Item 1. Business
General
ZIOPHARM Oncology, Inc. is a
biopharmaceutical company seeking to develop, acquire and commercialize, on its own or with partners, a diverse portfolio of cancer therapies that address unmet medical needs. We are currently focused on developing products in immuno-oncology that
employ novel gene expression, control and cell technologies to deliver safe, effective and scalable cell- and viral-based therapies for the treatment of cancer and graft-versus-host-disease (GvHD). Pursuant to two exclusive channel partner
agreements, or Channel Agreements with Intrexon Corporation, or Intrexon, we obtained certain exclusive rights to Intrexons technologies for use in the fields of oncology and graft-versus-host disease.
The technologies represent an industrialized engineering approach for molecular and cell biology and gene control. They employ an inducible gene-delivery
system, or switch, that enables controlled in vivo expression of genes that produce therapeutic proteins to treat cancer. We and Intrexon refer to this switch as the RheoSwitch Therapeutic System
®
, or RTS
®
, platform. Our initial product candidate being developed using the immuno-oncology platform is
Ad-RTS-IL-12
+ veledimex, a clinical stage product that we license from Intrexon under the Channel Agreement.
Ad-RTS-IL-12
+ veledimex uses our gene
delivery system to produce
interleukin-12,
or
IL-12,
a potent, naturally occurring anti-cancer protein.
IL-12
is a potent
pro-inflammatory
cytokine capable of reversing immune escape mechanisms and improving the function of tumor fighting natural killer, or NK, and T cells. Additionally, expression of functional
IL-12
in human subjects by direct intratumoral injection of
Ad-RTS-hIL-12
+ veledimex is
further demonstrated by the generation of downstream interferon gamma, or
IFN-
g
. We have completed two Phase 2 studies evaluating
Ad-RTS-IL-12
+ veledimex, the first for the treatment of metastatic melanoma, and the second for the treatment of metastatic breast cancer. We are conducting a
single-center Phase 1b/2 study, following standard chemotherapy, for the treatment of patients with locally advanced or metastatic breast cancer, and a multi-center Phase 1 study in patients with recurrent or progressive glioblastoma, or GBM, or
Grade III malignant glioma, a form of brain cancer. We have concluded enrollment in the Phase 1b/2 breast cancer study and enrollment is ongoing in the Phase 1 GBM study. Early clinical data from the GBM study was presented at the Society for
Neuro-Oncology (SNO) meeting in November 2015, and on February 24, 2016, we announced the successful completion of the initial dosing phase of the study and the dosing of the first patient in the next succeeding cohort of the study. On
June 27, 2016, we announced the successful completion of enrollment in the first and second cohorts and the opening of a third cohort, which has now completed. Updated clinical data from this trial occurred during the 2016 SNO meeting. In
addition, we presented nonclinical data in a pontine mouse model at SNO; we believe these data will support initiation of a pediatric brain tumor clinical trial during the first half of 2017. We also presented information about the Phase 1b/2 breast
cancer study at the San Antonio Breast Cancer Symposium in December 2015. We presented updated information on the GBM and breast cancer studies at the 2016 American Society of Clinical Oncology (ASCO) meeting in June and on the GBM study at the 2016
American Society of Hematology Workshop on Genome Editing in July. We also presented additional breast cancer clinical study results at the European Society for Medical Oncology (ESMO) 2016 Congress in October.
In addition to
Ad-RTS-IL-12
+
veledimex as monotherapy, we have undertaken
pre-clinical
studies that suggest we may be able to combine this viral-based immunotherapy with an immune checkpoint inhibitor, or iCPI, to improve the anti-tumor
effect for GBM. These
pre-clinical
data were presented at the 2016 Annual Meeting of the American Society of Gene and Cell Therapy, or ASGCT, in May, and we believe the data will lend support to the
first-in-human
application of combining
Ad-RTS-IL-12
+
veledimex with an iCPI for investigational treatment of GBM.
Pursuant to our Channel Agreement for the cancer program, we and Intrexon obtained an
exclusive, worldwide license to certain additional immuno-oncology technologies owned and licensed by The University of Texas MD
3
Anderson Cancer Center, or MD Anderson, including technologies relating to novel chimeric antigen receptors, or CARs, NK cells and TCRs. We refer to this as the MD Anderson License. We plan to
develop genetically modified T cells and other immune cells that will target and kill cancer cells using viral and
non-viral
approaches to gene transfer. Regarding our
non-viral
approach, we are using the
Sleeping Beauty
(SB) transposon/transposase system under the MD Anderson license to express CAR in clinical trials to render T cells specific for CD19. The initial
associated trials using the first generation CAR with a four-week manufacturing process showed favorable progression free survival, or PFS, and/or overall survival when patient- and donor-derived
CAR
+
T cells were infused after hematopoietic stem-cell transplantation. All patients receiving autologous
SB-modified
T cells had
non-Hodgkin
lymphoma and most patients receiving allogeneic CAR
+
T cells had acute lymphoblastic leukemia. In addition to survival of the recipients, these trials
demonstrated that the infused T cells persisted for length of times that compared favorably with T cells genetically modified with virus to express CAR. An update was provided in publication (J Clin Invest. 2016 Sep
1;126(9):3363-76.).
We are currently enrolling an
investigator-led
Phase
1 study using second generation CD19-specific CAR
+
T cells with a revised CAR structure in patients with advanced lymphoid malignancies at MD Anderson. A patient with multiple-relapsed
B-cell
ALL received CD19-specific CAR
+
T cells produced with a
3-week
manufacturing process and achieved a complete
remission with normalization of PET/CT tumor imaging. Steps were taken in 2016 to further decrease the
T-cell
culture time in the manufacturing process, which advances our efforts to address the challenges of
cost and manufacturing time associated with these therapies. Preclinical data in a mouse tumor model showing improved survival with treatment using CAR
+
T cells with reduced time in culture
(approximately 2 weeks versus 4 weeks for previous first generation CAR
+
T process) were presented at the 2016 annual meeting of American Society of Gene & Cell Therapy (ASGCT). The
second generation CD19 trial underway is now employing the shortened
2-week
manufacturing process advancement. On January 31, 2017, the Company announced a patient with
triple-hit
NHL treated in January 2017 was the first to receive
Sleeping Beauty
-modified CD19-specific CAR
+
T cells with the manufacturing time
reduced to 2 weeks.
In the
pre-clinical
setting, the time to administration of third generation
Sleeping
Beauty
CAR
+
T cells
co-expressing
a membrane-bound version of
IL-15
(mbIL15) has been reduced to less than two
days. This shortened process delivers genetically modified T cells with superior proliferative potential. Data presented at the 58
th
American Society of Hematology (ASH) Annual Meeting in December
2016, supported by an earlier publication in the Proceedings of the National Academy of Sciences (2016 Nov 29;113(48):E7788-E7797), revealed promising results: Third generation
Sleeping Beauty
CAR
+
T cells demonstrated that a single
low-dose
of T cells
co-expressing
a CD19-specific CAR and mbIL15
resulted in sustained
in vivo
persistence that produced potent anti-tumor effects and superior leukemia-free survival. These clinical and
pre-clinical
data support the Companys
point-of-care
(POC) plans to rapidly infuse
Sleeping Beauty
CAR
+
T cells in a Phase I trial expected to be opened
later this year. With the intent to administer clinical-grade
Sleeping Beauty
CAR
+
T cells in less than 48 hours, this
non-viral
CAR-T
approach has the potential to outpace viral-based methods.
We expect to enter the clinic with an additional CAR
+
T therapy specific for CD33 for treatment of relapsed or refractory acute myeloid leukemia or AML during the first half of 2017. An update on the
pre-clinical
data for the CD33 program was provided at the 2016 annual meeting of ASH. We successfully completed an application to the National Institute of Healths Office of Biotechnical Activities in June 2016 and expect to file an IND with the FDA in
the first half of 2017. Genetic modification will use lentivirus and enrollment to the CD33 CAR
+
T trial will occur in 2017. Together with Intrexon, we currently have research programs evaluating
additional CAR targets and CARs
co-expressed
with cytokines, in particular mbIL15. Control systems are also being developed such as the RTS
®
for
receptor and/or cytokine expression as well as for the conditional ablation of genetically modified cells using a kill switch. We anticipate future CAR
+
T programs will also utilize the POC
manufacturing approach.
Only a minority of tumor antigens are on the surface and thus can be targeted by CARs, while most tumor-derived antigens are
within the cell and will likely need to be targeted by TCRs. Therefore, we are developing approaches to target solid tumors using T cells genetically modified with the SB system to express TCRs for
4
recognition of neoantigens. An update was provided in publication (Molecular Therapy (2016); 24(6), 10781089) and further
pre-clinical
information
regarding the targeting of solid tumors was presented at the annual meeting of ASH in December 2016. On January 10, 2017, the Company announced the signing of a Cooperative Research and Development Agreement (CRADA) with the National Cancer
Institute (NCI) for the development of adoptive cell transfer (ACT)-based immunotherapies genetically modified using the
Sleeping Beauty
(SB) transposon/transposase system to express T cell receptors (TCRs) for the treatment of solid tumors.
The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes (PBL) genetically modified using the
non-viral
SB system to
express TCRs that recognize specific immunogenic mutations, or neoantigens, expressed within a patients cancer. Clinical evaluations of the ability of these
SB-engineered
PBL to express TCRs reactive
against cancer mutations to mediate cancer regression in patients with metastatic disease will be performed. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in
collaboration with researchers at the Company and Intrexon.
We plan to leverage the synergy between the platforms to accelerate an immuno-oncology
pipeline and programs for the development of allogeneic CAR
+
T and/or NK cells that can be used as
off-the-shelf,
or
OTS, therapies. For example, NK cells do not have endogenous TCRs, so do not require genetic editing to eliminate TCRs, and may be used as an OTS therapy. Further, cytokines such as
IL-
12 are fuel
for NK cells. In addition to developing T cells, we expect to initiate an investigator led trial of OTS primary NK cells for AML after completing regulatory review during 2017. We have additional interest in OTS products such as the development of
an allogenic CAR
+
T therapy.
We plan to continue to combine Intrexons technology suite with
our capabilities to translate science to the patient, and to identify and develop additional products to stimulate or inhibit key pathways, including those used by the bodys immune system, to treat cancer.
On March 27, 2015, we entered into a global collaboration with Intrexon focused exclusively on CAR T cell, or CAR
+
T, products with Ares Trading, or Ares, a biopharmaceutical division of Merck KGaA, which we refer to as the Ares Trading Agreement. Intrexon will share the economic provisions of this collaboration
equally with us, including an upfront payment of $115.0 million that was received in July 2015, milestones and royalties. Under this collaboration, Ares already selected two CAR
+
T targets
for which we will perform certain research activities that will, in part, be funded by Ares. Pursuant to the terms of an amendment to our Channel Agreement with Intrexon, or ECP Amendment, that we entered into at the time of the Ares Trading
Agreement, we will be responsible for any additional research and development expenditures. Once these candidates reach investigational new drug stage, the programs will be transferred to Ares for clinical development and commercialization. We,
together with Intrexon, will also independently conduct research and development on other CAR
+
T candidates, with Ares Trading having the opportunity during clinical development to
opt-in
to these candidates for additional payments to us and Intrexon.
On September 28, 2015, we entered into a
new Exclusive Channel Collaboration Agreement, or the GvHD Agreement, with Intrexon to develop therapies for the treatment and/or prevention of graft-versus-host disease, or GvHD, a major complication of allogeneic hematopoietic stem-cell
transplantation, or HSCT, which significantly impairs the quality of life and survival of many recipients. Allogeneic HSCT is used for the treatment of various diseases including hematological malignancies, immunological deficiencies as well as
non-malignant
conditions. Human studies have shown that administration of
low-dose
subcutaneous
interleukin-2,
or
IL-2,
a cytokine critical for modulation of the immune system, in patients with steroid-refractory GvHD acts via regulatory T cells, or Tregs, to ameliorate its manifestations.
We believe that the combined expertise and knowledge gained from our research programs with Intrexon in adoptive
T-cell
therapies and cytokine modulation for the treatment of cancer positions us well to develop and implement therapeutic approaches addressing an area of high unmet medical need for patients with GvHD.
Through the GvHD Agreement, we, together with Intrexon, plan to pursue engineered cell therapy strategies,
5
used either separately or in combination, for targeted prevention and/or treatment of GvHD. The first approach is expected to utilize the infusion of Tregs, such as those conditionally expressing
IL-2,
such as utilizing the RTS
®
platform. The second approach is expected to utilize the deployment of Intrexons orally-delivered microbe-based
ActoBiotics
®
therapeutics, based on
Lactococcus lactis
, such as to express
IL-2
to modulate immune function.
Enabling Technology
Our approach to
immuno-oncology and GvHD entails the application of engineering principles to biological systems for the purpose of designing and constructing new biological systems or redesigning/modifying existing biological systems. Biological systems are
governed by DNA, the building block of gene programs, which control cellular processes by coding for the production of proteins and other molecules that have a functional purpose and by regulating the activities of these molecules. This regulation
occurs via complex biochemical and cellular reactions working through intricate cell signaling pathways, and control over these molecules modifies the output of biological systems. Our approach to immuno-oncology and GvHD has been enabled by the
application of information technology and advanced statistical analysis, also known as bioinformatics, to genetic engineering, as well as by improvements in DNA synthesis. This approach aims to engineer gene-based programs or codes to modify
cellular function to achieve a desired biological outcome. Its application is intended to allow more precise control of drug concentration and dose, thereby improving the therapeutic index associated with the resulting drug. A further embodiment of
this technology is the ability to eliminate genetically modified immune cells after infusion.
On January 6, 2011, we entered into the Channel
Agreement with Intrexon, to develop and commercialize novel
DNA-based
therapeutics in the field of cancer treatment by combining Intrexons technological platform with our capabilities to translate
science to the patient. As a result, our bioengineered DNA platform employs an inducible gene-delivery system that enables regulated and controlled delivery of genes that produce therapeutic proteins to treat cancer. The first example of this
regulated controlled delivery is achieved by producing
IL-12,
a potent, naturally occurring anti-cancer protein, under the control of Intrexons proprietary biological switch to turn on and
off the therapeutic protein expression at the tumor site. We and Intrexon refer to this switch as the RheoSwitch Therapeutic System
®
or RTS
®
, platform. Our initial product candidate being developed using the immuno-oncology platform is
Ad-RTS-IL-12
+ veledimex.
On
September 28, 2015, we entered into the GvHD Agreement with Intrexon to develop therapies for the treatment and/or prevention of GvHD, a major complication of allogeneic HSCT, which significantly impairs the quality of life and survival of many
recipients. Some of the technologies used to generate product candidates for immuno-oncology have potential application for GvHD. These include the ability to genetically modify cells using viral and
non-viral
approaches and the application of RTS
®
to control gene expression, such as cytokines. Some of these methodologies as well as our expertise in bioprocessing are being investigated to generate
regulatory T cells, or Tregs. In addition, we are generating genetically modified
L lactis
to alter the inflammatory milieu of patients with GvHD, especially of the gastrointestinal tract. These modifications are facilitated though
collaboration with ActoBiotics
®
, a division of Intrexon.
More detailed descriptions of our
clinical development plans for each of these programs are set forth below under the caption
Product Candidates.
Immuno-oncology
and GvHD
Immuno-oncology, which typically utilizes a patients own immune system to treat cancer, is one of the most actively pursued areas
of research by biotechnology and pharmaceutical companies today. Cancer cells contain mutated proteins and may overexpress other proteins usually found in the body at low levels. The immune system typically recognizes unusual or aberrant cell
protein expression and eliminates these cells in a highly efficient process known as immune surveillance. Central players in immune surveillance are types of white blood
6
cell known as the T cells and NK cells. In healthy individuals, T cells and NK cells can identify and kill infected or abnormal cells, including cancer cells. Cancer cells develop the ability to
evade immune surveillance, which is a key factor in their growth, spread, and persistence. In the recent past, there has been substantial scientific progress in countering these evasion mechanisms using immunotherapies, or therapies that activate
the immune system.
On January 13, 2015, we, together with Intrexon, entered into a license agreement with MD Anderson, which we refer to as the MD
Anderson License. Pursuant to the MD Anderson License, we and Intrexon hold an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR
+
T cell therapies arising from the laboratory of Laurence Cooper, M.D., Ph.D., who was then a tenured professor at MD Anderson and is now our current Chief Executive Officer, as well as either
co-exclusive
or
non-exclusive
licenses under certain related technologies.
Combining the
non-viral
genetic engineering technologies, we licensed from MD Anderson together with Intrexons
industrialized approach to gene engineering and cell control, we believe we can reprogram T cells to express a particular CAR or TCR construct that will enable the T cell and/or NK cell to recognize and target cancer cells. CAR
+
T cells target cell surface tumor antigens, such as CD19, that exist on cancer cells and that are independent of human leukocyte antigens, or HLAs, and which we refer to as public
antigens.
TCR-expressing
T cells target tumor antigens that are dependent on HLAs and which we refer to as private antigens and include
neo-antigens.
NK
cells target tumors with loss or differences of HLAs, or tumors with no defined antigens. Most CAR
+
T cell and TCR products currently being developed by competitors are autologous, or derived from
the patients own mononuclear white blood cells, and gene engineered with viral technology. As a result, the patients blood must be harvested, shipped to a manufacturing facility where the isolated mononuclear white blood cells are
modified using a virus to express the CAR or TCR, and then shipped back to the hospital and infused into the patient. The process can take weeks and is labor intensive and costly. Currently, this complex technique can only be done in sophisticated
laboratories. We believe we will be able to manufacture genetically modified cells using viral and
non-viral
methods. The latter may result in a reduced cost of manufacturing, particularly as we develop
processes to eliminate the requirements for cell propagation and activation, thereby facilitating a shortened manufacturing process which can be implemented at multiple
points-of-care.
We intend to use our gene transfer methods to develop allogeneic treatments that can be used as an OTS treatment. An allogeneic OTS (also referred to as
universal donor) treatment would enable a patient to be treated with a CAR
+
T and/or
NK-cell
products that are created in advance of need from one or more
separate healthy donor(s), possibly genetically modified for a tumor type, and then distributed to multiple points of care. Our
non-viral
methods, which we believe are customizable, fast, and less costly than
other gene transfer approaches, together with our industrialized, scalable engineering approach are expected to enable highly efficient and less costly manufacturing approaches to gene engineered cell-based therapy. In addition, our proprietary RTS
®
and/or kill switches may give us the ability to control
in vivo
gene expression of CAR or TCR or cytokine on T cells and/or NK cells, which we believe could result in significantly lower
toxicity compared to other products currently in development.
Cancer Overview
Cancer is a group of diseases characterized by either the runaway growth of cells or the failure of cells to die normally. Often, cancer cells spread to
distant parts of the body, where they can form new tumors. Cancer can arise in any organ of the body and, according to the American Cancer Society, strikes slightly less than one of every two American men and a little more than one of every three
American women at some point in their lives.
It is reported that there are more than 100 different varieties of cancer. Carcinomas, the most common type
of cancer, originate in tissues that cover a surface or line a cavity of the body. Lymphomas are cancers of the lymph system, which is a circulatory system that bathes and cleanses the bodys cells. Leukemias involve blood-forming tissues and
blood cells. As their name indicates, brain tumors are cancers that begin in the brain, skin cancers, including melanomas, originate in the skin, while soft tissue sarcoma arises in soft tissue. Cancers are considered metastatic if they spread
through the blood or lymphatic system to other parts of the body to form secondary tumors.
7
Cancer is caused by a series of mutations (alterations) in genes that control cells ability to grow and
divide. Some mutations are inherited; others arise from environmental factors such as smoking or exposure to chemicals, radiation, or viruses that damage cells DNA. The mutations cause cells to divide relentlessly or lose their normal ability
to die.
According to the American Cancer Society, it is estimated that about 1,685,210 new cases of cancer are expected to be diagnosed in 2016 and about
595,690 Americans are expected to die from cancer in 2016. The cost of treating cancer is significant. The Agency for Healthcare Research and Quality estimates that the direct medical cost of cancer in 2013 was $74.8 billion.
Cancer Treatments
Major treatments for cancer
include surgery, radiotherapy, chemotherapy and immunotherapy. Newer approaches such as anti-angiogenic and targeted therapies are rapidly evolving. While there are many experimental treatments under investigation, including DNA and other
immunological-based therapies, we believe the prevalence of cancer will remain a significant unmet medical need. Many therapies, including combination approaches, with different mechanisms of action may be needed to overcome tumor escape. In
addition to monotherapy treatment in GBM, our approach to cancer treatment includes applying multiple modality and multi-delivery approaches that encompasses viral and
non-viral
mechanisms, differentiating us
from many other companies in the field of adoptive cellular therapy today.
Market Opportunities
Glioblastoma is an aggressive primary brain tumor affecting approximately 74,000 people worldwide each year. Recurrent glioblastoma is an aggressive cancer
with one of the lowest
3-year
survival rates, at 3%, among all cancers. For patients who have experienced multiple recurrences the prognosis is particularly poor, with a median overall survival (OS) of
6-7
months, while OS in patients that have failed temozolomide and bevacizumab, or equivalent salvage chemotherapy, is approximately
3-5
months. Given the poor overall
prognosis and lack of effective treatments, new therapeutic approaches for malignant gliomas are needed.
It is estimated that there are nearly
3 million women living in the United States with a history of invasive breast cancer, and an additional 226,870 women were diagnosed in 2012. Approximately 50% of women diagnosed with primary breast cancer will eventually relapse and develop
metastatic or advanced disease. In addition, around 10% of patients present with metastatic disease at first diagnosis. The
5-year
relative survival rate for women diagnosed with localized breast cancer is
98.6%; survival declines to 83.8% for regional stage and to 23.3% for distant stage. In addition to stage, factors that influence survival include tumor grade, hormone receptor status, and human epidermal growth factor receptor 2 (HER2) status.
According the Leukemia and Lymphoma Society, an estimated 1,237,824 people in the US are living with, or are in remission from, leukemia, lymphoma, or
myeloma. New diagnoses for such hematologic malignancies in the US are expected to reach 171,500 people in 2016. These new diagnoses are expected to account for approximately 10% of the new cancer cases in the US in 2016.
GvHD Overview
GvHD is a major complication of
allogeneic HSCT, which significantly impairs the quality of life and survival of many recipients. Allogeneic HSCT is an increasingly important treatment of various diseases including hematological malignancies, immunological deficiencies as well as
non-malignant
conditions, and is considered to be the most effective form of tumor immunotherapy available to date. However, GvHD, when immune (graft) cells in a transplant patient recognize their engrafted host as
foreign and attack the patients (host) cells, remains a major source of morbidity and mortality following allogeneic HSCT. During development of GvHD, activation of various immune cells, especially donor T cells, leads to damage of target
organs including skin, liver, hematopoietic system, and of particular importance, gut.
8
There were approximately 23,000 allogeneic HSCT procedures in the US and Europe in 2013. Approximately 40% to 60%
of HSCT recipients develop GvHD, either acute or chronic. Immunosuppressive agents and systemic steroids routinely used to treat GvHD have limited efficacy and toxicity; patients with steroid-resistant acute GvHD have a dismal prognosis, with
mortality rates in excess of 90%, defining the need for safer, more effective therapies. New ways of treating and preventing GvHD have the potential to increase the market opportunity through (1) broadening of patient eligibility to receive
allogeneic HSCT and (2) increasing the number of effective donor/recipient combinations.
Product Candidates
The following chart identifies our immuno-oncology product candidates and their current stage of development, each of which are described in more detail below.
Immuno-oncology programs:
Ad-RTS-IL-12
+ veledimex
Ad-RTS-IL-12
+ veledimex has been
evaluated in two Phase 2 studies, the first for the treatment of metastatic melanoma, and the second for the treatment of unresectable recurrent or metastatic breast cancer. We are continuing to evaluate
Ad-RTS-IL-12
+ veledimex, in brain cancer and breast cancer.
Ad-RTS-IL-12
+ veledimex, our most advanced product candidate, uses our gene delivery system to produce
IL-12,
a potent, naturally occurring anti-cancer protein.
More specifically,
IL-12
is a potent immunostimulatory cytokine which activates and recruits dendritic cells that facilitate the cross-priming of tumor antigen-specific T cells. We have developed an adenoviral vector,
Ad-RTS-IL-12,
administered intra-tumorally under the control of the RheoSwitch Therapeutic System
®
(RTS
®
) expression platform. Gene expression and subsequent
IL-12
protein production is tightly
controlled by the activator ligand veledimex.
Ad-RTS-IL-12
+ veledimex for
malignant glioma
We initiated a multi-center Phase 1 study in patients with recurrent or progressive GBM or Grade III malignant glioma, a form of
brain cancer, in June 2015. We reported biologic data from this study in our presentation titled Intra-tumoral regulated expression of
IL-12
as a gene therapy approach to treatment of glioma at the
Society
9
for Neuro-Oncology (SNO) 20th Annual Scientific Meeting, November
19-22,
2015 in San Antonio, TX, and on February 24, 2016, we announced the
successful completion of the initial dosing cohort and that the first patient has been dosed in the next succeeding cohort of the GBM study.
Our ongoing
Phase 1, multi-center dose-escalation study of the gene therapy candidate
Ad-RTS-hIL-12
+ orally-administered veledimex in
patients with recurrent or progressive GBM was presented at the ASCO Annual Meeting in June 2016.
Ad-RTS-hIL-12
+ veledimex is a
novel viral gene therapy candidate for the controlled expression of
IL-12.
On June 27, 2016, we announced
the successful completion of enrollment in the first and second dosing cohorts as well as the initiation of enrollment in a third cohort of our ongoing multi-center Phase 1 study of
Ad-RTS-hIL-12
+ orally administered veledimex to treat recurrent or progressive glioblastoma (GBM) or grade III malignant glioma.
The primary objective of the study is to determine the safety and tolerability of a single intratumoral
Ad-RTS-hIL-12
injection activated upon dosing with oral veledimex. Secondary objectives are to determine the maximum tolerated dose, the immune responses elicited, and
assessment of biologic response. The first cohort of seven patients received 20 mg doses of veledimex, the second cohort of six patients received 40 mg doses of veledimex, and the third cohort of four patients received 30 mg doses of veledimex to
refine the effect of activating the immune response within the tumor. The resultant immunologic activity that followed
IL-12
expression from the brain tumor suggested that no further dose escalation would be
necessary and the optimal dosing may be reached sooner than initially anticipated. An expansion cohort to enroll additional patients at 20 mg has also been completed
Data from 11 patients with recurrent high-grade gliomas were presented at the 2016 ASCO Annual Meeting in June 2016. All of these patients had failed at least
two prior lines of therapy and underwent partial resection leaving residual tumors, in certain cases with significant tumor burden.
Ad-RTS-hIL-12
was administered through direct injection into the brain tumor at the time of surgery and veledimex was taken
orally to activate the production of
IL-12
from the tumor site and stimulate an immune response. No enrollment restrictions were imposed for tumor size or location within the supratentorial space.
As of May 18
th
, the date of data collection for the ASCO presentation, overall median follow up was 6.2
months, with 10 of 11 patients alive.
IL-12
in the bloodstream was measured and was found to be proportional to the amount of veledimex administered, demonstrating that this orally-delivered activator crossed
the blood brain barrier to turn on the RheoSwitch
®
technology in a dose-dependent manner.
It is
increasingly recognized that the measurement of progression free survival, or PFS, with immunotherapy may not correlate directly with overall survival, or OS. For purposes of the data that we presented at the ASCO Annual Meeting, all
pseudoprogression/progression were assumed to trigger progressive disease for PFS analysis by Response Assessment for Neuro-Oncology, or RANO. However, clinical benefit, including long term survival and tumor regression, can still occur after
initial disease progression or after the appearance of new lesions in the Immunotherapy Response Assessment for Neuro-Oncology, or iRANO.
Overall,
Ad-RTS-hIL-12
+ veledimex was well tolerated, with a higher incidence of grade 3 or greater adverse events in the 40 mg cohort. All
serious adverse events and Grade 3 related toxicities were rapidly reversible upon discontinuation of veledimex. The most common related adverse events included headache, nausea/vomiting, fever, white blood cell/leukocyte count decrease, platelet
count decrease, liver function test increase and cytokine release syndrome. Five subjects had related serious adverse events. As of July 8, 2016, we received a report of one additional death occurring approximately 3.9 months after completing
veledimex therapy and subsequently receiving additional salvage therapy. The death is unrelated to
Ad-RTS-hIL-12
+ veledimex.
On July 15, 2016 the Company issued a statement with regard to a third death that had been recently reported to us. In our statement we announced
that we were collecting and analyzing information concerning this death to
10
determine appropriate and timely reporting to the FDA. The cause of death was an intracranial hemorrhage, which occurred sometime after the patient had been discharged from the treating center.
We have determined that this is an isolated case, and there have been no other reported related instances of brain hemorrhage in any pervious cohort or prior studies with
Ad-RTS-hIL-12
+ veledimex. On July 19
th
, we announced that the Safety Review Committee for the GBM trial concluded that this third patient
death was unrelated to study drug. The GBM trial remained open to enrollment and we have subsequently completed the 30 mg cohort. For patients who have experienced multiple recurrences of GBM, as the patients in our study have, prognoses are
particularly poor. As of July 19
th
, median follow up in the first dose cohort from our study was 8 months, and the overall survival remains very encouraging in a population with an expected
overall survival of 3 to 5 months for patients that have failed temozolomide and bevacizumab, or equivalent salvage chemotherapy.
We presented further
interim updates on the progress of the Phase 1 GBM study, including longer-term survival follow up, at the SNO 21st Annual Scientific Meeting November 17-20, 2016 in Scottsdale, Arizona, in a poster entitled Phase 1 study of intratumoral viral
delivery of
Ad-RTS-hIL-12
+ oral veledimex is well tolerated and suggests survival benefit in recurrent high grade glioma
demonstrating median overall survival of 12.8 months, with 11 of 17 patients alive. Survival rates at 6, 9, and 12 months for patients with multiple recurrences prior to administration of
Ad-RTS-hIL-12
were 100%, 86% and 71% respectively in the 20 mg cohort and 87%, 65% and 54% respectively for all subjects. In addition, a nonclinical poster was also
presented at SNO in November entitled Local regulated
IL-12
expression as an immunotherapy for the treatment of pontine glioma. We intend to initiate a pediatric brain tumor study in the first half
of 2017.
At the 35
th
Annual J.P. Morgan Healthcare Conference on January 11
th
we presented further Phase 1 GBM study data. Based on tolerability and survival benefit (median OS=12.7 months, n=15), 20 mg was selected for an expansion cohort and we are following patients
overall survival data.
Ad-RTS-hIL-12
+ veledimex is well tolerated and suggests a survival benefit over historical controls at 6,
9, and 12 months (median OS=9.6 months, n=25). Toxicities were tolerable, predictable and reversible upon discontinuing veledimex. There is a strong correlation between veledimex dose, BBB penetration, and
IL-12
production. These data demonstrate that the RTS
®
gene switch works in humans toggling not only as a switch to turn on and off the production of
IL-12,
but also as a rheostat to control the level of
IL-12.
The company is
meeting with the FDA and European regulators in Q1 2017 to discuss the design and commencement of a multi-national pivotal trial in recurrent or progressive glioblastoma patients.
We reported
pre-clinical
data on combining
Ad-RTS-IL-12
+ veledimex with iCPI at ASGCT May 6, 2016 The combination of controlled expression of
IL-12
with multiple immune checkpoint inhibitors in a
GBM mice model showed superior results than either treatment alone, with a combination with
anti-PD1
demonstrating 100% survival. These data provide a strong scientific rationale for evaluating this
combination in human GBM; ZIOPHARM plans to initiate a combination study in the first half of 2017 in recurrent GBM.
On July 23, 2015, the FDA
granted orphan drug designation for
Ad-RTS-IL-12
+ veledimex for the treatment of malignant glioma. Orphan drug designation
provides eligibility for a seven-year period of market exclusivity in the United States after product approval, an accelerated review process, accelerated approval where appropriate, grant funding, tax benefits and an exemption from user fees.
Ad-RTS-IL-12
+ veledimex for
metastatic breast cancer
On April 27, 2015, we announced the initiation of a Phase 1b/2 study of
Ad-RTS-hIL-12
+ veledimex following standard chemotherapy for the treatment of patients with locally advanced or metastatic breast cancer. The study was conducted at
the Memorial Sloan Kettering Cancer Center in New York and evaluated improving the patients response at
12-weeks.
A poster presentation of this study titled Phase 1b/2 study of intra-tumoral
Ad-RTS-hIL-12
+ veledimex in patients with chemotherapy-responsive locally advanced or metastatic breast cancer was presented at
the San Antonio Breast Cancer Symposium, in San Antonio, Texas in December 2015. We also presented updated information on the study at the 2016 ASCO meeting in June 2016.
11
We presented an update of the study at the European Society for Medical Oncology (ESMO) 2016 Congress, October 7
th
-11
th
in Copenhagen, Denmark. As of August 30, 2016, a total of nine patients were available for initial assessment. Results show that
Ad-RTS-hIL-12
+ 7 days of veledimex consistently elicited production of
IL-12
which in turn
produced IFN
g
. It was notable that the intratumoral influx of CD8+ T cells and IFN
g
were present six weeks after completion of veledimex consistent with the
ability of
Ad-RTS-hIL-12
to favorably impact the tumor environment over the long term. In two patients,
Ad-RTS-hIL-12
+ veledimex provided a meaningful drug holiday, with durable responses for 18 and 35 weeks. In all patients, disease
control rate (DCR) was 44% at Week 6 and 22% at Week 12. Overall response rate (ORR), defined as achieving a partial response (PR) or better, was 11% at Week 12. Most toxicities promptly reversed upon discontinuation of veledimex, including cytokine
release syndrome (grade
1-2
CRS), observed in six of nine patients. The higher than expected incidence of CRS was likely related to
CYP-3A4
drug interactions with
veledimex (80 mg) which resulted in enhanced peak cytokine expression.
CAR, NK and TCR cells
We are actively pursuing viral and
non-viral
genetic engineering technologies and approaches to cell propagation to
develop novel CAR
+
T, NK and TCR therapies. Combining this technology with Intrexons industrialized synthetic biologic engineering and clinically tested and validated RTS modules and/or kill
switches, represents a differentiated approach to genetically modified T cells and other immune cells, such as NK cells. Employing novel cell engineering techniques and multigenic gene programs, we expect to implement next-generation
non-viral
and viral adoptive cellular therapies based on specialized cytokines, CARs and TCRs targeting both hematologic malignancies and solid tumors.
The platform we, together with Intrexon, exclusively licensed from MD Anderson uses the
Sleeping Beauty,
or SB,
non-viral
genetic modification system to generate and characterize new CAR
+
T and TCR designs, which enables a high throughput approach to evaluate the
genetically modified immune cells in oncology. In addition, we can rapidly assemble CARs and TCRs to fashion immuno-receptors that differ in specificity and ability to activate T cells. These CAR and TCR molecules are evaluated based on measurements
of T cell function, phenotype, and genotype. We believe this
non-viral
gene transfer using the SB system is unique in the field of oncology and may avoid the expense and manufacturing difficulty associated
with creating T cells engineered to express CAR and TCR using viral vectors. After electroporation, the transposon/transposase employed by
Sleeping Beauty
improves the efficiency of integration of donor plasmids used to express CAR and other
transgenes in T cells. Propagation of genetically modified T cells on
bio-engineered
activating and propagating cells (AaPC) may provide a competitive advantage over other methods of modification. The SB
system combined with AaPC can selectively propagate and thus retrieve
CAR-expressing
T cells suitable for human applications. The time in culture with or without AaPC may be shortened to manufacture
minimally-manipulated T cells within days of gene transfer by electroporation. Associated
pre-clinical
data were presented at both the May 2016 ASGCT meeting and the December 2016 annual meeting of ASH. In the
pre-clinical
setting, the time to administration of third generation
Sleeping Beauty
CAR
+
T cells
co-expressing
a membrane-bound version of
IL-15
(mbIL15) has been reduced to less than two days through elimination of the need for
in vitro
T cell activation and
propagation.
The ability to genetically modify immune cells using
non-viral
and viral-based technologies enables
us to express other genes in addition to immunoreceptors (CARs and TCRs) to redirect specificity. The addition of mbIL15 described above in
pre-clinical
modeling endows
CAR-expressing
younger: T cells with an ability to be long-lived. The Company expects to build upon these data to
co-express
immunoreceptors with cytokines and to
leverage its ability to control expression with RTS
®
and/or kill switches. The Company expects to build upon these data to
co-express
immunoreceptors
with cytokines and to leverage its ability to control expression with RTS and/or kill switches. Using this unique set of genetic engineering tools, the company can employ a broad immunotherapy approach against cancer.
12
CAR
Through the MD Anderson License, the Company was able to enter the clinic with three CAR
+
T therapies in
2015 utilizing the
non-viral
genetic modification capabilities of the SB system. Two of these trials are with first generation technologies, the results from which were published in the Journal of
Clinical Investigation August 2016.
We are currently enrolling an
investigator-led
Phase 1 study using second
generation CD19-specific CAR
+
T cells with a revised CAR structure in patients with advanced lymphoid malignancies at MD Anderson. A patient with multiple-relapsed
B-cell
ALL received CD19-specific CAR
+
T cells produced with a
3-week
manufacturing process and achieved a complete
remission with normalization of PET/CT tumor imaging. Steps were taken in 2016 to further decrease the T cell culture time in the manufacturing process, which advances our efforts to address the challenges of cost and manufacturing time associated
with these therapies. Preclinical data in a mouse tumor model showing improved survival with treatment using CAR
+
T cells with reduced time in culture (approximately 2 weeks versus 4 weeks for
previous first generation CAR
+
T process) were presented at the 2016 annual meeting of American Society of Gene & Cell Therapy (ASGCT). The second generation CD19 trial underway is now
employing the shortened
2-week
manufacturing process advancement. On January 31, 2017, the Company announced a patient with
triple-hit
NHL treated in January 2017
was the first to receive
Sleeping Beauty
-modified CD19-specific CAR
+
T cells with the manufacturing time reduced to 2 weeks.
In the
pre-clinical
setting, the time to administration of third generation
Sleeping Beauty
CAR
+
T cells
co-expressing
a membrane-bound version of
IL-15
(mbIL15) has been reduced to less than two days. This shortened
process delivers genetically modified T cells with superior proliferative potential. Data presented at the 58th American Society of Hematology (ASH) Annual Meeting in December 2016, supported by an earlier publication in the Proceedings of the
National Academy of Sciences (2016 Nov 29;113(48):E7788-E7797), revealed promising results: Third generation
Sleeping Beauty
CAR
+
T cells demonstrated that a single
low-dose
of T cells
co-expressing
a CD19-specific CAR and mbIL15 resulted in sustained
in vivo
persistence that produced potent anti-tumor effects and superior
leukemia-free survival. These clinical and
pre-clinical
data support the Companys
point-of-care
(POC) plans to rapidly
infuse
Sleeping Beauty
CAR
+
T cells in a Phase I trial expected to be opened this year. With the intent to administer clinical-grade
Sleeping Beauty
CAR
+
T cells in less than 48 hours, this
non-viral
CAR-T
approach has the potential to outpace viral-based methods.
On July 12, 2016, we announced that after receiving feedback from the U.S. National Institutes of Health Office of Biotechnology Activities
Recombinant DNA Advisory Committee, we anticipated progressing plans for a Phase I adoptive cellular therapy clinical trial at MD Anderson infusing autologous T cells transduced with lentivirus to express a CD33-specific CAR
co-expressed
with a kill switch in patients with relapsed or refractory AML. Preclinical studies, presented at the 2016 annual meeting of ASH, demonstrated that lentiviral transduced
CAR-T
cells targeting CD33 exhibit specific cytotoxic activity for CD33
+
AML cells. A
proof-of-concept
study utilizing an
in vivo
mouse model for AML showed that these
CAR-T
cells were able to eliminate
disease burden and significantly enhance survival as compared to control groups. These positive preliminary results indicate biological activity and are suggestive of potential therapeutic effect for the treatment of AML. We plan to initiate this
Phase 1 clinical trial at MD Anderson during the first half of 2017.
NK Cell
In addition to T cells, we are pursuing
NK-cell
therapies for the treatment of cancers. NK cells may have advantages
over
T-cell
therapies in that killing is independent of a target antigen and the lack of expression of endogenous TCR obviates the need to genetically edit the associated genes. Initially, this OTS NK cell
treatment will be tested in patients with AML in a clinical trial at MD Anderson which we expect to initiate in 2017.
Discovery programs are also
underway to explore genetic modification of NK cells for increased tumor killing specificity. We expect to advance these and other exploratory
NK-cell
programs in preclinical studies in 2017.
13
TCR
Many of these genetic engineering technologies can also be applied towards targeting intracellular antigens with one or more TCRs. This approach is
particularly important for addressing the complexity of solid tumors. We believe that SB is ideally suited for targeting intracellular antigens by TCR as it may be more cost effective, should allow for rapid manufacturing and is customizable for
individual patient therapies with the ability to include multiple TCRs in a single therapy. We are pursuing discovery programs in TCR therapies for neoantigen targets. The development of an approach to create a truly personalized therapy for each
cancer patient based on his/her neoantigens is a strategic goal of our Company. On January 10, 2017, the Company announced the signing of a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) for the
development of adoptive cell transfer (ACT)-based immunotherapies genetically modified using the
Sleeping Beauty
(SB) transposon/transposase system to express T cell receptors (TCRs) for the treatment of solid tumors. The principal goal of
the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes (PBL) genetically modified using the
non-viral
SB system to express TCRs that recognize
specific immunogenic mutations, or neoantigens, expressed within a patients cancer. Clinical evaluations of the ability of these
SB-engineered
PBL to express TCRs reactive against cancer mutations to
mediate cancer regression in patients with metastatic disease will be performed. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in collaboration with
researchers at the Company and Intrexon.
GvHD Program
GVHD may occur after a bone marrow or stem cell transplant in which someone receives bone marrow tissue or cells from a donor. The new, transplanted cells
regard the recipients body as foreign. When this happens, the newly transplanted cells attack the recipients body. We, together with Intrexon, are initiating a research program focused on addressing the underlying pathologies of GvHD
through its engineered cell platforms. The exclusive collaboration, or the GvHD Program, will focus on the pursuit of the following engineered cell therapy strategies, used either separately or in combination, for the targeted treatment of GvHD:
(i) the infusion of regulatory T cell expressing membrane-bound and/or soluble
interleukin-2
and (ii) the deployment of orally delivered, genetically modified
L. lactis
such as that express
interleukin-2
to modulate immune function. We believe these strategies have the potential to broaden the number of patients eligible to receive allogeneic HCST and also increase the number of effective
donor/recipient combinations.
Milestones
We
achieved and expect to achieve the following milestones in 2017:
|
|
|
Intra-tumoral
IL-12
RheoSwitch
®
programs:
|
|
|
|
Clinical data from Phase 1 of
Ad-RTS-hIL-12
+ veledimex for GBM to be presented at scientific
meeting in 2017
|
|
|
|
Initiate pivotal clinical trial for GBM in 2017
|
|
|
|
Initiate combination study of
Ad-RTS-hIL-12
+ veledimex with iCPI
(PD-1)
during the first half of 2017
|
|
|
|
Initiate Phase 1 study in the treatment of brain tumors in children during the first half of 2017
|
|
|
|
Continue CD19 specific CAR
+
T clinical study in 2017 enrolling patients under shortened manufacturing process towards point of care
|
|
|
|
Initiate a CD33 specific CAR
+
T clinical study for relapsed or refractory AML in 2017
|
14
|
|
|
Advance CAR
+
T-cell
preclinical studies for at least one hematological malignancy under a shortened manufacturing process
towards point of care
|
|
|
|
Execute CRADA with NCI utilizing
Sleeping Beauty
to generate T cells targeting neoantigens
|
|
|
|
Initiate a Phase 1 study of OTS NK cells for AML in 2017
|
|
|
|
Advance preclinical studies in 2017
|
We are also evaluating additional potential preclinical candidates and
continuing discovery efforts aimed at identifying other potential product candidates under our Channel Agreement and GvHD Agreement with Intrexon. In addition, we may seek to enhance our pipeline in immuno-oncology through focused strategic
transactions, which may include acquisitions, partnerships and
in-licensing
activities.
Small molecule
program
In addition to our immuno-oncology programs, we maintain certain rights to a small molecule program, darinaparsin which we are no longer
developing directly. We entered into an amended and restated global licensing agreement with Solasia Pharma K.K., or Solasia, on July 31, 2014 granting Solasia an exclusive worldwide license to develop and commercialize darinaparsin, and
related organoarsenic molecules, in both intravenous and oral forms in all indications for human use. In exchange, we will be eligible to receive from Solasia
development-and
sales-based milestones, a royalty
on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenues generated by Solasia. On March 28, 2016, Solasia initiated a multi-center pivotal clinical trial intended to provide substantial evidence of efficacy
necessary to support the filing of an application for a new drug approval in certain of the territories assigned to Solasia. The start of this trial triggered a $1.0 million milestone payment to us which was subsequently paid to MD Anderson
under the terms of the MD Anderson License.
Development Plans
As of December 31, 2016, we have approximately $81.1 million of cash and cash equivalents. Given our development plans, we anticipate cash resources will be
sufficient to fund our operations into the fourth quarter of 2017 and the Company has no committed sources of additional capital. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual
amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently
anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to the Company when needed, if at all. If adequate additional funds are not available when required, or if the Company is unsuccessful in
entering into partnership agreements for further development of its products, management may need to curtail development efforts. Based on the forecast, management determined that there is substantial doubt regarding our ability to continue as a
going concern. As a result, our independent registered accounting firm has expressed substantial doubt as to our ability to continue as a going concern in their report dated February 16, 2017 included elsewhere in the Form 10-K.
Competition
The development and commercialization
for new products to treat cancer, including the indications we are pursuing is highly competitive, and considerable competition exists from major pharmaceutical, biotechnology and specialty cancer companies. In addition, many of these companies have
more experience in preclinical and clinical development, manufacturing, regulatory, and global commercialization. We are also competing with academic institutions, governmental agencies, and private organizations that are conducting research in the
field of cancer. Competition for highly qualified employees and their retention is intense, particularly as companies adjust to the current economic environment.
15
License Agreements, Intellectual Property and Other Agreements
Our goal is to obtain, maintain, and enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies in order
to preserve our trade secrets and to operate without infringing upon the proprietary rights of other parties. Our policy is to actively seek the broadest possible intellectual property protection for our product candidates through a combination of
contractual arrangements and patents, both in the United States and abroad.
Exclusive Channel Partner Agreement with Intrexon Corporation for the
Cancer Programs
On January 6, 2011, the Company entered into the Channel Agreement with Intrexon that governs a channel partnering
arrangement in which the Company uses Intrexons technology to research, develop and commercialize products in which DNA is administered to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer,
which the Company collectively refers to as the Cancer Program. This Channel Agreement establishes committees comprised of representatives of the Company and Intrexon that govern activities related to the Cancer Program in the areas of project
establishment, chemistry, manufacturing and controls, clinical and regulatory matters, commercialization efforts and intellectual property.
The Channel
Agreement grants the Company a worldwide license to use patents and other intellectual property of Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products involving DNA administered to
humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer, which is collectively referred to as the ZIOPHARM Products. Such license is exclusive with respect to any clinical development, selling, offering
for sale or other commercialization of ZIOPHARM Products, and otherwise is
non-exclusive.
Subject to limited exceptions, the Company may not sublicense these rights without Intrexons written consent.
Under the Channel Agreement, and subject to certain exceptions, the Company is responsible for, among other things, the performance of the Cancer
Program, including the development, commercialization and certain aspects of manufacturing of ZIOPHARM Products. Intrexon is responsible for establishing manufacturing capabilities and facilities for the bulk manufacture of products developed under
the Cancer Program, certain other aspects of manufacturing and costs of discovery-stage research with respect to platform improvements and costs of filing, prosecution and maintenance of Intrexons patents.
Subsequent to the terms of the Third Amendment to the Exclusive Channel Partner Agreement, or the 2016 ECP Amendment, discussed below, and subject to certain
expense allocations and other offsets provided in the Channel Agreement, the Company is obligated to pay Intrexon on a quarterly basis 20% of net profits derived in that quarter from the sale of ZIOPHARM Products, calculated on a ZIOPHARM
Product-by-
ZIOPHARM Product basis. The Company likewise agreed to pay Intrexon on a quarterly basis 50% of revenue obtained in that quarter from a sublicensor in the event of
a sublicensing arrangement. In addition, in partial consideration for each partys execution and delivery of the Channel Agreement, the Company entered into a stock purchase agreement with Intrexon.
Upon termination of the Channel Agreement, the Company may continue to develop and commercialize any ZIOPHARM Product that, at the time of termination:
|
|
|
Is being commercialized by the Company;
|
|
|
|
Has received regulatory approval;
|
|
|
|
Is a subject of an application for regulatory approval that is pending before the applicable regulatory authority; or
|
|
|
|
Is the subject of at least an ongoing Phase 2 clinical trial (in the case of a termination by Intrexon due to an
uncured breach or a voluntary termination by the Company), or an ongoing Phase 1 clinical trial
|
16
|
in the field (in the case of a termination by the Company due to an uncured breach or a termination by Intrexon following an unconsented assignment by the Company or its election not to pursue
development of a Superior Therapy (as defined in the Channel Agreement)).
|
The Companys obligation to pay 20% of net profits or
revenue described above with respect to these retained products will survive termination of the Channel Agreement.
Exclusive Channel
Collaboration Agreement with Intrexon Corporation for Graft-Versus-Host Disease (GvHD)
On September 28, 2015, the Company entered into the GvHD
Agreement with Intrexon, whereby the Company will use Intrexons technology directed towards
in vivo
expression of effectors to research, develop and commercialize products for use in the treatment or prevention of graft-versus-host
disease, or GvHD. GVHD may occur after a bone marrow or stem cell transplant in which someone receives bone marrow tissue or cells from a donor. The new, transplanted cells regard the recipients body as foreign. When this happens, the newly
transplanted cells attack the recipients body.
The exclusive collaboration, or the GvHD Program, will focus on the pursuit of the following
engineered cell therapy strategies, used either separately or in combination, for the targeted treatment of GvHD: (i) the infusion of regulatory T cells expressing membrane-bound and/or soluble
interleukin-2
and (ii) the deployment of orally delivered, genetically modified
L. lactis
that express
interleukin-2
to modulate immune function. The GvHD
Agreement establishes committees comprised of Company and Intrexon representatives that will govern activities related to the GvHD Program in the areas of project establishment, chemistry, manufacturing and controls, clinical and regulatory matters,
commercialization activities and intellectual property.
The GvHD Agreement grants the Company a worldwide license to use specified patents and other
intellectual property of Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products developed under the GvHD Program, or the Products. Such license is exclusive with respect to any
clinical development, selling, offering for sale or other commercialization of the Products, and otherwise is
non-exclusive.
Subject to limited exceptions, the Company may not sublicense the rights described
without Intrexons written consent.
Under the GvHD Agreement, and subject to certain exceptions, the Company is responsible for, among other things,
the performance of the GvHD Program including development, commercialization and certain aspects of manufacturing of the Products. Among other things, Intrexon is responsible for the costs of establishing manufacturing capabilities and facilities
for the bulk manufacture of the Products, certain other aspects of manufacturing, costs of discovery-stage research with respect to platform improvements and costs of filing, prosecution and maintenance of Intrexons patents.
The Company paid Intrexon a technology access fee of $10.0 million in cash in October 2015 and will reimburse Intrexon for all research and development
costs. Subject to certain expense allocations and other offsets provided in the GvHD Agreement, the GvHD Agreement also provides for equal sharing of the profits derived from the sale of the Products.
The Company has determined that the rights acquired in the GvHD Agreement represent
in-process
research and
development with no alternative future use. Accordingly, the Company recorded a charge of $10.0 million to research and development expense in September 2015.
During the first 24 months after September 28, 2015, the GvHD Agreement may be terminated by (i) either party in the event of a material breach by
the other, except for the failure of the other party to use diligent efforts or to comply with any diligence obligations set forth in the GvHD Agreement and (ii) Intrexon under certain circumstances if the Company assigns its rights under the
GvHD Agreement without Intrexons consent. Following such twenty-four-month period, Intrexon may also terminate the GvHD Agreement if the Company elects not to pursue the development of the GvHD Program identified by Intrexon that is a
Superior Therapy, as such term is defined in the GvHD Agreement. Also following such period, the Company may voluntarily terminate the GvHD Agreement upon 90 days written notice to Intrexon.
17
Upon termination of the GvHD Agreement, the Company may continue to develop and commercialize any Product that,
at the time of termination:
|
|
|
is being commercialized by the Company,
|
|
|
|
has received regulatory approval,
|
|
|
|
is a subject of an application for regulatory approval that is pending before the applicable regulatory authority, or
|
|
|
|
is the subject of at least an ongoing Phase 2 clinical trial (in the case of a termination by Intrexon due to a Company uncured breach or a voluntary termination by the Company), or an ongoing Phase 1 clinical trial (in
the case of a termination by the Company due to an Intrexon uncured breach or a termination by Intrexon following an unconsented assignment by the Company or the Companys election not to pursue development of a Superior Therapy).
|
The Companys obligation to pay 20% of net profits or revenue with respect to these retained products will survive
termination of the GvHD Agreement.
Amendment of Collaborations with Intrexon
On March 27, 2015, the Company and Intrexon entered into an Exclusive Channel Partner Amendment, or ECP Amendment, amending the Channel Agreement. The ECP
Amendment modifies the scope of the parties collaboration under the Channel Agreement in connection with the Ares Trading Agreement discussed below. Pursuant to the ECP Amendment, the chimeric antigen receptor T cell products to be developed
and commercialized pursuant to the Ares Trading Agreement shall be included within our collaboration under the Channel Agreement with Intrexon. The ECP Amendment provides that Intrexon will pay to the Company fifty percent of all payments Intrexon
receives for upfronts, milestones and royalties under the Ares Trading Agreement.
On June 29, 2016, the Company entered into (1) the 2016 ECP
Amendment with Intrexon amending the Channel Agreement, and (2) the 2016 GvHD Amendment with Intrexon, amending the GvHD Agreement. The 2016 ECP Amendment reduced the royalty percentage that the Company will pay to Intrexon under the Channel
Agreement on a quarterly basis from 50% to 20% of net profits derived in that quarter from the sale of ZIOPHARM Products (as defined in the Channel Agreement, as amended), calculated on a ZIOPHARM
Product-by-ZIOPHARM
Product basis, subject to certain expense allocations and other offsets provided in the Channel Agreement. The 2016 GvHD Amendment reduced the royalty percentage that the Company will pay
to Intrexon under the GvHD Agreement on a quarterly basis from 50% to 20% of net profits derived in that quarter from the sale of Products (as defined in the GvHD Agreement), subject to certain expense allocations and other offsets provided in the
GvHD Agreement. The reductions in the royalty percentages provided by the 2016 ECP Amendment and the 2016 GvHD Amendment do not apply to sublicensing revenue or royalties under the Channel Agreement and GvHD Agreement, nor do they apply to any
royalties or other payments made with respect to sublicensing revenue from the Companys existing collaboration Ares Trading S.A., or Ares Trading, a subsidiary of the biopharmaceutical business of Merck KGaA, Darmstadt, Germany.
In consideration for the execution and delivery of the 2016 ECP Amendment and the 2016 GvHD Amendment, the Company agreed to issue to Intrexon 100,000 shares
of its Series 1 preferred stock. Each share of the Companys Series 1 preferred stock has a stated value of $1,200, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other recapitalization, and
certain other rights, preferences, privileges and obligations (Note 10).
License AgreementThe University of Texas MD Anderson Cancer Center
On January 13, 2015, the Company, together with Intrexon, entered into a License Agreement, or the MD Anderson License, with MD Anderson.
Pursuant to the MD Anderson License, the Company and Intrexon hold
18
an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel chimeric antigen receptor (CAR) T cell therapies,
non-viral
gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells and
T-cell
receptors, or TCRs arising from the laboratory of Dr. Cooper, M.D., Ph.D., who became the Chief Executive Officer of the Company on May 7, 2015 and was formerly a tenured professor of pediatrics at MD Anderson and now currently
a visiting scientist under that institutions policies, as well as either
co-exclusive
or
non-exclusive
licenses under certain related technologies.
Pursuant to the terms of the MD Anderson License, MD Anderson received consideration consisting of $50.0 million in shares of the Companys common
stock (or 10,124,561 shares), and $50.0 million in shares of Intrexons common stock, in each case based on a trailing 20 day volume weighted average of the closing price of the Companys and Intrexons common stock ending on the
date prior to the announcement of the entry into the MD Anderson License, collectively referred to as the License Shares, pursuant to the terms of the License Shares Securities Issuance Agreement described below. The License Shares were issued to MD
Anderson on March 11, 2015 pursuant to the terms of the MD Anderson License.
On January 9, 2015, in order to induce MD Anderson to enter into
the MD Anderson License on an accelerated schedule, the Company and Intrexon entered into a letter agreement, or the Letter Agreement, pursuant to which MD Anderson received consideration of $7.5 million in shares of the Companys common
stock (or 1,597,602 shares), and $7.5 million in shares of Intrexons common stock, in each case based on a trailing 20 day volume weighted average of the closing price of the Companys and Intrexons common stock ending on the
date prior to the execution of the Letter Agreement, collectively referred to as the Incentive Shares, in the event that the MD Anderson License was entered into on or prior to 8:00 am Pacific Time on January 14, 2015. The Incentive Shares were
issued to MD Anderson on March 11, 2015 pursuant to the terms of the Incentive Shares Securities Issuance Agreement described below.
On
August 17, 2015, the Company, Intrexon and MD Anderson entered into a research and development agreement, or the Research and Development Agreement, to formalize the scope and process for the transfer by MD Anderson, pursuant to the terms of
the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.
Pursuant to the Research and Development Agreement, the Company, Intrexon and MD Anderson have agreed to form a joint steering committee that will oversee and
manage the new and ongoing research programs. As provided under the MD Anderson License, the Company will provide funding for research and development activities in support of the research programs under the Research and Development Agreement for a
period of three years and in an amount of no less than $15.0 million and no greater than $20.0 million per year. During the quarter ended December 31, 2016, the Company made one quarterly payment of $3.8 million and has paid an
aggregate of $26.3 million under this arrangement. As of December 31, 2016, MD Anderson has used $3.4 million to offset costs incurred pursuant to the MD Anderson License and the Research and Development Agreement. The net balance of
$22.9 million is included in other current assets on the balance sheet at December 31, 2016.
The term of the MD Anderson License expires on the
last to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the License; provided, however, that following the expiration of the term of the MD Anderson License, the Company and
Intrexon shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a
90-day
cure period, MD Anderson will have the right to convert the MD Anderson License into a
non-exclusive
license if the Company and Intrexon are not using commercially
reasonable efforts to commercialize the licensed intellectual property on a
case-by-case
basis. After five years from the date of the MD Anderson License and subject to
a
180-day
cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific
19
technology(ies) funded by the government or subject to a third party contract if the Company and Intrexon are not meeting the diligence requirements in such funding agreement or contract, as
applicable. MD Anderson may also terminate the agreement with written notice upon material breach by the Company and Intrexon, if such breach has not been cured within 60 days of receiving such notice. In addition, the MD Anderson License will
terminate upon the occurrence of certain insolvency events for both the Company and Intrexon and may be terminated by the mutual written agreement of the Company, Intrexon and MD Anderson.
In connection with the License and the issuance of the License Shares and the Incentive Shares, on January 13, 2015, the Company and MD Anderson entered
into a Registration Rights Agreement, or the Registration Rights Agreement, pursuant to which the Company agreed to file a resale registration statement, or the Registration Statement, registering the resale of the License Shares, the
Incentive Shares and any other shares of the Companys common stock held by MD Anderson on the date that the Registration Statement is filed Under the Registration Rights Agreement, the Company is obligated to maintain the effectiveness of the
Registration Statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions. A prospectus supplement under the Companys already effective registration statement on Form
S-3
(File
No. 333-201826)
was filed on April 1, 2015 in satisfaction of the Companys obligations under the Registration Rights Agreement.
The Company has determined that the rights acquired in the MD Anderson License represent in process research and development with no alternative future use.
Accordingly, the Company recorded a charge of $67.3 million to research and development expense in 2015, representing the fair value of the 11,722,163 shares of its common stock on the date the MD Anderson License was executed.
Ares Trading License and Collaboration Agreement
On
March 27, 2015, the Company and Intrexon signed a worldwide License and Collaboration Agreement, or the Ares Trading Agreement, with Ares Trading S.A., or Ares, a subsidiary of the biopharmaceutical business of Merck KGaA, Darmstadt, Germany,
through which the parties established a collaboration for the research and development and commercialization of certain products for the prophylactic, therapeutic, palliative or diagnostic use for cancer in humans.
Under the collaboration, Ares has elected two CAR
+
T targets for which the Company will perform certain
research activities that will, in part, be funded by Ares. Once these candidates reach investigational new drug (IND) stage, the programs will be transferred to Ares for clinical development and commercialization. The Company expects to perform
multiple preclinical development programs, each consisting of the development of one product candidate, pursuant to the agreement. The Company and Intrexon will also independently conduct research and development on other CAR
+
T candidates, with Ares Trading having the opportunity during clinical development to
opt-in
to these candidates for additional payments to the Company and
Intrexon.
Intrexon is entitled to receive $5.0 million payable in equal quarterly installments over two years for each identified product candidate,
which will be used to fund discovery work. The Company will be responsible for costs exceeding the quarterly installments and all other costs of the preclinical research and development.
Ares Trading paid a
non-refundable
upfront fee of $115.0 million to Intrexon as consideration for entry into the
Ares Trading Agreement. Pursuant to the ECP Amendment, the Company was entitled to receive 50% of the upfront fee, or $57.5 million, which the Company received from Intrexon in July 2015.
The Ares Trading Agreement provides for up to $60.0 million in development milestone payments, up to $148.0 million in regulatory milestone payments
and up to $205.0 million in commercial milestone payments for each product candidate. Development milestone payments are triggered upon initiation of a defined phase of clinical research for a product candidate. Regulatory milestone payments
are triggered upon approval to market a product candidate by the U.S. Food and Drug Administration (FDA) or other global regulatory authorities.
20
Commercial milestone payments are triggered when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee. The Ares Trading Agreement also provides for up to
$50.0 million of
one-time
payments upon the achievement of certain technical milestones evidenced by the initiation of a defined phase of clinical research. All development, regulatory and technical
milestones are considered substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the milestone as
well as the level of effort and investment required. Accordingly, such amounts will be recognized as revenue in full in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. All commercial
milestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. The next potential milestone payment that Intrexon could be entitled
to receive under the Ares Trading Agreement is a $15.0 million substantive milestone for the initiation of a Phase I clinical trial. In addition, to the extent any of the product candidates licensed by Ares Trading are commercialized, Intrexon
would be entitled to receive royalties ranging from the lower-single digits to the
low-teens
of net sales derived from the sale of products developed under agreement. Intrexon will pay 50% of all milestone and
royalty payments that it receives under the Ares Trading Agreement to the Company pursuant to the ECP Amendment.
The term of the Ares Trading Agreement
commenced in May 2015 and may be terminated by either party in the event of a material breach as defined in the agreement and may be terminated voluntarily by Ares Trading upon 90 days written notice to the Company.
The Company considered FASB Accounting Standards Codification
605-25,
Multiple-Element Arrangements
, in
evaluating the appropriate accounting for the Ares Trading Agreement. In accordance with this guidance, the Company identified the license and research and development services as the Companys deliverables in the arrangement. The Company
concluded that the license does not have standalone value independent from the research and development services. Accordingly, the Ares Trading Agreement is accounted for by the Company as a single unit of accounting. The $57.5 million upfront
payment received by the Company was recorded as deferred revenue and is being recognized over the estimated period of performance of the research and development services which are currently estimated to be 9 years, beginning with the commencement
of the research and development services. During the twelve months ended December 31, 2016 and 2015, the Company recognized $6.4 and $3.2 million, respectively, of revenue related to the Ares Trading Agreement. As of December 31,
2016, the remaining balance of deferred revenue associated with the upfront payment is $47.9 million, of which $6.4 million is current and $41.5 million is classified as long-term. As of December 31, 2015, the remaining balance
of deferred revenue associated with the upfront payment was $54.3 million, of which $6.4 million was current and $47.9 million was classified as long term.
Patent and Technology License AgreementThe University of Texas MD Anderson Cancer Center and the Texas A&M University System.
On August 24, 2004, the Company entered into a patent and technology license agreement with MD Anderson, which the Company refers to, collectively, as the
Licensors. Under this agreement, the Company was granted an exclusive, worldwide license to rights (including rights to U.S. and foreign patent and patent applications and related improvements and
know-how)
for the manufacture and commercialization of two classes of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.
The Company issued options to purchase 50,222 shares outside of the Companys stock option plans following the successful completion of certain clinical
milestones, of which 37,666 have vested. The remaining 12,556 shares vested upon enrollment of the first patient in a multi-center pivotal clinical trial i.e. a human clinical trial intended to provide the substantial evidence of efficacy necessary
to support the filing of an approvable New Drug Application, or NDA. An expense of $87 thousand was charged to research and development expense for the vesting event which occurred in March 2016. This trial was initiated by Solasia Pharma K.K.,
or Solasia, on
21
March 28, 2016 and triggered a $1.0 million milestone payment to the Company from Solasia which was received in May 2016. An equivalent milestone payment of $1.0 million was made
to MD Anderson. In addition, the Licensors are entitled to receive certain milestone payments. The Company may be required to make additional payments upon achievement of certain other milestones in varying amounts which on a cumulative basis could
total up to an additional $4.5 million. In addition, the Licensors are entitled to receive single digit percentage royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may
receive from a possible sublicense under certain circumstances.
Collaboration Agreement with Solasia Pharma K.K.
On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia. Pursuant to the License and Collaboration Agreement, the
Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both IV and oral forms and related organic arsenic molecules, in all indications for human use in a
pan-Asian/Pacific
territory comprised of Japan, China, Hong Kong, Macau, Republic of Korea, Taiwan, Singapore, Australia, New Zealand, Malaysia, Indonesia, Philippines and Thailand.
As consideration for the license, the Company received an upfront payment of $5.0 million to be used exclusively for further clinical development of
darinaparsin outside of the
pan-Asian/Pacific
territory, and will be entitled to receive additional payments of up to $32.5 million in development-based milestones and up to $53.5 million in
sales-based milestones. The Company will also be entitled to receive double digit royalty payments from Solasia based upon net sales of licensed products in the applicable territories, once commercialized, and a percentage of sublicense revenues
generated by Solasia. The $5.0 million upfront payment received in March 2011 was amortized over the period of the Companys research and development effort, which was completed in March 2016.
On July 31, 2014, the Company entered into an amendment and restatement of the License and Collaboration Agreement granting Solasia an exclusive
worldwide license to develop and commercialize darinaparsin, and related organoarsenic molecules, in both intravenous and oral forms in all indications for human use. In exchange, the Company will be eligible to receive from Solasia
development-and
sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenues generated by Solasia.
Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin. The Companys Licensors, as
defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the terms of the Companys license agreement with the Licensors.
On March 28, 2016, Solasia initiated a multi-center pivotal clinical trial intended to provide substantial evidence of efficacy necessary to support the
filing of an application for an NDA for darinaparsin in certain of the territories assigned to Solasia. The initiation of the trial on March 28, 2016 triggered a $1.0 million milestone payment from Solasia to the Company which was received
in May 2016. The Company subsequently made an equivalent payment to MD Anderson as the ultimate licensor of darinaparsin.
License Agreement with
Baxter Healthcare S.A.
On November 3, 2006, the Company entered into a definitive Asset Purchase Agreement for indibulin and a License Agreement
to proprietary nanosuspension technology with affiliates of Baxter Healthcare S.A. The purchase included the entire indibulin intellectual property portfolio as well as existing drug substance and capsule inventories. One additional payment of
$250 thousand is due in November 2017. The terms of the Asset Purchase Agreement included an upfront cash payment and an additional payment for existing inventory. During the 12 months ending December 31, 2016, the company made one payment
of $250 thousand. The Company is not actively pursuing the development of indibulin.
22
Patents and Other Intellectual Property Rights and Protection
Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent
protection is obtained. The actual protection offering by a patent, which can vary from country to country, depends of the type of patent, the scope of its coverage and the availability of legal remedies in the country.
Pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, some of our patents, under certain
conditions, may be eligible for limited patent term extension for a period of up to five years as compensation for patent term lost during drug development and the FDA regulatory review process. However, this extension period cannot be extended
beyond 14 years from the drugs approval date. The patent term restoration period is generally
one-half
the period of time elapsed between the effective date of an IND application or the issue date of the
patent, whichever is later, and the submission date of an NDA, plus the period of time between the submission date of the NDA or the issue date of the patent, whichever is later, and FDA approval. The United States Patent and Trademark Office, in
consultation with the FDA, reviews and approves applications for any patent term extension or restoration. We intend to seek the benefits of this statute, but there can be no assurance that we will be able to obtain any such benefits.
We also depend upon the skills, knowledge, and experience of our scientific and technical personnel, as well as those of our advisors, consultants, and other
contractors, none of which is patentable. To help protect proprietary
know-how,
which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely, and in the future
will continue to rely, on trade secret protection and confidentiality agreements to protect our interests. To this end, we generally require employees, consultants, advisors and other contractors to enter into confidentiality agreements that
prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.
Our patent position and proprietary rights are subject to certain risks and uncertainties. Please read the
Risk Related to Our Intellectual
Property
section for further information about certain risks and uncertainties that may affect our patent position and proprietary rights.
Additional information as of December 31, 2016 about material patents and other proprietary rights covering our product candidates is set forth below.
Ad-RTS-IL-12
+ veledimex and
DC-RTS-IL-12
+ veledimex.
The patent
estate licensed to us by Intrexon covering
Ad-RTS-IL-12
+ activator ligands, such as veledimex and
DC-RTS-IL-12
+ activator ligand compositions, methods of use, methods of manufacture, and formulations includes over one hundred
patents and applications. This portfolio also includes issued and pending foreign patents in Europe, Canada, Japan, Australia and other countries. The term of one or more of the issued patents may be extended due to the regulatory approval
process.
CAR+ Cells
In January 2015, we
in-licensed
from M.D. Anderson a technology portfolio that includes intellectual property directed to certain
non-viral
Sleeping Beauty system and CAR+ T cell and
bioprocessing technology. Under the terms of the agreement, we have an exclusive license to certain of the intellectual property, a
co-exclusive
license to certain of the intellectual property technology and a
non-exclusive
license to certain of the intellectual property technology. Our rights to the M.D. Anderson intellectual property flow to us via our agreement with Intrexon.
Governmental Regulation
The research, development,
testing, manufacture, labeling, promotion, advertising, distribution, import, export and marketing, among other things, of our products are extensively regulated by governmental authorities in the
23
United States and other countries. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and biologics under the Public Health Service Act, or
PSHA, as well as their respective implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending NDAs or Biologics License
Applications, or BLAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecution. Moreover, if our product candidates are approved by the FDA, government
coverage and reimbursement policies will both directly and indirectly affect our ability to successfully commercialize our product candidates, and such coverage and reimbursement policies will be affected by future healthcare reform measures. In
addition, we may be subject to state and federal laws, including anti-kickback statutes and false claims statutes as well as data privacy laws that restrict certain business practices in the biopharmaceutical industry.
Product Approval Process
.
None of our product candidates may be marketed in the United States until it has received FDA approval. The steps
required before a drug or biologic product may be marketed in the United States include:
|
|
|
Preclinical laboratory tests, animal studies, and formulation studies;
|
|
|
|
Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;
|
|
|
|
Adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for each indication;
|
|
|
|
Submission to the FDA of NDA or BLA;
|
|
|
|
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices, or cGMPs and if applicable,
current good tissue practices, or GTPs; and
|
|
|
|
FDA review and approval of the NDA or BLA.
|
Preclinical tests include laboratory evaluation of product
chemistry, pharmacokinetics, toxicity, immunogenicity and formulation, as well as animal studies. The conduct of the preclinical tests and formulation of the products for testing must comply with federal regulations and requirements. The results of
the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application, which must become effective before human clinical trials may begin. An IND automatically takes effect 30
calendar days after receipt by the FDA, unless before that time the FDA applies a clinical hold and raises safety concerns or questions about issues such as the design of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before clinical trials may proceed. We cannot be certain that submission of an IND will result in the FDA allowing a clinical trial to be initiated.
If a gene therapy trial is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to the submission of an IND
to the FDA, a protocol and related documents must be submitted to, and the study registered with, the NIH Office of Biotechnology Activities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or the NIH
Guidelines. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA. However, many companies and other institutions, not otherwise subject to the NIH Guidelines,
voluntarily follow them. The NIH is responsible for convening the recombinant DNA advisory committee, or RAC, that discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly
public meetings. The OBA will notify the FDA of the RACs decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA website and may be accessed by the public.
24
Clinical trials involve the administration of an investigational drug or biologic to human subjects under the
supervision of qualified investigators. Clinical trials are conducted according to protocols that detail the study objectives, the parameters to be used in monitoring participants safety, and the effectiveness criteria by which the
investigational product will be evaluated. Each protocol must be submitted to the FDA as part of the IND.
Clinical trials are typically conducted in
three sequential phases, but the phases may overlap. The study protocol and informed consent information for study subjects in a clinical trial must also be approved by an Institutional Review Board for each institution where the trial will be
conducted. Study subjects must sign an informed consent form before participating in a clinical trial. Phase 1 usually involves the initial introduction of the investigational product into people to evaluate its short-term safety, dosage tolerance,
metabolism, pharmacokinetics, and pharmacologic actions and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited patient population in order to (1) evaluate dosage tolerance and
appropriate dosage; (2) identify possible adverse effects and safety risks; and (3) evaluate preliminarily the efficacy of the drug for specific indications. Phase 3 trials usually continue to evaluate clinical efficacy and further test
for safety by using the product in its final form in an expanded patient population. There can be no assurance that Phase 1, Phase 2, or Phase 3 testing will be completed successfully within any specified period of time, if at all. Furthermore, the
sponsoring company, an IRB or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.
The FDCA permits the FDA and the IND sponsor to agree in writing on the design and size of clinical studies intended to form the primary basis of a claim of
effectiveness in an NDA or BLA. This process is known as Special Protocol Assessment, or SPA, and can be a somewhat lengthy process. An agreement may not be changed by the sponsor or the FDA after the trial begins, except (1) with the written
agreement of the sponsor and the FDA, or (2) if the director of the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or effectiveness of the drug was identified after the
testing began.
Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical studies,
together with other detailed information, including information on the manufacture and composition of the product candidate, are submitted to the FDA in the form of an NDA or BLA requesting approval to market the product for one or more indications.
An NDA or BLA must be accompanied by a substantial user fee, unless a waiver applies. The testing and approval process requires substantial time, effort, and financial resources. The FDA reviews the application and may deem it to be inadequate to
support the registration, and companies cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to the appropriate external advisory committee, typically a panel of clinicians, for
review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee.
The goals of the NDA/BLA are to provide enough information to permit FDA to reach the following key decisions:
|
|
|
Is the product safe and effective in its proposed use(s), and do its benefits outweigh its risks?
|
|
|
|
Is the products proposed labeling (package insert) appropriate, and what should it contain? Are measures necessary to mitigate risks of use of the product (referred to as Risk Evaluation and Mitigation Strategies,
or REMS)?
|
|
|
|
Are the methods used in manufacturing the product and the controls used to maintain its quality adequate to preserve identity, strength, quality, and purity?
|
The FDA has various programs, including orphan drug, fast track, priority review, and accelerated approval, which are intended to expedite or simplify the
process for developing and reviewing drugs, and/or provide for approval on the basis surrogate endpoints, or provide financial incentives and market exclusivity. Generally, drugs that may be eligible for one or more of these programs are those for
serious or life-threatening conditions,
25
those with the potential to address unmet medical needs, and those that provide meaningful benefit over existing treatments. A company cannot be certain that any of its investigational drugs will
qualify for any of these programs, or that, if a drug does qualify, the review time will be reduced. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which
is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a
drug or biological product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting an NDA or BLA. Orphan designation does not convey any
advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan designation subsequently receives the first FDA approval for such drug or biological product for the disease or condition for which it
has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in limited
circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for
the same product but for a different indication for which the orphan product has exclusivity. If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not
be entitled to orphan product exclusivity.
Before approving an NDA or BLA, the FDA usually will inspect the facility or the facilities at which the drug
is manufactured and will not approve the product unless cGMP compliance is satisfactory. If the FDA evaluates the NDA or BLA and the manufacturing facilities and deems them to be acceptable, the FDA may issue an approval letter, or in many cases, a
complete response letter. The complete response letter contains the conditions that must be met in order to secure final approval of the NDA or BLA. When and if those conditions have met with the FDAs satisfaction, the FDA will issue an
approval letter. The approval letter authorizes commercial marketing of the drug or biologic for specific indications. As a condition of NDA/BLA approval, the FDA may require post-marketing testing and surveillance to monitor the drugs safety
or efficacy, or impose other conditions.
After approval, certain changes to the approved drug product, such as adding new indications, initiating certain
manufacturing changes, or making certain additional labeling claims, are subject to further FDA review and approval. Before a company can market a drug product for any additional indication(s), it must obtain additional approval from the FDA.
Obtaining approval for a new indication generally requires that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product candidate will be approved on a timely basis, or at
all.
Post-approval Requirements
. Often times, even after a drug has been approved by the FDA for sale, the FDA may require that certain
post-approval requirements be satisfied, including the conduct of additional clinical studies. If such post-approval conditions are not satisfied, the FDA may withdraw its approval of the product. In addition, holders of an approved NDA or BLA are
required to: (1) report certain adverse reactions to the FDA; (2) comply with certain requirements concerning advertising and promotional labeling for their products; and (3) continue to have quality control and manufacturing
procedures conform to cGMP. The FDA periodically inspects the sponsors records relating to safety reporting and/or manufacturing facilities; this latter effort includes assessment of cGMP compliance. Accordingly, manufacturers must continue to
expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. We intend to use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may
identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in
restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market.
Patent Challenge
Process Regarding ANDAs.
The Hatch-Waxman Act provides incentives for generic pharmaceutical manufacturers to challenge patents on branded pharmaceutical products and/or their methods of
26
use, as well as to develop products comprising
non-infringing
forms of the patented drugs. The Hatch-Waxman legislation places significant burdens on the
Abbreviated New Drug Application, or ANDA, filer to ensure that such challenges are not frivolous, but also offers the opportunity for significant financial reward if the challenge is successful.
If there is a patent listed for the branded drug in the FDAs Orange Book at the time of submission of the ANDA or at any time before the ANDA is
approved and the generic company intends to market the generic equivalent prior to the expiration of that patent, the generic company includes a certification asserting that the patent is invalid, unenforceable and/or not infringed, a
so-called
paragraph IV certification.
After receiving notice from the FDA that its application is
acceptable for review or immediately if the ANDA has been amended to include a paragraph IV certification after the application was submitted to the FDA, the company filing a generic application is required to send the patent holder and the holder
of the NDA for the brand-name drug a notice explaining why it believes that the patents in question are invalid, unenforceable or not infringed. Upon receipt of the notice from the generic applicant, the patent holder has 45 days during which to
bring a patent infringement suit in federal district court against the generic applicant in order to obtain the
30-month
automatic stay.
If a suit is commenced by the patent holder during the
45-day
period, the Hatch-Waxman Act provides for an automatic
stay on the FDAs ability to grant final approval of the ANDA for the generic product. Patent holders may only obtain one
30-month
stay with respect to patents that were listed at the time an ANDA was
filed. The period during which the FDA may not approve the ANDA and the patent challenger therefore may not market the generic product is 30 months, or such other period as may be ordered by the court. The
30-month
period may or may not, and often does not, coincide with the timing of the resolution of the lawsuit or the expiration of a patent, but if the patent challenge is successful or the challenged patent
expires during the
30-month
period, the FDA may approve the generic drug for marketing, assuming there are no other obstacles to approval such as periods of
non-patent
exclusivity given to the NDA holder.
Under the Hatch-Waxman Act, any developer of a generic drug that is considered first to have filed its ANDA for
review by the FDA, and whose filing includes a paragraph IV certification, may be eligible to receive a
180-day
period of generic market exclusivity. This period of market exclusivity may provide the patent
challenger with the opportunity to earn a return on the risks taken and its legal and development costs and to build its market share before other generic competitors can enter the market. If the ANDA of the first applicant accepted for filing is
withdrawn, the
180-day
exclusivity period is forfeited and unavailable to any other applicant.
Coverage and
Reimbursement.
Sales of our product candidates, if approved, will depend, in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare
organizations. These third-party payors are increasingly limiting coverage and/or reducing reimbursements for medical products and services. A third-party payors decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Further, one payors determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. In addition, the U.S. government, state legislatures and
foreign governments have continued implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic or biosimilar products. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.
27
Healthcare Laws and Regulations.
We are currently or will in the future be subject to healthcare
regulation and enforcement by the federal government and the states and foreign governments in which we will conduct our business once our product candidates are approved. The healthcare laws and regulations that may affect our ability to operate
include the following:
|
|
|
The federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is in exchange for or to induce the
referral of business, including the purchase, order, arrangement or lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term remuneration has
been broadly interpreted to include anything of value.
|
|
|
|
Federal false claims and false statement laws, including the federal civil False Claims Act, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or
approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent.
|
|
|
|
HIPAA created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private
third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
|
|
|
|
HIPAA, as amended by HITECH, and their implementing regulations, imposes obligations on certain types of individuals and entities regarding the electronic exchange of information in common healthcare transactions, as
well as standards relating to the privacy and security of individually identifiable health information.
|
|
|
|
The federal Physician Payments Sunshine Act requires certain manufacturers of products for which payment is available under Medicare, Medicaid or the Childrens Health Insurance Program, with specific exceptions,
to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members.
|
Also, many states have similar laws and regulations, such as anti-kickback and false claims
laws that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that require biopharmaceutical companies to
comply with the federal governments and/or industrys voluntary compliance guidelines, state laws that require biopharmaceutical manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. If our
operations are found to be in violation of any of these federal, state or foreign laws or regulations, we may be subject to penalties, including without limitation, administrative or civil penalties, imprisonment, damages, fines, disgorgement,
exclusion from participation in government healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, or the curtailment or restructuring of our operations.
Healthcare Reform.
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to
change the healthcare system in ways that could affect our ability to sell our products profitably. By way of example, in March 2010, the ACA was signed into law, which intended to broaden access to health insurance, reduce or constrain the growth
of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms. In January
2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA. Further, on January 20, 2017, President Trump signed an
Executive Order directing federal agencies with authorities and responsibilities under the ACA
28
to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers,
health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elements of the ACA that are repealed.
We expect that healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in
additional downward pressure on the price that we receive for any approved product. We cannot predict what healthcare reform initiatives may be adopted in the future.
Employees
As of February 6, 2017 we had 36
full-time employees, 24 of whom were engaged in research and development activities and 12 of whom were engaged in business development, finance, information systems, facilities, human resources or administrative support. None of our employees are
subject to a collective bargaining agreement.
Corporate Information
We originally incorporated in Colorado in September 1998 (under the name Net Escapes, Inc.) and later changed our name to EasyWeb, Inc. in February
1999. We
re-incorporated
in Delaware on May 16, 2005 under the same name. On September 13, 2005, we completed a reverse acquisition of privately held ZIOPHARM, Inc., a Delaware
corporation. To effect this transaction, we caused ZIO Acquisition Corp., our wholly-owned subsidiary, to merge with and into ZIOPHARM, Inc., with ZIOPHARM, Inc. surviving as our wholly owned subsidiary. In accordance with the terms of the merger,
the outstanding common stock of ZIOPHARM, Inc. automatically converted into the right to receive an aggregate of approximately 97.3% of our outstanding common stock (after giving effect to the transaction). Following the merger, we caused ZIOPHARM,
Inc. to merge with and into us and we changed our name to ZIOPHARM Oncology, Inc. Although EasyWeb, Inc. was the legal acquirer in the transaction, we accounted for the transaction as a reverse acquisition under generally accepted
accounting principles. As a result, ZIOPHARM, Inc. became the registrant with the SEC and the historical financial statements of ZIOPHARM, Inc. became our historical financial statements.
Our principal executive offices are located at One First Avenue, Parris Building 34, Navy Yard Plaza, Boston, Massachusetts 02129, and our telephone number is
(617)
259-1970.
Available Information
Our website address is www.ziopharm.com. Our website and information included in or linked to our website are not part of this Annual Report on Form
10-K.
We file reports with the SEC, which we make available on our website free of charge. These reports include annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to such reports, each of which is provided on our website as soon as reasonably practicable after we
electronically file such materials with or furnish them to the SEC. You can also read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You can obtain additional
information about the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains
a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, like us, that file electronically with the SEC, including us.
29
Item 1A. Risk Factors
An investment in our common stock is very risky. In addition to the other information in this Annual Report on Form
10-K,
you should carefully consider the following risk factors in evaluating us and our business. If any of the events described in the following risk factors were to occur, our business, financial condition,
results of operation and future growth prospects would likely be materially and adversely affected. In that event, the trading price of our common stock could decline and you could lose all or a part of your investment in our common stock.
Therefore, we urge you to carefully review this entire report and consider the risk factors discussed below. 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, financial condition, operating results or prospects.
RISKS RELATED TO OUR BUSINESS
Our plans to develop and commercialize
non-viral
and viral adoptive cellular therapies based on engineered
cytokines and novel chimeric antigen receptor, or CAR, T cell and natural killer, or NK, cell therapies as well as T cell Receptor, or TCR, therapies can be considered as new approaches to cancer treatment, the successful development of which is
subject to significant challenges.
We intend to employ technologies such as the technology licensed from MD Anderson pursuant to the MD Anderson
License described above, and from Intrexon, pursuant to the Channel Agreement and GvHD Agreement, to pursue the development and commercialization of
non-viral
and viral adoptive cellular therapies based on
cytokines, T cells, NK cells, CARs and TCRs possibly under control of the RTS
®
and other switch technologies targeting both hematologic and solid tumor malignancies. Because this is a
new approach to cancer immunotherapy and cancer treatment generally, developing and commercializing product candidates subjects us to a number of challenges, including:
|
|
|
obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercial development of genetically modified and/or unmodified
T-cell
and
NK-cell
therapies for cancer;
|
|
|
|
developing and deploying consistent and reliable processes for engineering a patients and/or donors T cells or NK cells
ex vivo
and infusing the T cells or NK cells back into the patient;
|
|
|
|
possibly conditioning patients with chemotherapy in conjunction with delivering each of the potential products, which may increase the risk of adverse side effects of the potential products;
|
|
|
|
educating medical personnel regarding the potential side effect profile of each of the potential products, such as the potential adverse side effects related to cytokine release;
|
|
|
|
addressing any competing technological and market developments;
|
|
|
|
developing processes for the safe administration of these potential products, including long-term
follow-up
for all patients who receive the potential products;
|
|
|
|
sourcing additional clinical and, if approved, commercial supplies for the materials used to manufacture and process the potential products;
|
|
|
|
developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment;
|
|
|
|
establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance;
|
|
|
|
developing therapies for types of cancers beyond those addressed by the current potential products;
|
|
|
|
maintaining and defending the intellectual property rights relating to any products we develop; and
|
|
|
|
not infringing the intellectual property rights, in particular, the patent rights, of third parties, including competitors such as developing
T-cell
and/or
NK-cell
therapies.
|
30
We cannot be sure that immunotherapy technologies that we intend to develop in partnership with MD Anderson and
Intrexon will yield satisfactory products that are safe and effective, scalable, or profitable. Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence
the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment
practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose
not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.
We cannot assure you that we will be able to successfully address these challenges, which could prevent us from achieving our research, development and
commercialization goals.
Our current product candidates are based on novel technologies and are supported by limited clinical data and we cannot
assure you that our current and planned clinical trials will produce data that supports regulatory approval of one or more of these product candidates.
Our Channel Agreement and GvHD Agreement with Intrexon described the terms of our use of Intrexons advanced transgene engineering platform for the
controlled and precise cellular production of anti-cancer effectors and for the development of therapeutic approaches for GvHD. The immuno-oncology effector platform in which we have acquired rights represents early-stage technology in the field of
human oncology biotherapeutic, with
DC-RTS-IL-12
+ veledimex having completed a Phase 1 study in melanoma and
Ad-RTS-IL-12
+ veledimex having completed two Phase 2 studies, in melanoma and breast cancer. We are continuing to pursue intratumoral
injection of
Ad-RTS-IL-12
+ veledimex in brain cancer and breast cancer. Although we plan to leverage Intrexons
immuno-oncology platform for additional products targeting key pathways used by cancers to grow and metastasize, we may not be successful in developing and commercializing these products for a variety of reasons.
Similarly, our genetically modified and/or
non-modified
T cell and/or NK cell product candidates are supported by
limited clinical data, all of which has been generated through trials conducted by MD Anderson, not by us. We plan to assume control of the overall clinical and regulatory development of our T cell and NK cell product candidates, and any failure to
obtain, or delays in obtaining, sponsorship of INDs or in filing new investigational new drug applications, or INDs, sponsored by us for these or any other product candidates we determine to advance could negatively affect the timing of our
potential future clinical trials. Such an impact on timing could increase research and development costs and could delay or prevent obtaining regulatory approval for our product candidates, either of which could have a material adverse effect on our
business. Further, we did not control the design or conduct of the previous trials. It is possible that the FDA will not accept these previous trials as providing adequate support for future clinical trials, whether controlled by us or third
parties, for any of one or more reasons, including the safety, purity, and potency of the product candidate, the degree of product characterization, elements of the design or execution of the previous trials or safety concerns, or other trial
results. We may also be subject to liabilities arising from any treatment-related injuries or adverse effects in patients enrolled in these previous trials. As a result, we may be subject to unforeseen third-party claims and delays in our potential
future clinical trials. We may also be required to repeat in whole or in part clinical trials previously conducted by MD Anderson or other entities, which will be expensive and delay the submission and licensure or other regulatory approvals with
respect to any of our product candidates.
In addition, the results of the limited clinical trials conducted by us, Intrexon and MD Anderson to date may
not be replicated in future clinical trials. Our
Ad-RTS-IL-12
+ veledimex and genetically modified and
non-modified
T cell and NK cell product candidates, as well as other product candidates may fail to show the desired safety and efficacy in clinical development and we cannot assure you that the results of any
future trials will demonstrate the value and efficacy of our product candidates. Moreover, there are a number of regulatory requirements that
31
we must satisfy before we can continue clinical trials of CAR
+
T or other cellular therapy product candidates in the United States.
Satisfaction of these requirements will entail substantial time, effort and financial resources. Any time, effort and financial resources we expend on our
Ad-RTS-IL-12
+ veledimex and genetically modified and
non-modified
T cell and NK cell product candidates and other early-stage product candidate development
programs may adversely affect our ability to continue development and commercialization of our immuno-oncology product candidates.
If we cannot
compete successfully for market share against other biopharmaceutical companies, we may not achieve sufficient product revenues and our business will suffer.
The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T cells and NK cells in particular, is characterized by
intense competition and rapid innovation. Genetically engineering T cells and NK cells faces significant competition in the CAR and TCR technology space from multiple companies and their collaborators, such as Novartis/University of Pennsylvania,
Bluebird bio/Celgene/Baylor College of Medicine, Kite Pharma/National Cancer Institute, Juno Therapeutics/Fred Hutchinson Cancer Research Center/Memorial Sloan-Kettering Cancer Center/Seattle Childrens Research Institute, Cellectis/Pfizer,
Adaptimmune/GSK, Celgene, NantKwest, Gritstone, Neon, BioNTech, and Advaxis. We also face competition from
non-cell
based treatments offered by other companies such as Amgen, AstraZeneca, Bristol-Myers,
Incyte, Merck, and Roche. In addition, our gene therapy immuno-oncology products such as
Ad-RTS-IL-12
+ veledimex face
competition from VBL Therapeutics, Immunocellular Therapeutics, Merck, Genentech, Bristol-Myers, Arbor Pharmaceuticals, Tocagen, OncoSec and Insys Therapeutics. Even if we obtain regulatory approval of potential products, we may not be the first to
market and that may affect the price or demand for our potential products. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer
comparable performance at a lower cost. Additionally, the availability and price of our competitors products could limit the demand and the price we are able to charge for our potential products. We may not be able to implement our business
plan if the acceptance of our potential products is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our potential products, or if physicians switch to other new drug or biologic products
or choose to reserve our potential products. Additionally, a competitor could obtain orphan product exclusivity from the FDA with respect to such competitors product. If such competitor product is determined to be the same product as one of
our potential products, that may prevent us from obtaining approval from the FDA for such potential products for the same indication for seven years, except in limited circumstances. If our products fail to capture and maintain market share, we may
not achieve sufficient product revenues and our business will suffer.
We compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have products already approved or in development. In addition,
many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs or have substantially greater financial resources than we do, as well as significantly greater experience in:
|
|
|
developing drugs and biopharmaceuticals;
|
|
|
|
undertaking preclinical testing and human clinical trials;
|
|
|
|
obtaining FDA and other regulatory approvals of drugs and biopharmaceuticals;
|
|
|
|
formulating and manufacturing drugs and biopharmaceuticals; and
|
|
|
|
launching, marketing, and selling drugs and biopharmaceuticals.
|
Our commercial opportunity could be reduced
or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive
32
than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in
our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
Any termination of our licenses with Intrexon or MD Anderson could result in the loss of significant rights and could harm our ability to develop
and commercialize our product candidates.
We are dependent on patents,
know-how,
and proprietary
technology that are licensed from others, particularly MD Anderson and Intrexon. Any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. Disputes may also
arise between us and these licensors regarding intellectual property subject to a license agreement, including those relating to:
|
|
|
the scope of rights granted under the applicable license agreement and other interpretation-related issues;
|
|
|
|
whether and the extent to which our technology and processes, and the technology and processes of Intrexon, MD Anderson and our other licensors, infringe on intellectual property of the licensor that is not subject to
the applicable license agreement;
|
|
|
|
our right to sublicense patent and other rights to third parties pursuant to our relationships with our licensors and partners;
|
|
|
|
whether we and/or Intrexon are complying with our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our potential products under the MD
Anderson License; and
|
|
|
|
the allocation of ownership of inventions and
know-how
resulting from the joint creation or use of intellectual property by our licensors and by us.
|
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements, particularly with
MD Anderson and Intrexon, on acceptable terms, we may be unable to successfully develop and commercialize the affected potential products. We are generally also subject to all of the same risks with respect to protection of intellectual property
that we license as we are for intellectual property that we own. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize potential products under our applicable licenses could suffer.
There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as
well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the United States Patent and Trademark Office, or U.S. PTO, or oppositions and other comparable proceedings in
foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented, which adds uncertainty to the possibility of challenge to our or our
licensors patents in the future.
We will require additional financial resources in order to continue ongoing development of our product
candidates; if we are unable to obtain these additional resources, we may be forced to delay or discontinue clinical testing of our product candidates.
We have not generated significant revenue and have incurred significant net losses in each year since our inception. For the year ended December 31, 2016,
we had a net loss of $165.3 million, and we have incurred approximately $658.0 million of cumulative net losses since our inception in 2003. We expect to continue to incur significant operating expenditures and net losses. Further
development of our product candidates, including
33
product candidates that we may develop under our Channel Agreement or GvHD Agreement with Intrexon, pursuant to the MD Anderson License or pursuant to the Ares Trading Agreement, will likely
require substantial increases in our expenses as we:
|
|
|
continue to undertake clinical trials for product candidates;
|
|
|
|
scale-up
the formulation and manufacturing of our product candidates;
|
|
|
|
seek regulatory approvals for product candidates;
|
|
|
|
work with regulatory authorities to identify and address program related inquiries;
|
|
|
|
implement additional internal systems and infrastructure;
|
|
|
|
hire additional personnel;
|
|
|
|
begin to advance candidates pursuant to the MD Anderson License; and
|
|
|
|
commence providing funding for certain research and development activities of MD Anderson pursuant to the terms of the MD Anderson License.
|
We continue to seek additional financial resources to fund the further development of our product candidates. If we are unable to obtain sufficient additional
capital, one or more of these programs could be placed on hold. Because we are currently devoting a significant portion of our resources to the development of immuno-oncology, further progress with the development of our other candidates may be
significantly delayed and may depend on the licensing of those compounds to third parties.
As of December 31, 2016, we have approximately $81.1 million
of cash and cash equivalents. Given our development plans, we anticipate cash resources will be sufficient to fund our operations into the fourth quarter of 2017 and the Company has no committed sources of additional capital. The forecast of cash
resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove
to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to the Company when needed, if at all. If adequate
additional funds are not available when required, or if the Company is unsuccessful in entering into partnership agreements for further development of its products, management may need to curtail development efforts. Based on the forecast,
management determined that there is substantial doubt regarding our ability to continue as a going concern. As a result, our independent registered accounting firm has expressed substantial doubt as to our ability to continue as a going concern in
their report dated February 16, 2017 included elsewhere in the Form 10-K.
We need to raise additional capital to fund our operations. The manner in
which we raise any additional funds may affect the value of your investment in our common stock.
As of December 31, 2016, we have incurred
approximately $658.0 million of cumulative net losses and had approximately $81.1 million of cash and cash equivalents. Given our current development plans, we anticipate that our current cash resources will be sufficient to fund our
operations into the fourth quarter of 2017. However, changes may occur that would consume our existing capital prior to then, including expansion of the scope of, and/or slower than expected progress of, our research and development efforts and
changes in governmental regulation. Actual costs may ultimately vary from our current expectations, which could materially impact our use of capital and our forecast of the period of time through which our financial resources will be adequate to
support our operations. Also our estimates include the advancement of our immuno-oncology product candidates in the clinic under our Channel Agreement and GvHD Agreement with Intrexon and our increased expenses as we begin to advance candidates
pursuant to the MD Anderson License with MD Anderson and commence providing funding for certain research and development activities of MD Anderson pursuant to the terms of the MD Anderson License, and we expect that the costs associated with these
and additional product candidates will increase the level of our overall research and development expenses significantly going forward.
34
In addition to above factors, our actual cash requirements may vary materially from our current expectations for
a number of other factors that may include, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associated with the development of our product candidates, our ability to
secure partnering arrangements, and costs of filing, prosecuting, defending and enforcing our intellectual property rights. If we exhaust our capital reserves more quickly than anticipated, regardless of the reason, and we are unable to obtain
additional financing on terms acceptable to us or at all, we will be unable to proceed with development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.
The unpredictability of the capital markets may severely hinder our ability to raise capital within the time periods needed or on terms we consider
acceptable, if at all. Moreover, if we fail to advance one or more of our current product candidates to later-stage clinical trials, successfully commercialize one or more of our product candidates, or acquire new product candidates for development,
we may have difficulty attracting investors that might otherwise be a source of additional financing.
Our need for additional capital and limited capital
resources may force us to accept financing terms that could be significantly dilutive to existing stockholders. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience dilution. In addition, we
may grant future investors rights superior to those of our existing stockholders. If we raise additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to our technologies, product candidates
or products, or grant licenses on terms that are not favorable to us. If we raise additional funds by incurring debt, we could incur significant interest expense and become subject to covenants in the related transaction documentation that could
affect the manner in which we conduct our business.
Clinical trials are very expensive, time-consuming, and difficult to design, initiate and
implement.
Human clinical trials are very expensive and difficult to design, initiate and implement, in part because they are subject to rigorous
regulatory requirements. The clinical trial
start-up
and process itself is also time-consuming and results are inherently uncertain. We estimate that clinical trials of our product candidates will take at
least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to delay the start of, abandon or repeat clinical trials. The commencement and completion of clinical trials
may be delayed by several factors, including:
|
|
|
Additional nonclinical data requests by regulatory agencies;
|
|
|
|
Unforeseen safety issues;
|
|
|
|
Determination of dosing issues;
|
|
|
|
Lack of effectiveness during clinical trials;
|
|
|
|
Slower than expected rates of patient recruitment and enrollment;
|
|
|
|
Inability to monitor patients adequately during or after treatment;
|
|
|
|
Inability or unwillingness of medical investigators to follow our clinical protocols; and
|
|
|
|
Regulatory determinations to temporarily or permanently cease enrollment for other reasons not related to patient safety.
|
Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. In addition, we or the FDA may suspend
our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our IND submission or in the conduct of these trials.
See also Risks Related to the Clinical Testing, Regulatory Approval and Manufacturing of our Product Candidates
Our product candidates are in
various stages of clinical trials, which are very expensive and time-
35
consuming. We cannot be certain when we will be able to submit an NDA or BLA, to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our
business.
We may not be able to obtain or maintain orphan drug exclusivity for our product candidates.
We have received orphan drug designation for
Ad-RTS-IL-12
+ veledimex for the treatment of malignant glioma in the United States, and we may be able to receive additional
orphan drug designation from the FDA and the European Medicines Agency, or EMA, for our other product candidates. In the United States, orphan designation is available to drugs intended to treat, diagnose or prevent a rare disease or condition that
affects fewer than 200,000 people in the United States at the time of application for orphan designation. Orphan designation qualifies the sponsor of the product for a tax credit and marketing incentives. The first sponsor to receive FDA marketing
approval for a drug with an orphan designation is entitled to a seven-year exclusive marketing period in the United States for that product for that indication and, typically, a waiver of the prescription drug user fee for its marketing application.
However, a drug that the FDA considers to be clinically superior to, or different from, the approved orphan drug, even though for the same indication, may also obtain approval in the United States during the seven-year exclusive marketing period.
Orphan drug exclusive marketing rights may also be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. There is no guarantee that any
of our other product candidates will receive orphan drug designation or that, even if such product candidate is granted such status, the product candidates clinical development and regulatory approval process will not be delayed or will be
successful.
We may not be able to commercialize any products, generate significant revenues, or attain profitability.
To date, none of our product candidates have been approved for commercial sale in any country. The process to develop, obtain regulatory approval for, and
commercialize potential product candidates is long, complex, and costly. Unless and until we receive approval from the FDA and/or other foreign regulatory authorities for our product candidates, we cannot sell our drugs and will not have product
revenues. Even if we obtain regulatory approval for one or more of our product candidates, if we are unable to successfully commercialize our products, we may not be able to generate sufficient revenues to achieve or maintain profitability, or to
continue our business without raising significant additional capital, which may not be available. Our failure to achieve or maintain profitability could negatively impact the trading price of our common stock.
Ethical, legal and social concerns about synthetic biologically engineered products could limit or prevent the use of our product candidates.
Our product candidates use an immuno-oncology platform. Public perception about the safety and environmental hazards of, and ethical concerns
over, genetically engineered products could influence public acceptance of our product candidates. If we and our collaborators are not able to overcome the ethical, legal and social concerns relating to biological engineering, our product candidates
may not be accepted. These concerns could result in increased expenses, regulatory scrutiny, delays or other impediments to the public acceptance and commercialization of our product candidates. Our ability to develop and commercialize products
could be limited by public attitudes and governmental regulation.
The subject of genetically modified organisms has received negative publicity, which
has aroused public debate. This adverse publicity could lead to greater regulation and trade restrictions on the development and commercialization of genetically altered products. Further, there is a risk that our product candidates could cause
adverse health effects or other adverse events, which could also lead to negative publicity.
The biological platform that we use may have significantly
enhanced characteristics compared to those found in naturally occurring organisms, enzymes or microbes. While we believe we produce biological technologies only for use in a controlled laboratory and industrial environment, the release of such
biological technologies into uncontrolled environments could have unintended consequences. Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, and we may have exposure to
liability for any resulting harm.
36
Our use of synthetic immuno-oncology to develop product candidates may become subject to increasing
regulation in the future.
Most of the laws and regulations concerning immuno-oncology relate to the end products produced using synthetic biology,
but that may change. For example, the Presidential Commission for the Study of Bioethical Issues recommended in December 2010 that the federal government oversee, but not regulate, synthetic biology research. The Presidential Commission also
recommended that the government lead an ongoing review of developments in the synthetic biology field and that the government conduct a reasonable risk assessment before the field release of synthetic organisms. Other findings and recommendations
have been published by the Presidential Commission through 2014. Immuno-oncology may become subject to additional government regulations as a result of the recommendations, which could require us to incur significant additional capital and operating
expenditures and other costs in complying with these laws and regulations.
We will incur additional expenses in connection with our Channel
Agreement and GvHD Agreement with Intrexon Corporation.
The immuno-oncology platform, in which we have acquired rights for cancer indications and
for the development of therapeutic approaches for GvHD from Intrexon, includes two existing product candidates,
Ad-RTS-IL-12
+
veledimex and
DC-RTS-IL-12
+ veledimex. Upon entry into the Channel Agreement and GvHD Agreement with Intrexon, we assumed
responsibility for the clinical development of these product candidates, and our cell therapy programs, which we expect will increase the level of our overall research and development expenses significantly going forward. Although all human clinical
trials are expensive and difficult to design and implement, we believe that due to complexity, costs associated with clinical trials for immuno-oncology products are greater than the corresponding costs associated with clinical trials for small
molecule candidates. In addition to increased research and development costs, we may need to add headcount to support our Channel Agreement and GvHD Agreement endeavors, which would add to our general and administrative expenses going forward.
Although our forecasts for expenses and the sufficiency of our capital resources takes into account our plans to develop the Intrexon products, the actual
costs associated therewith may be significantly in excess of forecasted amounts. In addition to the amount and timing of expenses related to the clinical trials, our actual cash requirements may vary materially from our current expectations for a
number of other factors that may include, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associated with the development of our product candidates and costs of
filing, prosecuting, defending and enforcing our intellectual property rights. If we exhaust our capital reserves more quickly than anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or
at all, we will be unable to proceed with development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.
Failing to pay any dividends on our Series 1 preferred stock issued to Intrexon may have adverse consequences.
In June 2016, we amended our Channel Agreement and GvHD Agreement with Intrexon in order to, among other things, reduce the royalty rate on operating profits
payable by us to Intrexon from 50% to 20%. In consideration for these amendments, we issued to Intrexon shares of our Series 1 preferred stock, $0.001 par value per share, or Series 1 preferred stock, which include, among other things, a monthly
dividend of 1% payable in additional shares of Series 1 preferred stock. If we fail to pay such dividends when due, it would affect our eligibility to file Registration Statements on Form
S-3
and our status as
a well-known seasoned issuer, which may increase the expense and time associated with both the filing and effectiveness of future registration statements and the consummation of future financing transactions or other offerings of our
securities.
37
Our common stockholders may experience additional dilution as a result of the Series 1 preferred stock
issued to Intrexon.
The shares of our Series 1 preferred stock include a monthly dividend of 1% which shall accrue and be paid each month in the
form of additional shares of Series 1 preferred stock. For the year ended December 31, 2016, we issued an aggregate of 6,184 shares of Series 1 preferred stock to Intrexon, the holder of all of the outstanding shares of our Series 1 preferred
stock, as dividends, representing monthly dividends due from June 30, 2016 through December 31, 2016. As a result of the monthly dividend, the number of shares of outstanding Series 1 preferred stock will increase each month that they are
outstanding. Since the number of shares of our common stock issuable upon conversion of the Series 1 preferred stock is based on the 20 day volume weighted average price of our common stock immediately prior to the public announcement of the first
approval in the United States of (i) a ZIOPHARM Product under the Channel Agreement, (ii) a Product under the GvHD Agreement or (iii) a Product under the Ares Trading Agreement, if, at the time of such public announcement, the 20 day
volume weighted average price of our common stock has not increased by more than the cumulative amount of the dividends on the shares of Series 1 preferred stock that we originally issued to Intrexon, then our common stockholders may experience
additional dilution as a result of the conversion of the Series 1 preferred stock into shares of our common stock.
The holders of our Series 1
preferred stock are entitled to rights and preferences that are significantly greater than the rights and preferences of the holders of our common stock, including payments upon a liquidation event, as well as dividend and registration rights
associated with their shares.
The shares of Series 1 preferred stock that we issued to Intrexon in June 2016 in consideration for amending the
Channel Agreement and GvHD Agreement are entitled to a number of rights and preferences which our common stock do not and will not have. Among these rights and preferences is the right to receive a portion of all funds to be distributed in
connection with a voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, as defined in our Amended and Restated Certificate of Designation, Preferences and Rights of Series 1 preferred stock, or
the Certificate of Designation (which includes a change of control or the sale, lease transfer or exclusive license of all or substantially all of our assets), in proportion to the holders proportionate share of our common stock on an
as-converted
to common stock basis. For purposes of determining the Series 1 preferred stocks proportionate share on an
as-converted
basis in such a transaction, it
would be assumed that the Series 1 preferred stock is convertible into a number of shares of common stock equal to (i) the stated value of all outstanding shares of Series 1 preferred stock, divided by (ii) the volume weighted average
price of our common stock for the
20-day
period ending on the date of the public announcement of such voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event,
rounded down to the nearest whole share, unless such transaction occurred following the public announcement of the first approval in the United States of a ZIOPHARM Product under the Channel Agreement, a Product under the GvHD Agreement or a Product
under the Ares Trading Agreement, in which case the stated value would be divided by the volume weighted average price of the Companys common stock for the
20-day
period ending on the date of the public
announcement such approval. We refer to this proportionate share allocated to the holders of Series 1 preferred stock as the Series 1 Liquidation Amount. In addition, the Company may elect to redeem the shares of Series 1 preferred stock in
connection with or following a Deemed Liquidation Event at a price per share equal to the Series 1 Liquidation Amount. Since the conversion rate is based on the stated value of the shares of Series 1 preferred stock, which was initially
$120 million and increases at a rate of 1% per month, the holders of shares of our Series 1 preferred stock could receive a disproportionate amount of the proceeds of any voluntary or involuntary liquidation, dissolution or winding up of the
Company or Deemed Liquidation Event if our stock price has not sufficiently increased prior to the time that their proportionate share is calculated. Further, pursuant to the terms of a Securities Issuance Agreement we entered into with Intrexon in
connection with the issuance of the Series 1 preferred stock, we agreed that the holders of common stock issued upon the conversion of the shares of Series 1 preferred stock issued to Intrexon shall be entitled to piggy-back registration rights with
respect to any common stock registered by us following such conversion.
38
The Series 1 preferred stock contains protective provisions that may limit our business flexibility.
For so long as any shares of Series 1 preferred stock are outstanding, we may not, without first obtaining the consent of the holders of at least
a majority of the Series 1 preferred stock then outstanding, voting together as a single class:
|
|
|
amend our certificate of incorporation or the Certificate of Designation of the Series 1 preferred stock, in each case in a manner that adversely affects the powers, preferences or rights of the Series 1 preferred stock
in a manner that is more adverse than the effect on any other class or series of our capital stock;
|
|
|
|
authorize, create, issue or obligate us to issue (by reclassification, merger or otherwise) any security (or any class or series thereof) that has any powers, preferences or rights senior to the Series 1 preferred stock
with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption; or
|
|
|
|
enter into any transaction (or series of related transactions) the effect of which would adversely affect the holders of the Series 1 preferred stock in a manner that is more adverse than the effect on any other class
or series of our capital stock.
|
As a result, we will not be able to take any of these actions without first seeking and obtaining the
approval of the holders of our Series 1 preferred stock. In addition, we may not be able to obtain such approval in a timely manner or at all, even if we think that taking the action for which we seek approval is in our best interests. Any failure
to obtain such approval could harm our business and result in a decrease in the value of our common stock.
We may not be able to retain the
exclusive rights licensed to us by Intrexon Corporation to develop and commercialize products involving DNA administered to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer.
Under the Channel Agreement, we use Intrexons technology directed towards in vivo expression of effectors in connection with the development of
Ad-RTS-IL-12
+ veledimex, our cell therapy programs and generally to research, develop and commercialize products, in each case in
which DNA is administered to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer, which we collectively refer to as the Cancer Program. The Channel Agreement grants us a worldwide license to use
patents and other intellectual property of Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products involving DNA administered to humans for expression of anti-cancer effectors for the
purpose of treatment or prophylaxis of cancer, which we refer to collectively as the ZIOPHARM Products. Such license is exclusive with respect to any clinical development, selling, offering for sale or other commercialization of ZIOPHARM Products,
and otherwise is
non-exclusive.
Subject to limited exceptions, we may not sublicense the rights described without Intrexons written consent. Under the Channel Agreement, and subject to certain
exceptions, we are responsible for, among other things, the performance of the Cancer Program, including development, commercialization and certain aspects of manufacturing of ZIOPHARM Products.
Intrexon may terminate the Channel Agreement if we fail to use diligent efforts to develop and commercialize ZIOPHARM Products or if we elect not to pursue
the development of a Cancer Program identified by Intrexon that is a Superior Therapy as defined in the Channel Agreement. We may voluntarily terminate the Channel Agreement upon 90 days written notice to Intrexon. Upon termination of
the Channel Agreement, we may continue to develop and commercialize any ZIOPHARM Product that, at the time of commercialization:
|
|
|
is being commercialized by us;
|
|
|
|
has received regulatory approval;
|
|
|
|
is a subject of an application for regulatory approval that is pending before the applicable regulatory authority; or
|
39
|
|
|
is the subject of at least an ongoing Phase 2 clinical trial (in the case of a termination by Intrexon due to an uncured breach or a voluntary termination by us), or an ongoing Phase 1 clinical trial in the field (in
the case of a termination by us due to an uncured breach or a termination by Intrexon following an unconsented assignment by us or our election not to pursue development of a Superior Therapy);
|
Our obligation to pay 20% of net profits or revenue and 50% of sublicensing revenue or royalties with respect to these retained products will
survive termination of the Channel Agreement, as described further in Note 7 to our financial statements (Commitments and Contingencies), as well as our Annual Report on Form
10-K
under the heading
BusinessLicense Agreements, Intellectual Property and Other AgreementsExclusive Channel Partner Agreement with Intrexon Corporation for the Cancer Programs
(such description in our Annual Report on Form
10-K
does not describe changes effected pursuant to the 2016 ECP Amendment).
There can be no assurance that we will be
able to successfully perform under the Channel Agreement and if the Channel Agreement is terminated it may prevent us from achieving our business objectives.
The technology on which our Channel Agreements with Intrexon Corporation are based in part on early stage technology in the field of human oncologic and
autoimmune therapeutics.
Our Channel Agreements with Intrexon contemplate our use of Intrexons advanced transgene engineering platform for
the controlled and precise cellular production of anti-cancer effectors and for the development of therapeutic approaches for GvHD. The synthetic immuno-oncology effector platform in which we have acquired rights represents early-stage technology in
the field of human oncology biotherapeutic, with
DC-RTS-IL-12
+ veledimex having completed a Phase 1 study in melanoma and
Ad-RTS-IL-12
+ veledimex having completed two Phase 2 studies, in melanoma and breast cancer. We are continuing to pursue intratumoral
injection of
Ad-RTS-IL-12
+ veledimex in brain cancer and breast cancer. Although we plan to leverage Intrexons synthetic
immuno-oncology platform for additional products targeting key pathways used by cancers to grow and metastasize, we may not be successful in developing and commercializing these products for a variety of reasons. The risk factors set forth herein
that apply to our small molecule drug candidates, which are in various stages of development, also apply to product candidates that we seek to develop under our Channel Agreement with Intrexon.
We will incur additional expenses in connection with our Channel Agreements with Intrexon Corporation.
The synthetic immuno-oncology platform, in which we have acquired rights for cancer indications and for the development of therapeutic approaches for GvHD from
Intrexon, includes two existing product candidates,
Ad-RTS-IL-12+
veledimex and
DC-RTS-IL-12
+ veledimex. Upon entry into the Channel Agreements with Intrexon, we assumed responsibility for the clinical development of these product candidates,
which we expect will increase the level of our overall research and development expenses significantly going forward. Although all human clinical trials are expensive and difficult to design and implement, we believe that due to complexity, costs
associated with clinical trials for synthetic immuno-oncology products are greater than the corresponding costs associated with clinical trials for small molecule candidates. In addition to increased research and development costs, prior to the
adoption of our April 2013 workforce reduction plan, we added headcount in part to support our Channel Agreement endeavors, and we may need to do so again in the future which would add to our general and administrative expenses going forward.
Although our forecasts for expenses and the sufficiency of our capital resources takes into account our plans to develop the Intrexon products, the actual
costs associated therewith may be significantly in excess of forecasted amounts. In addition to the amount and timing of expenses related to the clinical trials, our actual cash requirements may vary materially from our current expectations for a
number of other factors that may include, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associated with the development of our product candidates and costs of
filing, prosecuting, defending and enforcing our intellectual property rights. If we exhaust our capital reserves more quickly than
40
anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or at all, we will be unable to proceed with development of some or all of our
product candidates on expected timelines and will be forced to prioritize among them.
We may not be able to retain the exclusive rights licensed to
us by Intrexon Corporation to develop and commercialize products involving DNA administered to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer.
Under the Channel Agreement, we use Intrexons technology directed towards in vivo expression of effectors in connection with the development of
Ad-RTS-IL-12+
veledimex and
DC-RTS-IL-12
+ veledimex and generally to research, develop and commercialize products, in each case in which DNA is administered
to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer, which we collectively refer to as the Cancer Program. The Channel Agreement grants us a worldwide license to use patents and other intellectual
property of Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products involving DNA administered to humans for expression of anti-cancer effectors for the purpose of treatment or
prophylaxis of cancer, which we refer to collectively as the ZIOPHARM Products. Such license is exclusive with respect to any clinical development, selling, offering for sale or other commercialization of ZIOPHARM Products, and otherwise is
non-exclusive.
Subject to limited exceptions, we may not sublicense the rights described without Intrexons written consent. Under the Channel Agreement, and subject to certain exceptions, we are responsible
for, among other things, the performance of the Cancer Program, including development, commercialization and certain aspects of manufacturing of ZIOPHARM Products.
Intrexon may terminate the Channel Agreement if we fail to use diligent efforts to develop and commercialize ZIOPHARM Products or if we elect not to pursue
the development of a Cancer Program identified by Intrexon that is a Superior Therapy as defined in the Channel Agreement. We may voluntarily terminate the Channel Agreement upon 90 days written notice to Intrexon.
Our obligation to pay 20% to 50% of net profits or revenue as described further in our Annual Report on Form
10-K
under the heading
BusinessLicense Agreements, Intellectual Property and Other AgreementsExclusive Channel Partner Agreement with Intrexon Corporation
with respect to these retained products will survive
termination of the Channel Agreement.
There can be no assurance that we will be able to successfully perform under the Channel Agreement and if the
Channel Agreement is terminated it may prevent us from achieving our business objectives.
We will incur additional expenses in connection with our
License Agreement with The University of Texas M.D. Anderson Cancer Center
Pursuant to the MD Anderson License with MD Anderson, we, together with
Intrexon, obtained an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR
+
T cell, NK cell and TCR cell therapies
arising from the laboratory of Laurence Cooper, M.D., Ph.D., who was then at MD Anderson, as well as either
co-exclusive
or
non-exclusive
licenses under certain related
technologies. Pursuant to the MD Anderson License, MD Anderson agreed to transfer to us certain existing research programs described in the MD Anderson License and we, together with Intrexon, entered into a research and development agreement with MD
Anderson pursuant to which we agreed to provide funding for certain research and development activities of MD Anderson for a period of three years from the date of the MD Anderson License, in an amount between $15.0 and $20.0 million per year.
In addition, we also expect to enter into additional collaboration and technology transfer agreements with MD Anderson and Intrexon to accelerate technology and clinical development of these product candidates. We expect to increase the level of our
overall research and development expenses significantly going forward as a result of each of these items.
41
Although our forecasts for expenses and the sufficiency of our capital resources takes into account our plans to
develop the technology licensed from MD Anderson and our obligations under the MD Anderson License, the MD Anderson License is still only beginning to be implemented, therefore the actual costs associated therewith may be significantly in excess of
forecasted amounts. In addition to the amount and timing of expenses related to our relationship with MD Anderson, our actual cash requirements may vary materially from our current expectations for a number of other factors that may include, but are
not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associated with the development of our product candidates and costs of filing, prosecuting, defending and enforcing our
intellectual property rights. If we exhaust our capital reserves more quickly than anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or at all, we will be unable to proceed with
development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.
We may not be able to
retain the rights licensed to us and Intrexon by The University of Texas M.D. Anderson Cancer Center to technologies relating to novel chimeric antigen receptor (CAR) T cell therapies and other related technologies.
Under the MD Anderson License, we, together with Intrexon, received an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson
including technologies relating to novel CAR
+
T cell, NK cell and TCR cell therapies arising from the laboratory of Laurence Cooper, M.D., Ph.D., who was then at MD Anderson, as well as either
co-exclusive
or
non-exclusive
licenses under certain related technologies. When combined with Intrexons technology suite and ZIOPHARMs clinically tested RheoSwitch
Therapeutic System
®
interleukin-12
modules, the resulting proprietary methods and technologies may help realize the promise of genetically modified CAR
+
T cell and other immune cells by controlling cell expansion and activation in the body, minimizing
off-target
and unwanted
on-target
effects and toxicity while maximizing therapeutic efficacy. The term of the MD Anderson License expires on the last to occur of (a) the expiration of all patents licensed thereunder, or
(b) the twentieth anniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term, the Company and Intrexon shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable
license to use the licensed intellectual property thereunder.
After 10 years from the date of the MD Anderson License and subject to a
90-day
cure period, MD Anderson will have the right to convert the MD Anderson License into a
non-exclusive
license if we and Intrexon are not using commercially reasonable
efforts to commercialize the licensed intellectual property on a
case-by-case
basis. After five years from the date of the MD Anderson License and subject to a
180-day
cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to a third party contract if we and Intrexon are
not meeting the diligence requirements in such funding agreement or contract, as applicable. Subject to a
30-day
cure period, MD Anderson has the right to terminate the MD Anderson License if we and Intrexon
fail to timely deliver the shares due in consideration for the MD Anderson License. MD Anderson may also terminate the agreement with written notice upon material breach by us or Intrexon, if such breach has not been cured within 60 days of
receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both us or Intrexon and may be terminated by the mutual written agreement of us, Intrexon and MD Anderson.
There can be no assurance that we will be able to successfully perform under the MD Anderson License and if the MD Anderson License is terminated it may
prevent us from achieving our business objectives.
We have a limited operating history upon which to base an investment decision.
We have not demonstrated an ability to perform the functions necessary for the successful commercialization of any product candidates. The successful
commercialization of any product candidates will require us to perform a variety of functions, including:
|
|
|
Continuing to undertake preclinical development and clinical trials;
|
|
|
|
Participating in regulatory approval processes;
|
42
|
|
|
Formulating and manufacturing products; and
|
|
|
|
Conducting sales and marketing activities.
|
Our operations have been limited to organizing and staffing our
company, acquiring, developing and securing our proprietary product candidates, and undertaking preclinical and clinical trials of our product candidates. These operations provide a limited basis for you to assess our ability to commercialize our
product candidates and the advisability of investing in our securities.
Because we currently neither have nor intend to establish internal research
capabilities, we are dependent upon pharmaceutical and biotechnology companies and academic and other researchers to sell or license us their product candidates and technology.
Proposing, negotiating, and implementing an economically viable product acquisition or license is a lengthy and complex process. We compete for partnering
arrangements and license agreements with pharmaceutical, biopharmaceutical, and biotechnology companies, many of which have significantly more experience than we do, and have significantly more financial resources. Our competitors may have stronger
relationships with certain third parties including academic research institutions, with whom we are interested in collaborating and may have, therefore, a competitive advantage in entering into partnering arrangements with those third parties. We
may not be able to acquire rights to additional product candidates on terms that we find acceptable, or at all.
We expect that any product candidate to
which we acquire rights will require significant additional development and other efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All drug product
candidates are subject to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe or effective for approval by regulatory authorities. Even
if our product candidates are approved, they may not be economically manufactured or produced, or be successfully commercialized.
We actively evaluate
additional product candidates to acquire for development. Such additional product candidates, if any, could significantly increase our capital requirements and place further strain on the time of our existing personnel, which may delay or otherwise
adversely affect the development of our existing product candidates. We must manage our development efforts and clinical trials effectively, and hire, train and integrate additional management, administrative, and sales and marketing personnel. We
may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing.
We may not be able
to successfully manage our growth.
In the future, if we are able to advance our product candidates to the point of, and thereafter through,
clinical trials, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide for these capabilities. Any future growth will place a significant strain on our
management and on our administrative, operational, and financial resources. Therefore, our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage
any future growth effectively. To manage this growth, we must expand our facilities, augment our operational, financial and management systems, and hire and train additional qualified personnel. If we are unable to manage our growth effectively, our
business may be harmed.
Our business will subject us to the risk of liability claims associated with the use of hazardous materials and chemicals.
Our contract research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that our
safety procedures for using, storing, handling and disposing of these
43
materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an
accident, we could be held liable for any resulting damages and any liability could have a materially adverse effect on our business, financial condition, and results of operations. In addition, the federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require our contractors to incur substantial compliance costs that could materially adversely affect our business, financial
condition, and results of operations.
We rely on key executive officers and scientific and medical advisors, and their knowledge of our business
and technical expertise would be difficult to replace.
We are highly dependent on Dr. Laurence J.N. Cooper, our Chief Executive Officer,
Caesar J. Belbel, our Chief Operating Officer, Executive Vice President and Chief Legal Officer, Dr. Francois Lebel, our Chief Medical Officer, and Executive Vice President of Research and Development and our principal scientific, regulatory,
and medical advisors. Dr. Coopers, Mr. Belbels, and Dr. Lebels employment are governed by written employment agreements. Dr. Cooper, Mr. Belbel, and Dr. Lebel may terminate their employment with us at
any time, subject, however, to certain
non-compete
and
non-solicitation
covenants. The loss of the technical knowledge and management and industry expertise of
Dr. Cooper, Mr. Belbel, Dr. Lebel, or any of our other key personnel, could result in delays in product development, loss of customers and sales, and diversion of management resources, which could adversely affect our operating
results. We do not carry key person life insurance policies on any of our officers or key employees.
If we are unable to hire
additional qualified personnel, our ability to grow our business may be harmed.
We will need to hire additional qualified personnel with expertise
in preclinical and clinical research and testing, government regulation, formulation and manufacturing, and eventually, sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities, and other
research institutions. Competition for such individuals is intense and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success. If we are unable to hire
additional qualified personnel, our ability to grow our business may be harmed.
We may incur substantial liabilities and may be required to limit
commercialization of our products in response to product liability lawsuits.
The testing and marketing of medical products entail an inherent risk
of product liability. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products, if approved. Even a successful defense would require
significant financial and management resources. Regardless of the merit or eventual outcome, liability claims may result in:
|
|
|
Decreased demand for our product candidates;
|
|
|
|
Injury to our reputation;
|
|
|
|
Withdrawal of clinical trial participants;
|
|
|
|
Withdrawal of prior governmental approvals;
|
|
|
|
Costs of related litigation;
|
|
|
|
Substantial monetary awards to patients;
|
44
|
|
|
The inability to commercialize our product candidates.
|
We currently carry clinical trial insurance and
product liability insurance. However, an inability to renew our policies or to obtain sufficient insurance at an acceptable cost could prevent or inhibit the commercialization of pharmaceutical products that we develop, alone or with collaborators.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems and those of our current and future contractors and consultants are vulnerable
to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we are not aware of any such material system failure, accident or security breach to date, if such an event
were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could
result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture our product candidates and conduct clinical trials, and similar events
relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed.
RISKS RELATED TO THE CLINICAL TESTING, REGULATORY APPROVAL AND MANUFACTURING OF OUR PRODUCT CANDIDATES
If we are unable to obtain the necessary U.S. or worldwide regulatory approvals to commercialize any product candidate, our business will suffer.
We may not be able to obtain the approvals necessary to commercialize our product candidates, or any product candidate that we may acquire or
develop in the future for commercial sale. We will need FDA approval to commercialize our product candidates in the United States and approvals from regulatory authorities in foreign jurisdictions equivalent to the FDA to commercialize our product
candidates in those jurisdictions. In order to obtain FDA approval of any product candidate, we must submit to the FDA a Biologics License Application, or BLA, demonstrating that the product candidate is safe for humans and effective for its
intended use. This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials. Satisfaction of the FDAs regulatory requirements
typically takes many years, depending upon the type, complexity, and novelty of the product candidate, and will require substantial resources for research, development, and testing. We cannot predict whether our research, development, and clinical
approaches will result in drugs that the FDA will consider safe for humans and effective for their intended uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional preclinical and clinical
testing or to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation, or administrative action or changes in FDA policy that occur prior to or during our regulatory review.
Delays in obtaining regulatory approvals may:
|
|
|
Delay commercialization of, and our ability to derive product revenues from, our product candidates;
|
|
|
|
Impose costly procedures on us; and
|
|
|
|
Diminish any competitive advantages that we may otherwise enjoy.
|
Even if we comply with all FDA requests, the
FDA may ultimately reject one or more of our NDAs or BLAs. We cannot be sure that we will ever obtain regulatory approval for any of our product candidates. Failure to obtain
45
FDA approval for our product candidates will severely undermine our business by leaving us without a saleable product, and therefore without any potential revenue source, until another product
candidate can be developed. There is no guarantee that we will ever be able to develop or acquire another product candidate or that we will obtain FDA approval if we are able to do so.
In foreign jurisdictions, we similarly must receive approval from applicable regulatory authorities before we can commercialize any drugs. Foreign regulatory
approval processes generally include all of the risks associated with the FDA approval procedures described above.
Our product candidates are in
various stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will be able to submit a BLA to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our
business.
Our product candidates are in various stages of development and require extensive clinical testing. Notwithstanding our current clinical
trial plans for each of our existing product candidates, we may not be able to commence additional trials or see results from these trials within our anticipated timelines. As such, we cannot predict with any certainty if or when we might submit a
BLA for regulatory approval of our product candidates or whether such a BLA will be accepted. Because we do not anticipate generating revenues unless and until we submit one or more BLAs and thereafter obtain requisite FDA approvals, the timing of
our BLA submissions and FDA determinations regarding approval thereof, will directly affect if and when we are able to generate revenues.
Our
product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any
potential marketing approval.
As with many pharmaceutical and biological products, treatment with our product candidates may produce undesirable
side effects or adverse reactions or events, including potential adverse side effects related to cytokine release. If our product candidates or similar products or product candidates under development by third parties demonstrate unacceptable
adverse events, we may be required to halt or delay further clinical development of our product candidates. The FDA, the EMA or other foreign regulatory authorities could order us to cease further development of or deny approval of our product
candidates for any or all targeted indications.
The product-related side effects could affect patient recruitment or the ability of enrolled patients to
complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff, particularly outside of the institutions that collaborate
with us, as toxicities resulting from our novel technologies may not be normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel using our product candidates to understand their
side effect profiles, both for our planned clinical trials and upon any commercialization of any product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in adverse effects
to patients, including death.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify
undesirable side effects caused by such products, including during any long-term
follow-up
observation period recommended or required for patients who receive treatment using our products, a number of
potentially significant negative consequences could result, including:
|
|
|
regulatory authorities may withdraw approvals of such product;
|
|
|
|
regulatory authorities may require additional warnings on the label;
|
|
|
|
we may be required to create a risk evaluation and mitigation strategy plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for
healthcare providers, and/or other elements to assure safe use;
|
46
|
|
|
we could be sued and held liable for harm caused to patients; and
|
|
|
|
our reputation may suffer.
|
Any of the foregoing could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved. Furthermore, any of these occurrences may harm our business, financial condition and prospects significantly.
Our cell-based and gene therapy immuno-oncology products rely on the availability of reagents, specialized equipment, and other specialty materials and
infrastructure, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to
manufacture and supply our products.
Manufacturing our product candidates will require many reagents, which are substances used in our
manufacturing processes to bring about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics
production. We currently depend on a limited number of vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support commercial products manufactured under
current good manufacturing practices by biopharmaceutical firms or may otherwise be
ill-equipped
to support our needs. We also do not have supply contracts with many of these suppliers and may not be able to
obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing.
For some of these reagents, equipment, infrastructure, and materials, we rely and may in the future rely on sole source vendors or a limited number of
vendors. An inability to continue to source product from any of these suppliers, which could be due to regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor
disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to
conduct clinical trials, either of which could significantly harm our business.
As we continue to develop and scale our manufacturing process, we expect
that we will need to obtain rights to and supplies of certain materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and if we are unable to
alter our process in a commercially viable manner to avoid the use of such materials or find a suitable substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials or
equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for product candidate that is already in clinical testing, the change may require us to perform both ex vivo
comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials.
The results of our clinical
trials may not support our product candidate claims.
Even if our clinical trials are completed as planned, we cannot be certain that their results
will support approval of our product candidates. The FDA normally expects two randomized, well-controlled Phase 3 pivotal studies in support of approval of an NDA or BLA. Success in preclinical testing and early clinical trials does not ensure that
later clinical trials will be successful, and we cannot be certain that the results of later clinical trials will replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate that our
product candidates are safe for humans and effective for the indicated uses. This failure would cause us to abandon a product candidate and may delay development of other product candidates. Any
47
delay in, or termination of, our clinical trials will delay the submission of our BLAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product
revenues. In addition, our clinical trials involve small patient populations. Because of the small sample size, the results of these clinical trials may not be indicative of future results.
Our synthetic immuno-oncology product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product
candidate development and subsequently obtaining regulatory approval. Currently, no gene therapy products have been approved in the United States and only one product has been approved in Europe.
We have recently focused our product research and development efforts on our immuno-oncology product candidates under our Channel Agreement with Intrexon.
These products, including
Ad-RTS-IL-12
+ veledimex, are based on gene therapy technology. Due to the novelty of this medical
technology, there can be no assurance that any development problems we experience in the future related to our immuno-oncology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may
also experience unanticipated problems or delays in expanding our manufacturing capacity or transferring our manufacturing process to commercial partners, which may prevent us from completing our clinical studies or commercializing our
immuno-oncology product candidates on a timely or profitable basis, if at all.
In addition, the clinical study requirements of the FDA, the EMA and other
regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory
approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. Currently, only one gene therapy product, UniQures
Glybera, which received marketing authorization from the EMA in 2012, has been approved in Europe but has not yet been launched for commercial sale, which makes it difficult to determine how long it will take or how much it will cost to obtain
regulatory approvals for our product candidates in either the United States or Europe. Approvals by the EMA may not be indicative of what the FDA may require for approval.
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. For example, the FDA has
established the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory
Committee to advise CBER on its review. Gene therapy clinical studies conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, are also subject to review by the NIH Office
of Biotechnology Activities Recombinant DNA Advisory Committee, or the RAC. Although the FDA decides whether individual gene therapy protocols may proceed, the RAC review process can impede the initiation of a clinical trial, even if the FDA
has reviewed the trial and approved its initiation. Conversely, the FDA can put an IND on clinical hold even if the RAC has provided a favorable review. Also, before a clinical trial can begin at an
NIH-funded
institution, that institutions institutional review board, or IRB, and its Institutional Biosafety Committee will have to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical
trials of gene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our product candidates.
These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to
perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations
or restrictions. As we advance our immuno-oncology product candidates, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue
development of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected for oncology product candidates. Delay or failure to obtain, or
48
unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.
Because we are dependent upon clinical research institutions and other contractors for clinical testing and for research and development
activities, the results of our clinical trials and such research activities are, to a certain extent, beyond our control.
We materially rely upon
independent investigators and collaborators, such as universities and medical institutions, to conduct our preclinical and clinical trials under agreements with us. These collaborators are not our employees and we cannot control the amount or timing
of resources that they devote to our programs. These investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If outside collaborators fail to devote
sufficient time and resources to our drug development programs, or if their performance is substandard, the approval of our FDA applications, if any, and our introduction of new products, if any, will be delayed. These collaborators may also have
relationships with other commercial entities, some of whom may compete with us. If our collaborators assist our competitors to our detriment, our competitive position would be harmed.
Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development,
regulatory approval and commercialization of our products or result in higher product costs.
We do not have experience in drug formulation or
manufacturing of drugs or biologics and do not intend to establish our own manufacturing facilities. Although we will work closely with and rely upon Intrexon on the manufacturing and
scale-up
of Intrexon
product candidates, we lack the resources and expertise to formulate or manufacture our own product candidates. We currently are contracting for the manufacture of our product candidates. We intend to contract with one or more manufacturers to
manufacture, supply, store, and distribute drug supplies for our clinical trials. If a product candidate we develop or acquire in the future receives FDA approval, we will rely on one or more third-party contractors or Intrexon to manufacture our
products. Our anticipated future reliance on a limited number of third-party manufacturers exposes us to the following risks:
|
|
|
We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA must approve any replacement contractor. This approval would require new
testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any.
|
|
|
|
Our third-party manufacturers might be unable to formulate and manufacture our products in the volume and of the quality required to meet our clinical needs and commercial needs, if any.
|
|
|
|
Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store, and distribute
our products.
|
|
|
|
Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration and corresponding state and foreign agencies to ensure strict compliance with current good
manufacturing practices, or cGMP, and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers compliance with these regulations and standards.
|
|
|
|
If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to the innovation.
|
|
|
|
Our third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements
outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical
|
49
|
holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of drug candidates or products, operating restrictions and
criminal prosecutions, any of which could significantly and adversely affect supplies of our products.
|
Each of these risks could delay
our clinical trials, the approval, if any, of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenues
Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market and we may be
subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and
promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include, among other things, submissions of safety and other post-marketing information
and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to
physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the
requirement to implement a risk evaluation and mitigation strategy, or REMS, which could include requirements for a restricted distribution system. If any of our product candidates receives marketing approval, the accompanying label may limit the
approved uses, which could limit sales of the product.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and
surveillance to monitor the safety or efficacy of our approved products. The FDA closely regulates the post-approval marketing and promotion of products to ensure that they are marketed only for the approved indications and in accordance with the
provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers communications regarding
off-label
use and if we market our products outside of their approved indications, we
may be subject to enforcement action for
off-label
marketing. Violations of the FDCA relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state health
care fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems
with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
|
|
|
Litigation involving patients taking our product;
|
|
|
|
Restrictions on such products, manufacturers or manufacturing processes;
|
|
|
|
Restrictions on the labeling or marketing of a product;
|
|
|
|
Restrictions on product distribution or use;
|
|
|
|
Requirements to conduct post-marketing studies or clinical trials;
|
|
|
|
Withdrawal of the products from the market;
|
|
|
|
Refusal to approve pending applications or supplements to approved applications that we submit;
|
|
|
|
Fines, restitution or disgorgement of profits or revenues;
|
50
|
|
|
Suspension or withdrawal of marketing approvals;
|
|
|
|
Damage to relationships with existing and potential collaborators;
|
|
|
|
Unfavorable press coverage and damage to our reputation;
|
|
|
|
Refusal to permit the import or export of our products;
|
|
|
|
Injunctions or the imposition of civil or criminal penalties.
|
Noncompliance with similar European Union
requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failure to comply with U.S. and foreign regulatory requirements regarding the development of products for pediatric
populations and the protection of personal health information can also lead to significant penalties and sanctions.
RISKS RELATED TO OUR ABILITY TO
COMMERCIALIZE OUR PRODUCT CANDIDATES
If we are unable either to create sales, marketing and distribution capabilities or enter into agreements
with third parties to perform these functions, we will be unable to commercialize our product candidates successfully.
We currently have no
marketing, sales, or distribution capabilities. If and when we become reasonably certain that we will be able to commercialize our current or future product candidates, we anticipate allocating resources to the marketing, sales and distribution of
our proposed products in North America and in certain other countries; however, we cannot assure that we will be able to market, sell, and distribute our products successfully. Our future success also may depend, in part, on our ability to enter
into and maintain collaborative relationships for such capabilities and to encourage the collaborators strategic interest in the products under development, and such collaborators ability to successfully market and sell any such
products. Although we intend to pursue certain collaborative arrangements regarding the sale and marketing of certain of our product candidates, there are no assurances that we will be able to establish or maintain collaborative arrangements or, if
we are able to do so, whether we would be able to conduct our own sales efforts. There can also be no assurance that we will be able to establish or maintain relationships with third-party collaborators or develop
in-house
sales and distribution capabilities. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there
can be no assurance that such efforts will be successful. In addition, there can also be no assurance that we will be able to market and sell our product candidates in the United States or overseas.
If we are not able to partner with a third party and are not successful in recruiting sales and marketing personnel or in building a sales and marketing
infrastructure, we will have difficulty commercializing our product candidates, which would harm our business. If we rely on pharmaceutical or biotechnology companies with established distribution systems to market our products, we will need to
establish and maintain partnership arrangements, and we may not be able to enter into these arrangements on acceptable terms or at all. To the extent that we enter into
co-promotion
or other arrangements, any
revenues we receive will depend upon the efforts of third parties that may not be successful and that will be only partially in our control.
If we
cannot compete successfully for market share against other biopharmaceutical companies, we may not achieve sufficient product revenues and our business will suffer.
The market for our product candidates is characterized by intense competition and rapid technological advances. If a product candidate receives FDA approval,
it will compete with a number of existing and future products and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a
specific indication than our products, or may offer comparable performance at a lower cost. If our products fail to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.
51
We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating
with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have products already approved or in development. In addition, many of these competitors,
either alone or together with their collaborative partners, operate larger research and development programs or have substantially greater financial resources than we do, as well as significantly greater experience in:
|
|
|
Developing drugs and biopharmaceuticals;
|
|
|
|
Undertaking preclinical testing and human clinical trials;
|
|
|
|
Obtaining FDA and other regulatory approvals of drugs and biopharmaceuticals;
|
|
|
|
Formulating and manufacturing drugs and biopharmaceuticals; and
|
|
|
|
Launching, marketing, and selling drugs and biopharmaceuticals.
|
Our commercial opportunity could be reduced
or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA
or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to
compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
If physicians and
patients do not accept and use our product candidates, our ability to generate revenue from sales of our products will be materially impaired.
Even if the FDA and/or foreign equivalents thereof approve our product candidates, physicians and patients may not accept and use them. Acceptance and use of
our products will depend upon a number of factors including:
|
|
|
Perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drugs;
|
|
|
|
Pharmacological benefit and cost-effectiveness of our products relative to competing products;
|
|
|
|
Availability of coverage and adequate reimbursement for our products from government or other healthcare payors;
|
|
|
|
Effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any; and
|
|
|
|
The price at which we sell our products.
|
Because we expect sales of our current product candidates, if
approved, to generate substantially all of our product revenues for the foreseeable future, the failure of a drug to find market acceptance would harm our business and could require us to seek additional financing in order to fund the development of
future product candidates.
Our ability to generate product revenues will be diminished if our products do not obtain coverage or adequate
reimbursement from payors.
Our ability to commercialize our product candidates, if approved, alone or with collaborators, will depend in part on
the extent to which coverage and reimbursement will be available from government and health administration authorities, private health maintenance organizations and health insurers and other third-party payors.
Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs
associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to
52
new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already
available or subsequently become available. Even if we obtain coverage for our product candidates, the resulting reimbursement payment rates might not be adequate or may require
co-payments
that patients find
unacceptably high. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates.
In addition, the market for our product candidates for which we may receive regulatory approval will depend significantly on access to third-party
payors drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement, which might not include all of the
FDA-approved
drugs for a particular indication. The
industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict
patient access to a branded drug when a less costly generic equivalent or other alternative is available.
Third-party payors, whether foreign or
domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party
payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that requires us to provide scientific and
clinical support for the use of our products to each payor separately, with no assurance that approval will be obtained. If we are unable to obtain coverage of and adequate payment levels for our product candidates from third-party payors,
physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact our
profitability, results of operations, financial condition, and future success.
In addition, in many foreign countries, particularly the countries of the
European Union, the pricing of prescription drugs is subject to government control. In some
non-U.S.
jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement
and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the
medicinal product on the market. We may face competition for our product candidates from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products
that compete with our own products, which could negatively impact our profitability.
The market opportunities for our product candidates may be
limited to those patients who are ineligible for or have failed prior treatments and may be small.
Cancer therapies are sometimes characterized as
first line, second line, or third line, and the FDA often approves new therapies initially only for third line use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure.
Whenever first line therapy, usually chemotherapy, hormone therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of more chemotherapy, radiation, antibody
drugs, tumor targeted small molecules, or a combination of these. Third line therapies can include bone marrow transplantation, antibody and small molecule targeted therapies, more invasive forms of surgery, and new technologies. We expect to
initially seek approval of our product candidates as a third line therapy for patients who have failed other approved treatments.
53
Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek
approval as a second line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if approved, would be approved for second line or first line therapy. In addition, we may have to conduct
additional clinical trials prior to gaining approval for second line or first line therapy.
Our projections of both the number of people who have the
cancers we are targeting, as well as the subset of people with these cancers in a position to receive third line therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These
estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence
of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates.
Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including use as a first
or second line therapy.
Our market opportunities may also be limited by competitor treatments that may enter the market. See also Risks Related to
Our Ability to Commercialize Our Product Candidates
If we cannot compete successfully for market share against other biopharmaceutical companies, we may not achieve sufficient product revenues and our business will suffer
.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory enactments in recent years that change the
healthcare system in ways that could impact our future ability to sell our product candidates profitably.
Furthermore, there have been and continue to be
a number of initiatives at the federal and state level that seek to reduce healthcare costs. Most significantly, in March 2010, President Obama signed into law the Patient Protection and Affordable Health Care Act, as amended by the Health Care and
Education Reconciliation Act, or collectively the ACA, which includes measures that significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA of importance to the pharmaceutical
industry are the following:
|
|
|
An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government
healthcare programs;
|
|
|
|
An increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively;
|
|
|
|
A new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50%
point-of-sale
discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs to be covered under Medicare Part D;
|
|
|
|
An extension of manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
|
|
|
|
New methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and for drugs that are line
extensions;
|
54
|
|
|
Expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals with income at or below 133% of the Federal Poverty Level, thereby
potentially increasing both the volume of sales and manufacturers Medicaid rebate liability;
|
|
|
|
Expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
|
|
|
|
A new requirement to annually report drug samples that certain manufacturers and authorized distributors provide to physicians;
|
|
|
|
Expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
|
|
|
|
A licensure framework for
follow-on
biologic products;
|
|
|
|
A new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and
|
|
|
|
Establishment of a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS to test innovative payment and service delivery models to lower Medicare and
Medicaid spending, potentially including prescription drug spending.
|
We cannot predict the full impact of the ACA, as many of the reforms
require the promulgation of detailed regulations implementing the statutory provisions, some of which have not yet fully occurred. Further, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will
be additional challenges and amendments to the ACA in the future.
In addition, other legislative changes have been proposed and adopted since the ACA was
enacted. For example, in August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The
Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislations automatic reductions to several government programs. These
reductions include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequent legislative amendments, will stay in effect through 2025 unless additional
Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years. Further, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug
pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. The full impact of these new laws, as well as laws and other reform and cost containment
measures that may be proposed and adopted in the future, remains uncertain, but may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our future customers and accordingly, our
ability to generate revenue, attain profitability, or commercialize our products.
If we fail to comply with federal and state healthcare laws,
including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other
third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients rights are and will be applicable to our business. For example, we could be subject to healthcare fraud and abuse and
patient privacy regulation by both the federal
55
government and the states in which we conduct our business. The laws that may affect our ability to operate include, among others:
|
|
|
The federal Anti-Kickback Statute, which regulates our business activities, including our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by
prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable
under a federal healthcare program, such as the Medicare and Medicaid programs;
|
|
|
|
Federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from
Medicare, Medicaid, or other third-party payors that are false or fraudulent;
|
|
|
|
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit
program or making false statements relating to healthcare matters;
|
|
|
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and
transmission of individually identifiable health information;
|
|
|
|
Requirements to report annually to CMS certain financial arrangements with physicians and teaching hospitals, as defined in the ACA and its implementing regulations, including reporting any transfer of value
made or distributed to teaching hospitals, prescribers, and other healthcare providers and reporting any ownership and investment interests held by physicians and their immediate family members and applicable group purchasing organizations during
the preceding calendar year; and
|
|
|
|
State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers;
state laws that require pharmaceutical companies to comply with the industrys voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts certain payments that may be
made to healthcare providers and entities; state laws that require drug manufacturers to report information related to payments and other transfer of value to physicians and other healthcare providers and entities; and state and foreign laws
governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts
|
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business
activities, including our consulting agreements with physicians, some of whom receive stock or stock options as compensation for their services, could be subject to challenge under one or more of such laws. In addition, recent health care reform
legislation has further strengthened these laws. For example, the ACA, among other things, amends the intent requirement of the federal anti-kickback statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have
actual knowledge of this statute or specific intent to violate it. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false
or fraudulent claim for purposes of the False Claims Act.
To the extent that any of our product candidates is ultimately sold in a foreign country, we
may be subject to similar foreign laws and regulations.
If we or our operations are found to be in violation of any of the laws described above or any
other governmental regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, exclusion from participation in United States federal or state health care programs, such as
56
Medicare and Medicaid, disgorgement, individual imprisonment and the curtailment or restructuring of our operations any of which could materially adversely affect our ability to operate our
business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if
we successfully defend against it, could cause us to incur significant legal expenses and divert our managements attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state
privacy, security and fraud laws may prove costly.
Our ability to use net operating loss carryforwards and research tax credits to reduce future
tax payments may be limited or restricted.
We have generated significant net operating loss carryforwards, or NOLs, and research and development
tax credits, or R&D credits, as a result of our incurrence of losses and our conduct of research activities since inception. We generally are able to carry NOLs and R&D credits forward to reduce our tax liability in future years. However,
our ability to utilize the NOLs and R&D credits is subject to the rules of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, respectively. Those sections generally restrict the use of NOLs and R&D credits
after an ownership change. An ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directly or indirectly, 5% or more of a corporations common stock or are
otherwise treated as 5% stockholders under Section 382 of the code and the United States Treasury Department regulations promulgated thereunder increase their aggregate percentage ownership of that corporations stock by more than 50
percentage points over the lowest percentage of the stock owned by these stockholders over the applicable testing period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a
corporation may offset with NOL carry forwards and Section 383 imposes an annual limitation on the amount of tax a corporation may offset with business credit (including the R&D credit) carry forwards. Any unused annual limitation may be
carried over to later years until the applicable expiration date for the respective NOL or R&D credit carry forwards. We may have experienced an ownership change within the meaning of Section 382 in the past and there can be no
assurance that we will not experience additional ownership changes in the future. As a result, our NOLs and business credits (including the R&D credit) may be subject to limitations and we may be required to pay taxes earlier and in larger
amounts than would be the case if our NOLs or R&D credits were freely usable.
Our synthetic immuno-oncology product candidates may face
competition in the future from biosimilars.
With the enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of
the Patient Protection and ACA, an abbreviated pathway for the approval of
follow-on
biological products was created. The new abbreviated regulatory pathway establishes legal authority for the FDA to review
and approve biosimilar biologics, including the possible designation of a biosimilar as interchangeable with an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years
after the original branded product was approved under a BLA. This data exclusivity does not prevent another company from developing a product that is highly similar to the original branded product, generating its own data and seeking approval. Data
exclusivity only assures that another company cannot rely upon the data within the innovators application to support the biosimilar products approval.
In his proposed budget for fiscal year 2014, President Obama proposed to cut this
12-year
period of exclusivity down
to seven years. He also proposed to prohibit additional periods of exclusivity due to minor changes in product formulations, a practice often referred to as evergreening. It is possible that Congress may take these or other measures to
reduce or eliminate periods of exclusivity.
Although final implementation of the BPCIA is not yet complete, such FDA implementation could have a material
adverse effect on the future commercial prospects for our product candidates.
57
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
If we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our
intellectual property rights would diminish and our ability to successfully commercialize our products may be impaired.
Our success, competitive
position, and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third
parties from infringing on our proprietary rights, and to operate without infringing the proprietary rights of third parties.
To date, we have exclusive
rights to certain U.S. and foreign intellectual property with respect to the Intrexon technology, including the existing Intrexon product candidates, such as
Ad-RTS-IL-12
+ veledimex, and the GvHD program, and with respect to CAR
+
T, NK and TCR cell therapies arising from the laboratory of Laurence
Cooper, M.D., Ph.D., who was then at MD Anderson. Under our Channel Agreement with Intrexon, Intrexon has the sole right to conduct and control the filings, prosecution and maintenance of the patents and patent applications licensed to us. Although
under the agreement Intrexon has agreed to consider in good faith and consult with us regarding any comments we may have regarding these patents and patent applications, we cannot guarantee that our comments will be solicited or followed. Under the
MD Anderson License, future filings and applications require the agreement of each of MD Anderson, Intrexon and us, and MD Anderson has the right to control the preparation and filing of additional patent applications unless the parties agree that
we or Intrexon may prosecute the application directly. Although under the agreement MD Anderson has agreed to review and incorporate any reasonable comments that we or Intrexon may have regarding these patents and patent applications, we cannot
guarantee that our comments will be solicited or followed. Without direct control of the channel program patents and patent applications, we are dependent on Intrexon or MD Anderson, as applicable, to keep us advised of prosecution, particularly in
foreign jurisdictions where prosecution information may not be publicly available. We anticipate that we, Intrexon and MD Anderson will file additional patent applications both in the United States and in other countries. However, we cannot predict
or guarantee:
|
|
|
The degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;
|
|
|
|
If and when patents will be issued;
|
|
|
|
Whether or not others will obtain patents claiming subject matter related to or relevant to our product candidates; or
|
|
|
|
Whether we will need to initiate litigation or administrative proceedings that may be costly whether we win or lose.
|
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at
a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some
circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. We may also require the cooperation of our
licensors in order to enforce the licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in
recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States and we may fail to seek or obtain patent protection in all major markets. For
example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the
58
United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or
narrow the scope of our patent protection. In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law, resulting in a number of significant changes to United States patent law. These changes include
provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In addition, the United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent
protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the value of patents, once obtained, and with regard to our ability to
obtain patents in the future. As the U.S. PTO continues to implement the Leahy-Smith Act, and as the federal courts have the opportunity to interpret the Leahy-Smith Act, the laws and regulations governing patents, and the rules regarding patent
procurement could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Certain technologies utilized in our research and development programs are already in the public domain. Moreover, a number of our competitors have developed
technologies, filed patent applications or obtained patents on technologies, compositions and methods of use that are related to our business and may cover or conflict with our owned or licensed patent applications, technologies or product
candidates. Such conflicts could limit the scope of the patents that we may be able to obtain or may result in the rejection of claims in our patent applications. Because patent applications in the United States and many foreign jurisdictions are
typically not published until eighteen months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that
others have not filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications. Therefore, we cannot know with certainty whether we were the first to make
the inventions claimed in our owned patents or pending patent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we license patents were the first to make the inventions
claimed or were the first to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which
protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and
other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, our own earlier filed patents and applications or those of Intrexon may limit the scope of later patents we obtain or may result in the
rejection of claims in our later filed patent applications. If third parties filed patent applications or obtained patents on technologies, compositions and methods of use that are related to our business and that cover or conflict with our owned or
licensed patent applications, technologies or product candidates, we may be required to challenge such protection, terminate or modify our programs impacted by such protection or obtain licenses from such third parties, which might not be available
on acceptable terms, or at all.
Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us
with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative
technologies or products in a
non-infringing
manner.
The issuance of a patent is not conclusive as to its
inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in
patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent
protection of our technology and products. Given the amount of time required for the development, testing and regulatory review
59
of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not
provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we are unable to protect the
confidentiality of our trade secrets, our business and competitive position would be harmed.
Our success also depends upon the skills, knowledge,
and experience of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. To help protect our proprietary
know-how
and our inventions for which patents
may be unobtainable or difficult to obtain, and to maintain our competitive position, we rely on trade secret protection and confidentiality agreements. To this end, it is our general policy to require our employees, consultants, advisors, and
contractors to enter into agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries, and inventions important to our business. These
agreements may not provide adequate protection for our trade secrets,
know-how
or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such
information. Moreover, we may not be able to obtain adequate remedies for any breaches of these agreements. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or
information to compete with us. If any of our trade secrets,
know-how
or other proprietary information is disclosed, the value of our trade secrets,
know-how
and other
proprietary rights would be significantly impaired and our business and competitive position would suffer.
Third-party claims of intellectual
property infringement would require us to spend significant time and money and could prevent us from developing or commercializing our products.
In order to protect or enforce patent rights, we, or Intrexon, may initiate patent infringement litigation against third parties. Similarly, we may be sued by
others for patent infringement. We also may become subject to proceedings conducted in the United States Patent and Trademark Office, including interference proceedings to determine the priority or derivation of inventions, or post-grant review,
inter partes review, or reexamination proceedings reviewing the patentability of our patented claims. In addition, any foreign patents that are granted may become subject to opposition, nullity, or revocation proceedings in foreign jurisdictions
having such proceedings. The defense and prosecution, if necessary, of intellectual property actions are costly and divert technical and management personnel away from their normal responsibilities.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates without
infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. While no such litigation has been brought against us and we have not been held by any
court to have infringed a third partys intellectual property rights, we cannot guarantee that our products or use of our products do not infringe third-party patents. It is also possible that we have failed to identify relevant third-party
patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in
the United States and elsewhere are published approximately 18 months after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering our products or technology could have been filed by others without
our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our products or the use of our products.
Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be
claimed to infringe patents or patent applications under which
60
we do not hold licenses or other rights. Patents do not protect its owner from a claim of infringement of another owners patent. Therefore, our patent position cannot and does not provide
any assurance that we are not infringing the patent rights of another.
The patent landscape in the field of synthetic immuno-oncology, which we are
pursuing under our Channel Agreement and GvHD Agreement with Intrexon, is particularly complex. We are aware of numerous United States and foreign patents and pending patent applications of third parties that cover compositions, methods of use and
methods of manufacture of synthetic immuno-oncology, including biotherapeutics involving the in vivo expression of human
IL-12.
In addition, there may be patents and patent applications in the field of which
we are not aware. The technology we license from Intrexon is early-stage technology and we are in the process of designing and developing products using this technology. Although we will seek to avoid pursuing the development of products that may
infringe any patent claims that we believe to be valid and enforceable, we may fail to do so. Moreover, given the breadth and number of claims in patents and pending patent applications in the field of synthetic immuno-oncology and the complexities
and uncertainties associated with them, third parties may allege that we are infringing upon patent claims even if we do not believe such claims to be valid and enforceable.
If a claim for patent infringement is asserted, there can be no assurance that the resolution of the claim would permit us to continue marketing the relevant
product on commercially reasonable terms, if at all. We may not have sufficient resources to bring these actions to a successful conclusion. If we do not successfully defend any infringement actions to which we become a party or are unable to have
infringed patents declared invalid or unenforceable, we may have to pay substantial monetary damages, which can be tripled if the infringement is deemed willful, or be required to discontinue or significantly delay commercialization and development
of the affected products.
Any legal action against us or our collaborators claiming damages and seeking to enjoin developmental or marketing activities
relating to affected products could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain licenses to continue to develop, manufacture, or market the affected products. Such a license may not be
available to us on commercially reasonable terms, if at all.
An adverse determination in a proceeding involving our owned or licensed intellectual
property may allow entry of generic substitutes for our products.
Obtaining and maintaining our patent protection depends on compliance with
various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the lifetime of the
patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete
loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time
limits,
non-payment
of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our
business.
If we breach any of the agreements under which we license rights to products or technology from others, we could lose license rights that
are material to our business or be subject to claims by our licensors.
We license rights to products and technology that are important to our
business, and we expect to enter into additional licenses in the future. For instance, we have exclusively licensed patents and patent applications under
61
our Channel Agreement, the ECP Agreement and the GvHD Agreement with Intrexon as well as under the MD Anderson License. Under these agreements, we are subject to a range of commercialization and
development, sublicensing, royalty, patent prosecution and maintenance, insurance and other obligations.
Any failure by us to comply with any of these
obligations or any other breach by us of our license agreements could give the licensor the right to terminate the license in whole, terminate the exclusive nature of the license or bring a claim against us for damages. Any such termination or claim
could have a material adverse effect on our financial condition, results of operations, liquidity or business. Even if we contest any such termination or claim and are ultimately successful, such dispute could lead to delays in the development or
commercialization of potential products and result in time-consuming and expensive litigation or arbitration. On termination we may be required to license to the licensor any related intellectual property that we developed.
In addition, in certain cases, the rights licensed to us are rights of a third party licensed to our licensor. In such instances, if our licensors do not
comply with their obligations under such licenses, our rights under our license agreements with our licensor may be adversely affected.
We may be
subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential
competitors. Although we try to ensure that our employees do not use the proprietary information or
know-how
of others in their work for us, we may be subject to claims that these employees or we have used or
disclosed intellectual property, including trade secrets or other proprietary information, of any such employees former employer. Litigation may be necessary to defend against these claims.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute
agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be
self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
OTHER RISKS RELATED TO OUR COMPANY
Our stock price
has been, and may continue to be, volatile.
The market price for our common stock is volatile and may fluctuate significantly in response to a
number of factors, most of which we cannot control, including:
|
|
|
Price and volume fluctuations in the overall stock market;
|
|
|
|
Market conditions or trends in our industry or the economy as a whole;
|
|
|
|
Laboratory or clinical trial results;
|
|
|
|
Public concern as to the safety of drugs developed by us or others;
|
|
|
|
Changes in operating results and performance and stock market valuations of other biopharmaceutical companies generally, or those that develop and commercialize cancer drugs in particular;
|
62
|
|
|
The financial or operational projections we may provide to the public, any changes in these projections or our failure to meet these projections;
|
|
|
|
Comments by securities analysts or changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or
maintain coverage of our common stock;
|
|
|
|
The publics response to press releases or other public announcements by us or third parties, including our filings with the Securities Exchange Commission, or the SEC, and announcements of the timing and amount of
product sales, announcements of the status of development of our products, announcements of technological innovations or new therapeutic products by us or our competitors, announcements regarding collaborative agreements and other announcements
relating to product development, litigation and intellectual property impacting us or our business;
|
|
|
|
FDA determinations on the approval of a product candidate NDA submission;
|
|
|
|
The sustainability of an active trading market for our common stock;
|
|
|
|
Future sales of our common stock by our executive officers, directors and significant stockholders;
|
|
|
|
Announcements of mergers or acquisition transactions;
|
|
|
|
Our inclusion or deletion from certain stock indices;
|
|
|
|
Developments in patent or other proprietary rights;
|
|
|
|
Changes in reimbursement policies;
|
|
|
|
Announcements of medical innovations or new products by our competitors;
|
|
|
|
Announcements of changes in our senior management;
|
|
|
|
Other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events; and
|
|
|
|
Changes in accounting principles.
|
In addition, the stock market from time to time experiences significant
price and volume fluctuations unrelated to the operating performance of particular companies. The stock markets, and in particular the NASDAQ Capital Market, have experienced extreme price and volume fluctuations that have affected and continue to
affect the market prices of equity securities of many biopharmaceutical companies. Stock prices of many biopharmaceutical companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the
past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be
diverted from our business.
Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be
beneficial to our stockholders, more difficult.
Provisions of our amended and restated certificate of incorporation and bylaws, as well as
provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions authorize the issuance of blank check preferred stock that could be issued by our
board of directors to increase the number of outstanding shares and hinder a takeover attempt, and limit who may call a special meeting of stockholders. In addition, Section 203 of the Delaware General Corporation Law generally prohibits a
publicly-held Delaware corporation from engaging in a business combination with a party that owns at least 15% of its common stock unless the business combination is approved by the companys board of directors before the person acquires the
15% ownership stake or later by its board of directors and
two-thirds
of its stockholders. Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders
might consider to be in their best interests.
63
In connection with our January 2011 issuance of shares of common stock to Intrexon in a private placement
transaction, our board of directors waived the Section 203 prohibition with respect to a future business combination with Intrexon.
Because we
do not expect to pay dividends, you will not realize any income from an investment in our common stock unless and until you sell your shares at profit.
We have never paid dividends on our common stock and we do not anticipate that we will pay any dividends for the foreseeable future. Accordingly, any return on
an investment in us will be realized, if at all, only when you sell shares of our common stock.
If securities and/or industry analysts fail to
continue publishing research about our business, if they change their recommendations adversely or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, it is
likely that in some future period our operating results will be below the expectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their
expectations, our stock price could decline.
Our principal stockholders, executive officers and directors have substantial control over the
company, which may prevent you and other stockholders from influencing significant corporate decisions and may harm the market price of our common stock.
As of December 31, 2016, our executive officers, directors and holders of five percent or more of our outstanding common stock, beneficially owned, in the
aggregate, 10.4% of our outstanding common stock. These stockholders may have interests that conflict with our other stockholders and, if acting together, have the ability to influence the outcome of matters submitted to our stockholders for
approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. Accordingly, this concentration of ownership may harm the market price of our common stock by:
|
|
|
Delaying, deferring or preventing a change in control;
|
|
|
|
Impeding a merger, consolidation, takeover or other business combination involving us; or
|
|
|
|
Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us
|