medical needs for such conditions. These provisions set forth a procedure for designation of a drug as a fast track product. The fast
track designation applies to the combination of the product and specific indication for which it is being studied. A product designated as fast track is ordinarily eligible for additional programs for expediting development and review, but products
that are not in fast track drug development programs may also be able to take advantage of these programs. These programs include priority review of NDAs and accelerated approval. Drug approval under the accelerated approval regulations may be based
on evidence of clinical effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. A post-marketing clinical study will be required to verify clinical benefit, and other restrictions to assure safe use may be
imposed. We do not currently have fast track designation for any of our clinical programs. If we should seek such designation for any of our programs, however, we cannot be assured that it will be granted by the FDA.
Under the Drug Price Competition and Patent Term Restoration Act of 1984, a sponsor may obtain marketing exclusivity for a period of time
following FDA approval of certain drug applications, regardless of patent status, if the drug is a new chemical entity or if new clinical studies were required to support the marketing application for the drug. This marketing exclusivity prevents a
third party from obtaining FDA approval for an identical or nearly identical drug under an Abbreviated New Drug Application or a 505(b)(2) New Drug Application. The statute also allows a patent owner to obtain an extension of applicable
patent terms for a period equal to one-half the period of time elapsed between the filing of an IND and the filing of the corresponding NDA plus the period of time between the filing of the NDA and FDA approval, with a five year maximum patent
extension. We cannot be certain that we will be able to take advantage of either the patent term extension or marketing exclusivity provisions of these laws.
The Best Pharmaceuticals for Children Act (BPCA), signed into law on January 4, 2002, was reauthorized and amended by the FDA
Amendments Act of 2007 (FDAAA). The reauthorization of BPCA provides an additional six months of patent protection to NDA applicants that conduct acceptable pediatric studies of new and currently-marketed drug products for which
pediatric information would be beneficial, as identified by the FDA in a Pediatric Written Request. The Pediatric Research Equity Act (PREA), signed into law on December 3, 2003, also was reauthorized and amended by the FDAAA. The
reauthorization of PREA requires that most applications for drugs and biologics include a pediatric assessment (unless waived or deferred) to ensure the drugs and biologics safety and effectiveness in children. Such pediatric assessment
must contain data, gathered using appropriate formulations for each age group for which the assessment is required, that are adequate to assess the safety and effectiveness of the drug or the biological product for the claimed indications in all
relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the drug or the biological product is safe and effective. The pediatric assessments can only be deferred provided there is a
timeline for the completion of such studies. The FDA may waive (partially or fully) the pediatric assessment requirement for several reasons, including if the applicant can demonstrate that reasonable attempts to produce a pediatric formulation
necessary for that age group have failed. The Food and Drug Administration Safety and Innovation Act signed into law on July 9, 2012, permanently renewed and strengthened BPCA and PREA.
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Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a
rare disease or condition, which generally is a disease or condition that affects fewer than 200,000 individuals in the U.S. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and
approval process. If a product which has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, i.e., the FDA may not approve any
other applications to market the same drug for the same indication for a period of seven years, except in limited circumstances. Pracinostat has been granted orphan drug designation by the FDA for the treatment of AML, but it may not receive orphan
designation for other indications. We also intend to seek orphan drug designation in the U.S. and Europe for Pracinostat in combination with azacitidine for the treatment of AML. Our other products may not be eligible for orphan drug status or be
designated as orphan drugs. Even if designated as orphan drugs, our products may not be approved before other applications or granted orphan drug exclusivity if approved.
Foreign Regulatory Requirements
Outside the U.S., our ability to market our products will also be contingent upon receiving marketing authorizations from the appropriate
regulatory authorities and compliance with applicable post-approval regulatory requirements. Although the specific requirements and restrictions vary from country to country, as a general matter, foreign regulatory systems include risks similar to
those associated with FDA regulation, described above.
Under European Union regulatory systems, marketing authorizations may be submitted
either under a centralized or a national procedure. Under the centralized procedure, a single application to the European Medicines Agency (EMA) leads to an approval granted by the European Commission which permits the marketing of the
product throughout the EU. The centralized procedure is mandatory for certain classes of medicinal products, but optional for others. For example, all medicinal products developed by certain biotechnological means, and those developed for cancer and
other specified diseases and disorders, must be authorized via the centralized procedure. We assume that the centralized procedure will apply to our products that are developed by means of a biotechnology process or are intended for treatment of
cancer. The national procedure is used for products that are not required to be authorized by the centralized procedure. Under the national procedure, an application for a marketing authorization is submitted to the competent authority of one member
state of the EU. The holders of a national marketing authorization may submit further applications to the competent authorities of the remaining member states via either the decentralized or mutual recognition procedure. The decentralized procedure
enables applicants to submit an identical application to the competent authorities of all member states where approval is sought at the same time as the first application, while under the mutual recognition procedure, products are authorized
initially in one member state, and other member states where approval is sought are then requested to recognize the original authorization based upon an assessment report prepared by the original authorizing competent authority. Both the
decentralized and mutual recognition procedures should take no longer than 90 days, but if one member state makes an objection, which under the legislation can only be based on a possible risk to human health, the application will be automatically
referred to the Committee for Medicinal Products for Human Use (CHMP) of the EMA. If a referral for arbitration is made, the procedure is suspended. However, member states that have already approved the application may, at the request of
the applicant, authorize the product in question without waiting for the result of the arbitration. Such authorizations will be without prejudice to the outcome of the arbitration. For all other concerned member states, the opinion of the CHMP,
which is binding, could support or reject the objection or alternatively could reach a compromise position acceptable to all EU countries concerned. The arbitration procedure may take an additional year before a final decision is reached and may
require the delivery of additional data.
As with FDA approval, we may not be able to secure regulatory approvals in Europe in a timely
manner, if at all. Additionally, as in the U.S., post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution, would apply to any product that is approved in Europe, and failure to comply with such
obligations could have a material adverse effect on our ability to successfully commercialize any product.
The conduct of clinical trials
in the European Union is governed by the European Clinical Trials Directive (2001/20/EC), which was implemented in May 2004. This Directive governs how regulatory bodies in member states control clinical trials. No clinical trial may be started
without a clinical trial authorization granted by the national competent authority and favorable ethics approval. New legislation to revise and replace the European Clinical Trials Directive is currently proposed by the European Commission and
is under consideration by European Union institutions.
Accordingly, there is a marked degree of change and uncertainty both in the
regulation of clinical trials and in respect of marketing authorizations which we face for our products in Europe.
Manufacturing
We do not have the facilities or capabilities to commercially manufacture any of our products and product candidates. We are and expect to
continue to be dependent on contract manufacturers for supplying our existing and future product candidates for clinical trials and commercial scale manufacturing of our product candidates in accordance with regulatory requirements, including
current Good Manufacturing Practices. Contract manufacturers may utilize their own technology, technology developed by us, or technology acquired or licensed from third parties. FDA approval of the manufacturing procedures and the site will be
required prior to commercial distribution.
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Employees
As of June 30, 2016, we had 23 employees, seven of whom hold a Ph.D. or M.D. degree. Other personnel resources are used from time to time
as consultants or third party service organizations on an as-needed basis. All members of our senior management team have prior experience with pharmaceutical, biotechnology or medical product companies. We believe that we have been successful
in attracting skilled and experienced personnel, but there can be no assurance that we will be able to attract and retain the individuals needed. None of our employees are represented by a collective bargaining agreement, nor have we
experienced work stoppages. We believe that our relations with our employees are good.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or
furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website at www.meipharma.com as soon as reasonably practicable after
they are electronically filed with, or furnished to, the Securities and Exchange Commission.
Item 1A. Risk Factors
Investment in our securities involves a high degree of risk. You should consider carefully the risks described below, together with other information in
this Annual Report and other public filings, before making investment decisions regarding our securities. If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially and
adversely affected. This could cause the trading price of our common stock to decline and you may lose all or part of your investment. Moreover, the risks described below are not the only ones that we face. Additional risks not presently known to us
or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition.
Risks Related to Our
Business
We will need substantial additional funds to progress the clinical trial program for our drug candidates, and to develop new compounds.
The actual amount of funds we will need will be determined by a number of factors, some of which are beyond our control.
We will
need substantial additional funds to progress the clinical trial program for our drug candidates and to develop any additional compounds. The factors which will determine the actual amount of funds that we will need to progress the clinical trial
programs may include, but are not limited to, the following:
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the therapeutic indications for use being developed;
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the clinical trial endpoint required to achieve regulatory approval;
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the number of clinical trials required to achieve regulatory approval;
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the number of sites included in the trials;
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the length of time required to enroll suitable patients;
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the number of patients who participate in the trials and the rate that they are recruited;
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the number of treatment cycles patients complete while they are enrolled in the trials; and
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the efficacy and safety profile of the product.
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We have been opportunistic in our efforts to
obtain cash, and we expect to continue to evaluate various funding alternatives from time to time. If we obtain additional funding, it may adversely affect the market price of our common stock. If we are unable to obtain additional funds on
favorable terms or at all, we may be required to cease or reduce our operations. We may sell additional shares of common stock, and securities exercisable for or convertible into shares of our common stock, to satisfy our capital and operating
needs; however, such transactions will be subject to market conditions and there can be no assurance any such transactions will be completed.
If
Helsinn does not satisfy its obligations under our collaboration agreement or if they terminate the collaboration agreement, we may not be able to develop or commercialize Pracinostat.
In August 2016, we entered into an exclusive license, development
and commercialization agreement with Helsinn to collaborate on the global development, manufacturing and commercialization of Pracinostat. In connection with this agreement, we granted to Helsinn certain rights regarding the use of our patents and
technology with respect to Pracinostat. Helsinn will be primarily responsible for the global development of Pracinostat and, subject to certain exceptions, will be solely responsible for all costs related thereto, and will also be solely responsible
for the global commercialization of Pracinostat and shall be solely responsible for the costs related thereto. We may earn up to $444 million in potential regulatory and sales-based milestone payments, plus royalties on global net sales of
Pracinostat, which, in the U.S., are tiered and begin in the mid-teens.
Helsinn might not fulfill all of its obligations under the
agreement. Our ability to receive revenue from Pracinostat is dependent upon Helsinns efforts. If Helsinn fails to devote adequate resources or otherwise does not successfully develop and commercialize Pracinostat, we may not receive the
future milestone payments or royalties provided for in the agreement. In addition, under certain circumstances, including our failure to satisfy our obligations under the agreement, Helsinn has the right to terminate the agreement.
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We could also become involved in disputes with Helsinn, which could lead to delays in or
termination of the agreement and time-consuming and expensive litigation or arbitration.
If Helsinn is unwilling or unable to fulfill its
obligations or if the agreement is terminated, we may lack sufficient resources to develop and commercialize Pracinostat on our own and may be unable to reach agreement with a suitable alternative collaborator. The failure to develop and
commercialize Pracinostat would have a material adverse effect on our business, operating results, prospects and financial condition.
Negative U.S.
and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators.
Negative conditions in the U.S. or global economy, including financial markets, may adversely affect our business and the business of current
and prospective vendors, licensees and collaborators, and others with whom we do or may conduct business. The duration and severity of these conditions is uncertain. If negative economic conditions occur, we may be unable to secure funding
to sustain our operations or to find suitable collaborators to advance our internal programs, even if we achieve positive results from our drug development programs.
We are a clinical research and development stage company and are likely to incur operating losses for the foreseeable future.
You should consider our prospects in light of the risks and difficulties frequently encountered by clinical research stage and developmental
companies. We were incorporated in December 2000, and have been in operation since May 2002. We have incurred net losses of $177.0 million from our inception through June 30, 2016, including net losses of $20.9 million, $32.7 million and $27.1
million for the years ended June 30, 2016, 2015 and 2014, respectively. We anticipate that we will incur operating losses and negative operating cash flow for the foreseeable future. We have not yet commercialized any drug candidates and cannot
be sure that we will ever be able to do so, or that we may ever become profitable.
The results of pre-clinical studies and completed clinical
trials are not necessarily predictive of future results, and our current drug candidates may not have favorable results in later studies or trials.
Pre-clinical studies and Phase I and Phase II clinical trials are an expensive and uncertain process that may take years to
complete. Pre-clinical studies and Phase I and Phase II clinical trials are not primarily designed to test the efficacy of a drug candidate, but rather to test safety, to study pharmacokinetics and pharmacodynamics, and to understand
the drug candidates side effects at various doses and schedules. Favorable results in early studies or trials may not be repeated in later studies or trials, including ongoing pre-clinical studies and large-scale Phase III clinical trials, and
our drug candidates in later-stage trials may fail to show desired safety and efficacy despite having progressed through earlier-stage trials. Unfavorable results from ongoing pre-clinical studies or clinical trials could result in delays,
modifications or abandonment of ongoing or future clinical trials, or abandonment of a clinical program. Pre-clinical and clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals or
commercialization. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be delayed, repeated or terminated, or a clinical program to be abandoned.
Final approval by regulatory authorities of our drug candidates for commercial use may be delayed, limited or prevented, any of which would adversely
affect our ability to generate operating revenues.
We will not generate any operating revenue until we successfully license or
commercialize one of our drug candidates. Currently, we have drug candidates at different stages of development, and each will need to successfully complete a number of studies and obtain regulatory approval before potential commercialization.
The preclinical and clinical development, manufacturing, labeling, packaging, storage, recordkeeping, export, marketing and distribution, and
other possible activities relating to our drug candidates are subject to extensive regulation by the FDA and other regulatory agencies. Failure to comply with applicable regulatory requirements may, either before or after product approval, subject
us to administrative or judicially imposed sanctions that may negatively impact the approval of one or more of our drug candidates or otherwise negatively impact our business.
Neither collaborators, licensees nor we are permitted to market a drug candidate in the United States until the particular drug candidate is
approved for marketing by the FDA. Specific preclinical data, chemistry, manufacturing and controls data, a proposed clinical trial protocol and other information must be submitted to the FDA as part of an IND application, and clinical trials may
commence only after the IND application becomes effective. To market a new drug in the United States, we must submit to the FDA and obtain FDA approval of an NDA. An NDA must be supported by extensive clinical and preclinical data, as well as
extensive information regarding chemistry, manufacturing and controls to demonstrate the safety and effectiveness of the drug candidate.
Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. Regulatory approval of an NDA is not guaranteed. The number
and types of preclinical studies and clinical trials that will be required for FDA approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to target and the regulations applicable to any
particular drug candidate. Despite the time and expense exerted in preclinical and clinical studies, failure can occur at any stage, and we could encounter problems that cause us to abandon clinical trials or to repeat or perform additional
preclinical studies and clinical trials. The FDA can delay, limit or deny approval of a drug candidate for many reasons, including but not limited to, the following:
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a drug candidate may not be deemed adequately safe or effective;
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FDA officials may not find the data from preclinical studies and clinical trials sufficient;
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the FDAs interpretation and our interpretation of data from preclinical studies and clinical trials may differ significantly;
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our or our contractors or collaborators failure to comply with applicable FDA and other regulatory requirements, including those identified in other risk factors;
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the FDA may not approve the manufacturing processes or facilities;
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the FDA may change its approval policies or adopt new regulations; or
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the FDA may not accept an NDA or other submission due to, among other reasons, the content or formatting of the submission.
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Our preclinical and clinical data, other information and procedures relating to a drug candidate may not be sufficient to support approval by
the FDA or any other U.S. or foreign regulatory authority, or regulatory interpretation of these data and procedures may be unfavorable. Our business and reputation may be harmed by any failure or significant delay in receiving regulatory approval
for the sale of any drugs resulting from our drug candidates. As a result, we cannot predict when or whether regulatory approval will be obtained for any drug we develop.
Additionally, any of the following factors may serve to delay, limit or prevent the final approval by regulatory authorities of our drug
candidates for commercial use, including, but not limited to:
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Pracinostat, ME-401, and ME-344 are in various stages of development, and we or our licensees will need to conduct significant clinical testing to demonstrate safety and efficacy of these drug candidates before
applications for marketing can be filed with the FDA, or with the regulatory authorities of other countries;
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development and testing of product formulation, including identification of suitable excipients, or chemical additives intended to facilitate delivery of our drug candidates;
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it may take us many years to complete the testing of our drug candidates, and failure can occur at any stage of this process; and
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negative or inconclusive results or adverse medical events during a clinical trial could cause us to delay or terminate our development efforts.
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The successful development of any of these drug candidates is uncertain and, accordingly, we may never commercialize any of these drug
candidates or generate significant revenue.
Even if we or our licensees receive regulatory approval to commercialize our drug candidates, our
ability to generate revenues from any resulting products will be subject to a variety of risks, many of which are out of our control.
Even if our drug candidates obtain regulatory approval, resulting products may not gain market acceptance among physicians, patients,
healthcare payers or the medical community. We believe that the degree of market acceptance and our ability to generate revenues from such products will depend on a number of factors, including, but not limited to, the following:
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timing of market introduction of our drugs and competitive drugs;
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actual and perceived efficacy and safety of our drug candidates;
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prevalence and severity of any side effects;
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potential or perceived advantages or disadvantages over alternative treatments;
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strength of sales, marketing and distribution support;
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price of our future products, both in absolute terms and relative to alternative treatments;
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the effect of current and future healthcare laws on our drug candidates; and
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availability of coverage and reimbursement from government and other third-party payers.
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any of our drugs are approved and fail to achieve market acceptance, we may not be able to generate significant revenue to achieve or sustain profitability.
We may not be able to establish the contractual arrangements necessary to develop, market and distribute our product candidates.
A key part of our business plan is to establish contractual relationships with third parties to package, market and distribute our product
candidates. There is no assurance that we will be able to negotiate commercially acceptable licensing or other agreements for the future exploitation of our drug product candidates, including continued clinical development, manufacture or
marketing. If we are unable to successfully contract for these services, or if arrangements for these services are terminated, we may have to delay our commercialization program which will adversely affect our ability to generate operating revenues.
Our commercial opportunity will be reduced or eliminated if competitors develop and market products that are more effective, have fewer side
effects or are less expensive than our drug candidates.
The development of drug candidates is highly competitive. A number of
other companies have products or drug candidates that have either been approved or are in various stages of pre-clinical or clinical development that are intended for the same therapeutic indications for which our drug candidates are being
developed. Some of these potential competing drugs are further advanced in development than our drug candidates and may be commercialized sooner. Even if we are successful in developing effective drugs, our compounds may not compete successfully
with products produced by our competitors.
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Our competitors include pharmaceutical companies and biotechnology companies, as well as
universities and public and private research institutions. In addition, companies active in different but related fields represent substantial competition for us. Many of our competitors developing oncology drugs have significantly greater capital
resources, larger research and development staffs and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do. These organizations also compete with us and our service providers, to recruit qualified
personnel, and with us to attract partners for joint ventures and to license technologies that are competitive with us. As a result, our competitors may be able to more easily develop technologies and products that would render our technologies or
our drug candidates obsolete or non-competitive.
We rely on third parties to conduct our clinical trials and many of our pre-clinical studies. If
those parties do not successfully carry out their contractual duties or meet expected deadlines, our drug candidates may not advance in a timely manner or at all.
In the course of our pre-clinical testing and clinical trials, we rely on third parties, including laboratories, investigators, clinical
contract research organizations (CROs), and manufacturers, to perform critical services for us. For example, we rely on third parties to conduct our clinical trials and many of our pre-clinical studies. CROs are responsible for many
aspects of the trials, including finding and enrolling subjects for testing and administering the trials. Although we rely on these third parties to conduct our clinical trials, we are responsible for ensuring that each of our clinical trials is
conducted in accordance with its investigational plan and protocol. Moreover, the FDA and foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as good clinical practices, or GCPs, for conducting,
monitoring, recording, and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of the potential risks of participating in clinical
trials. Our reliance on third parties does not relieve us of these responsibilities and requirements. These third parties may not be available when we need them or, if they are available, may not comply with all regulatory and contractual
requirements or may not otherwise perform their services in a timely or acceptable manner, and we may need to enter into new arrangements with alternative third parties and our clinical trials may be extended, delayed or terminated. These
independent third parties may also have relationships with other commercial entities, some of which may compete with us. In addition, if such third parties fail to perform their obligations in compliance with our clinical trial protocols or GCPs,
our clinical trials may not meet regulatory requirements or may need to be repeated. As a result of our dependence on third parties, we may face delays or failures outside of our direct control. These risks also apply to the development activities
of collaborators, and we do not control their research and development, clinical trial or regulatory activities.
We have no direct control over the
cost of manufacturing our drug candidates. Increases in the cost of manufacturing our drug candidates would increase our costs of conducting clinical trials and could adversely affect our future profitability.
We do not intend to manufacture our drug product candidates ourselves, and we will rely on third parties for our drug supplies both for
clinical trials and for commercial quantities in the future. We have taken the strategic decision not to manufacture active pharmaceutical ingredients (API) for our drug candidates, as these can be more economically supplied by third
parties with particular expertise in this area. We have identified contract facilities that are registered with the FDA, have a track record of large scale API manufacture, and have already invested in capital and equipment. We have no direct
control over the cost of manufacturing our product candidates. If the cost of manufacturing increases, or if the cost of the materials used increases, these costs will be passed on to us, making the cost of conducting clinical trials more expensive.
Increases in manufacturing costs could adversely affect our future profitability if we are unable to pass all of the increased costs along to our customers. We also rely on the contract manufacturers to comply with FDA regulatory requirements
for good manufacturing practices.
We rely on acquisitions or licenses from third parties to expand our pipeline of drug candidates.
We are not presently engaged in drug discovery activities. In order to expand our pipeline of drug candidates for future development, we may
need to purchase or in-license any such drug candidates. However, we may not be able to purchase or in-license future drug candidates from third parties on favorable terms, or at all.
We face a risk of product liability claims and claims may exceed our insurance limits.
Our business exposes us to the risk of product liability claims. This risk is inherent in the manufacturing, testing and marketing of human
therapeutic products. Our product liability insurance coverage is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential liabilities, or claims may exceed our insurance limits.
If we cannot or do not sufficiently insure against potential product liability claims, we may be exposed to significant liabilities, which may materially and adversely affect our business development and commercialization efforts.
Our efforts will be seriously jeopardized if we are unable to retain and attract key employees.
Our success depends on the continued contributions of our principal management, development and scientific personnel. We face competition
for such personnel, and we believe that risks and uncertainties related to our business, including the timing and risk associated with research and development, our available and anticipated cash resources, and the volatility of our stock price, may
impact our ability to hire and retain key and other personnel. The loss of services of our Chief Executive Officer or other key employees could adversely impact our operations and ability to generate or raise additional capital.
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Laws, rules and regulations relating to public companies may be costly and impact our ability to attract
and retain directors and executive officers.
Laws and regulations affecting public companies, including rules adopted by the
SEC and by Nasdaq, may result in increased costs to us. These laws, rules and regulations could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on
our board of directors, on our board committees or as executive officers. We cannot estimate accurately the amount or timing of additional costs we may incur to respond to these laws, rules and regulations.
Risks Relating to Our Intellectual Property
Our
commercial success is dependent, in part, on obtaining and maintaining patent protection and preserving trade secrets, which cannot be guaranteed.
Patent protection and trade secret protection are important to our business and our future will depend, in part on our ability to maintain
trade secret protection, obtain patents and operate without infringing the proprietary rights of others both in the United States and abroad. Litigation or other legal proceedings may be necessary to defend against claims of infringement, to
enforce our patents or to protect our trade secrets. Such litigation could result in substantial costs and diversion of our managements attention.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. In
August 2012, we acquired patents and patent applications related to Pracinostat from S*Bio. In September 2013, we acquired patents and patent applications related to ME-401 from Pathway Therapeutics, Inc. Additionally, prior to the
Isoflavone Transaction, Novogen had applied for patents in a number of countries with respect to the use of their isoflavone compounds, including ME-344. We acquired both issued patents and pending patent applications from Novogen in relation to our
Isoflavone-based compounds, which we previously licensed from Novogen. The patent applications may not proceed to grant or may be amended to reduce the scope of protection of any patent granted. The applications and patents may also be opposed
or challenged by third parties. Our commercial success will depend, in part, on our ability to obtain and maintain effective patent protection for our compounds and their use in treating, preventing, or curing cancer, and to successfully defend
patent rights in those technologies against third-party challenges. As patent applications in the United States are maintained in secrecy until published or issued and as publication of discoveries in the scientific or patent literature often lag
behind the actual discoveries, we cannot be certain that we, S*Bio, Novogen, or Pathway Therapeutics, Inc. were the first to make the inventions covered by the pending patent applications or issued patents referred to above or that we or they were
the first to file patent applications for such inventions. Additionally, the breadth of claims allowed in biotechnology and pharmaceutical patents or their enforceability cannot be predicted. We cannot be sure that, should any patents issue, we will
be provided with adequate protection against potentially competitive products. Furthermore, we cannot be sure that should patents issue, they will be of commercial value to us, or that private parties, including competitors, will not successfully
challenge our patents or circumvent our patent position in the United States or abroad.
Claims by other companies that we infringe on their
proprietary technology may result in liability for damages or stop our development and commercialization efforts.
The
pharmaceutical industry is highly competitive and patents have been applied for by, and issued to, other parties relating to products competitive with the compounds that we have acquired. Therefore, Pracinostat, ME-401 and ME-344 and any other drug
candidates may give rise to claims that they infringe the patents or proprietary rights of other parties existing now and in the future.
Furthermore, to the extent that we or our consultants or research collaborators use intellectual property owned by others in work performed
for us, disputes may also arise as to the rights in such intellectual property or in resulting know-how and inventions. An adverse claim could subject us to significant liabilities to such other parties and/or require disputed rights to be licensed
from such other parties.
We have contracted formulation development and manufacturing process development work for our product
candidates. This process has identified a number of excipients, or additives to improve drug delivery, which may be used in the formulations. Excipients, among other things, perform the function of a carrier of the active drug ingredient. Some of
these identified excipients or carriers may be included in third party patents in some countries. We intend to seek a license if we decide to use a patented excipient in the marketed product or we may choose one of those excipients that does not
have a license requirement.
We cannot be sure that any license required under any such patents or proprietary rights would be made
available on terms acceptable to us, if at all. If we do not obtain such licenses, we may encounter delays in product market introductions, or may find that the development, manufacture or sale of products requiring such licenses may be precluded.
We may be subject to substantial costs stemming from our defense against third-party intellectual property infringement claims.
Third parties may assert that we are using their proprietary information without authorization. Third parties may also have or obtain patents
and may claim that technologies licensed to or used by us infringe their patents. If we are required to defend patent infringement actions brought by third parties, or if we sue to protect our own patent rights, we may be required to pay substantial
litigation costs and managerial attention may be diverted from business operations even if the outcome is not adverse to us. In addition, any legal action that seeks damages or an injunction to stop us from carrying on our commercial activities
relating to the affected technologies could subject us to monetary liability and require us or any third party licensors to obtain a license to continue to use the affected technologies. We cannot predict whether we would prevail in any of these
types of actions or that any required license would be made available on commercially acceptable terms or at all.
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Risks Related to Securities Markets and Investment in Our Stock
The trading price of the shares of our common stock has been and may continue to be highly volatile and could decline in value and we may incur
significant costs from class action litigation.
The trading price of our common stock could be highly volatile in response to
various factors, many of which are beyond our control, including, but not limited to, the following:
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failure to successfully develop our drug candidates;
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design, results and timing of clinical trials and preclinical studies;
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announcements of technological innovations by us or our competitors;
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new products introduced or announced by us or our competitors;
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changes in financial estimates by securities analysts;
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actual or anticipated variations in operating results;
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expiration or termination of licenses, research contracts or other collaboration agreements;
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conditions or trends in the regulatory climate and the biotechnology, pharmaceutical and genomics industries;
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instability in the stock market as a result of current or future domestic and global events;
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changes in the market valuations of similar companies;
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the liquidity of any market for our securities; and
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threatened or actual delisting of our common stock from a national stock exchange.
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Equity
markets in general, and the market for biotechnology and life sciences companies in particular, have experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies
traded in those markets. In addition, changes in economic conditions in the U.S., Europe or globally, particularly in the context of current global events, could impact upon our ability to grow profitably. Adverse economic changes are outside our
control and may result in material adverse impacts on our business or our results of operations. These broad market and industry factors may materially affect the market price of shares of our common stock, regardless of our development and
operating performance. In the past, following periods of volatility in the market price of a companys securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us,
could cause us to incur substantial costs and divert managements attention and resources.
Future sales of our common stock, including common
stock issued upon exercise of outstanding warrants or options, may depress the market price of our common stock and cause stockholders to experience dilution.
The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market,
including upon exercise of outstanding warrants or stock options, or upon issuance of shares related to restricted stock units, and any subsequent sales of such shares. As of June 30, 2016, we had outstanding (i) warrants issued in our
December 2012 private placement exercisable to purchase 3,230,202 shares of common stock at an exercise price of $3.12 per share, which expire in December 2017; (ii) warrants issued in our May 2012 rights offering exercisable to purchase
315,484 shares of common stock at an exercise price of $7.14, which expire in May 2017; and (iii) Series A warrants issued in our May 2011 private placement exercisable to purchase 215,721 shares of common stock at an exercise price of
$6.00, which expire in November 2016. We also had outstanding options to purchase 2,827,172 shares of common stock and restricted stock units representing the right to receive 763,014 shares of common stock. We may seek additional capital through
one or more additional equity transactions in the future; however, such transactions will be subject to market conditions and there can be no assurance any such transactions will be completed. If we sell shares in the future, the prices at which we
sell these future shares will vary, and these variations may be significant. Stockholders will experience significant dilution if we sell these future shares at prices significantly below the price at which previous stockholders invested.
Because we do not intend to pay, and have not paid, any cash dividends on our shares of common stock, our stockholders will not be able to receive a
return on their shares unless the value of our common stock appreciates and they sell their shares.
We have never paid or
declared any cash dividends on our common stock, and we intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Therefore, our stockholders will not be able to receive a return on their investment unless the value of our common stock appreciates and they sell their shares.
We will have broad discretion over the use of the net proceeds from any exercise of outstanding warrants and options.
We will have broad discretion to use the net proceeds to us upon any exercise of outstanding warrants and options, and investors in our stock
will be relying on the judgment of our board of directors and management regarding the application of these proceeds. Although we expect to use a substantial portion of the net proceeds from any exercise of the warrants and options for general
corporate purposes and progression of our clinical trial programs, we have not allocated these net proceeds for specific purposes.
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We are authorized to issue blank check preferred stock, which could adversely affect the holders of our
common stock.
Our restated certificate of incorporation allows us to issue blank check preferred stock with rights potentially
senior to those of our common stock without any further vote or action by the holders of our common stock. The issuance of a class of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of our
common stock or could adversely affect the rights and powers, including voting rights, of such holders. In certain circumstances, such issuance could have the effect of decreasing the market price of our shares, or making a change in control of the
Company more difficult.
Our executive officers and directors may sell shares of their stock, and these sales could adversely affect our stock
price.
Sales of our stock by our executive officers and directors, or the perception that such sales may occur, could adversely
affect the market price of our stock. Our executive officers and directors may sell stock in the future, either as part, or outside, of trading plans under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.