Item 1. Business
We are a clinical-stage biotechnology company focused on discovering and developing therapeutic protein and antibody products for the treatment
of life-threatening infectious diseases, including those caused by drug-resistant pathogens, particularly those treated in hospital settings. Drug-resistant infections account for two million illnesses in the United States and 700,000 deaths
worldwide each year. We intend to address drug-resistant infections using product candidates from our lysin and monoclonal antibody platforms that target conserved regions of either bacteria or viruses. Lysins are enzymes derived from naturally
occurring bacteriophage which are viruses that infect bacteria. When recombinantly produced and then applied to bacteria, lysins cleave a key component of the target bacterias peptidoglycan cell wall, which results in rapid bacterial cell
death. Lysins kill bacteria faster than conventional antibiotics, which typically require bacterial cell division and metabolism in order to kill or stop the growth of bacteria. We believe that the properties of our lysins will make them suitable
for targeting antibiotic-resistant organisms, such as
Staphylococcus aureus
(
Staph aureus)
which causes serious infections such as bacteremia, pneumonia and osteomyelitis. In addition, our lysins have demonstrated the
ability to clear biofilms in animal models, and we believe they may be useful for the treatment of biofilm-related infections in prosthetic joints, indwelling devices and catheters. Beyond our lysin programs, we are exploring therapies using
monoclonal antibodies (mAbs) designed to bind to viral targets. Our approach to antibody therapy employs a combination of multiple mAbs to either achieve greater efficacy or provide broader coverage across pathogenic strains.
In August 2015, our most advanced lysin product candidate,
CF-301,
was granted fast track designation
for the treatment of
Staph aureus
bacteremia, including endocarditis. We have concluded a Phase 1 single ascending dose study of
CF-301
in healthy volunteers. The study was designed as a randomized,
double-blind, placebo-controlled trial in order to evaluate the safety, tolerability and pharmacokinetics of
CF-301
alone, administered as a single two hour intravenous (IV) infusion. As specified
in the protocol, an independent data safety monitoring board (the DSMB) reviewed the safety, tolerability, and pharmacokinetic data from healthy volunteers dosed in all of the planned cohorts.
CF-301
was generally well tolerated and there were no clinical adverse safety signals in the study. We intend to pursue an initial indication for the treatment of
Staph aureus
bacteremia, including
endocarditis, caused by methicillin-resistant (MRSA) or methicillin-susceptible (MSSA)
Staph aureus
. We believe
CF-301
may also be developed for the treatment of
Staph
aureus
pneumonia, osteomyelitis, and biofilm-related infections in prosthetic joints, indwelling devices and catheters. Our second product candidate,
CF-404,
is a combination of three human mAbs for the
treatment of life-threatening human influenza, including all seasonal and most pandemic varieties. We are also advancing earlier stage programs that leverage the lysin and monoclonal antibody platforms.
Our Strategy
Our strategy is to use our
therapeutic products to achieve a leading market position in the treatment of life-threatening infectious diseases, including those caused by drug-resistant pathogens. We plan to pursue commercialization of therapeutic products through discovery,
acquisition and development as follows:
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Advance our lead product candidate,
CF-301,
through clinical trials and demonstrate superiority of our therapy combined with
standard-of-care
(SOC) drugs over SOC alone for the treatment of
Staph aureus
bacteremia;
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Advance additional product candidates from our lysin and antibody portfolio, including
CF-404
and lysins to gram-negative bacteria;
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Acquire additional foundation technologies that enable the efficient discovery of anti-infective agents; and
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Acquire clinical stage therapies that treat infectious diseases through unique mechanisms of action.
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1
Our Indications
Staph aureus bacteremia
In the United States (U.S.) alone there are approximately 120,000 cases annually of
Staph aureus
bacteremia, a bloodstream
infection, which causes approximately 30,000 deaths.
Staph aureus
bacteremia can be further complicated when the infection spreads into the heart muscle, heart valves or lining of the heart, causing endocarditis. Even with current SOC
antibiotic therapy, the resulting damage to the heart muscle or heart valves could require surgery to prevent stroke, heart failure or severe organ damage. Of further concern, drug-resistant strains of
Staph aureus
are now evolving additional
resistance against SOC antibiotics, which may ultimately result in an increase in the number of cases and in mortality from
Staph aureus
bacteremia, including endocarditis.
Influenza
On a global
basis, approximately 20% of children and 5% of adults develop symptomatic influenza annually, resulting in approximately 4 million severe cases and 375,000 deaths each year. Of further concern, despite the widespread availability of annual
vaccines in the U.S., approximately 30 million people will contract influenza, resulting in an average of over 200,000 hospitalizations and up to 49,000
influenza-associated
deaths each year in the U.S.
alone. Because of reduced vaccine effectiveness against the predominant circulating influenza virus in the 2014-2015 season, approximately 40 million people contracted influenza, resulting in over 970,000
flu-associated
hospitalizations. As a result of genetic drift and genetic shift, mutations in influenza occur each year as it circulates through the population. These mutations may result in drug-resistance of
the virus and ineffectiveness of the vaccine, which causes the need for annual reformulation of the vaccine. In addition, influenza has multiple chromosomes, and the virus can grow in a variety of species, such as human, swine, bird, etc., which may
result in novel strains of influenza entering into human circulation, as did the swine flu. These new viruses have the potential to cause worldwide pandemics.
Our Pipeline
With our product
candidates, we intend to treat life-threatening infections, including those caused by drug resistant pathogens. Our current pipeline of product candidates and advanced research programs is reflected in Figure 1:
2
Lysins
Lysins are enzymes derived from naturally occurring bacteriophage, which are viruses that infect bacteria. When recombinantly produced and then
applied to bacteria, lysins cleave a key component of the target bacterias peptidoglycan cell wall, resulting in rapid bacterial cell death. We believe lysins are unlike conventional antibiotics, especially regarding their mechanism and speed
of action. Conventional antibiotics require bacterial cell division and metabolism to occur in order to exert their effect (i.e., cell death or cessation of growth). Based on
in vitro
tests, lysins, however, are fundamentally different in
that they kill bacteria immediately upon contact, regardless of bacterial growth and cell division.
Bacteria can be divided into two
groups based on structural differences of the bacterias outermost walls: (a) gram-positive and (b) gram-negative. Gram-positive bacteria have an outermost cell wall of peptidoglycan (a structure consisting of
sugars and amino acids), which, when exposed to a dye known as the Gram-stain, absorb the dye and appear dark blue or violet when viewed under a microscope whereas Gram-negative bacteria which have an additional outer membrane, appear
red under a microscope by the Gram staining technique. We have multiple research programs ongoing and have discovered lysins that selectively kill specific species of gram-positive or gram-negative bacteria.
Our pipeline of lysins includes internally discovered lysins targeting gram-positive and gram-negative organisms, as well as lysins discovered
at The Rockefeller University (Rockefeller) which are being developed by us. We were granted a worldwide, exclusive license under Rockefeller patent rights to discover, develop, make, have made, use, import, lease, sell and offer for
sale lysin products. We acquired worldwide exclusive license rights to patents for composition of matter for nine lysins from Rockefeller. Each lysin targets a specific species of bacteria, including drug-sensitive and drug-resistant forms of
Staph aureus
, pneumococcus, group B streptococcus, enterococcus and anthrax. Significantly, lysins have a narrow spectrum meaning they kill only specific species of bacteria or closely related bacteria, an attribute we believe
will avoid the damaging side effects that often occur when conventional broad spectrum antibiotics kill the bodys normal, desirable bacteria. Table 1 sets forth the lysins for which we have acquired licenses to patents from
Rockefeller, the bacteria that each lysin targets and the diseases associated with such pathogenic bacteria.
Table 1: Lysins Licensed
from The Rockefeller University
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Lysin
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Bacteria
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Disease
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CF-301, CF-302
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Staphylococcus aureus
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Bacteremia*
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Abscesses*
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Endocarditis
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Meningitis
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Pneumonia
Skin/Skin Structure Infections
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CF-303,
CF-309
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Pneumococcus
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Pneumonia*
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Bacteremia*
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Endocarditis*
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Meningitis*
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Otitis Media*
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CF-304
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Enterococcus
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Serious Intestinal Infections
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CF-305
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Group B Strep
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Neonatal Meningitis*
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CF-306,
CF-307, CF-308
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Bacillus Anthracis
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Anthrax*
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*
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Indicates published data showing lysin activity in specific disease models.
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3
Our Lead Lysin Program:
CF-301
CF-301:
Market Opportunity
CF-301
represents a
first-in-class
anti-bacterial therapeutic candidate.
CF-301
has been granted fast track designation for the initial indication we
intend to pursue for the treatment of
Staph aureus
bacteremia, including endocarditis, caused by MRSA or MSSA. If we are able to obtain regulatory approval of
CF-301
for this initial indication, we
believe
CF-301
may be further developed for the treatment of
Staph aureus
pneumonia, osteomyelitis, and biofilm-related infections in prosthetic joints, indwelling devices and catheters.
The issue of antibiotic-resistant bacterial infections has been widely recognized as an increasingly urgent public health threat, including by
the World Health Organization, the Centers for Disease Control and Prevention and the Infectious Disease Society of America. Antibiotic resistance has limited the effectiveness of many existing drugs, and the discovery of new antibiotics to address
resistance has not kept pace with the increasing incidence of
difficult-to-treat
microbial infections. According to the Infectious Diseases Society of America, as of
2010 the estimated cost to the U.S. healthcare system of antibiotic-resistant infections was approximately $21 billion to $34 billion annually, a substantial portion of which is due to increased length of hospital stays.
Staph aureus
bacteremia is a serious bacterial infection associated with high morbidity and mortality. In the U.S. alone, there were
approximately 120,000 cases of
Staph aureus
bacteremia, of which over 80,000 were reported as invasive MRSA infections in 2011. Of further concern, the incidence of infective endocarditis is increasing, with over 47,000 cases in 2011, due to
the growth of the
at-risk
populations, such as adults with heart disease and prosthetic device implants, especially cardiac devices.
CF-301:
Potential Advantages
Our preclinical studies to date have shown that
CF-301
has the following attributes:
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Rapid and selective bactericidal activity
. In vitro,
CF-301
kills
Staph aureus
bacteria within seconds after contact.
CF-301
exhibits potent antibacterial activity against
Staph aureus
strains, including methicillin sensitive staph aureus (MSSA), as well as the superbug MRSA (methicillin-resistant
Staph aureus
)
and
Staph aureus
strains resistant to vancomycin, daptomycin, or linezolid. Significantly,
CF-301
is highly selective against
Staph aureus
, which we believe will avoid the damaging side effects
that often occur when conventional broad spectrum antibiotic treatments are used, which often can destroy the bodys normal, desirable bacterial flora (known as the microbiome).
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Synergy with
standard-of-care
(SOC) antibiotics.
We have discovered a strong synergy between
CF-301
and several SOC antibiotics, including daptomycin, vancomycin and oxacillin. We intend to seek approval for
CF-301
to be used in addition to SOC antibiotics. We
believe that, if approved, the use of
CF-301,
in addition to (rather than as a replacement for) SOC antibiotics, will provide the best outcome for patients and may help speed adoption of our product by
physicians.
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Clears biofilms.
In
in vitro
studies,
CF-301
clears biofilms that protect bacterial infections in the body. Infected human tissues, such as a heart valve in
endocarditis or bone in osteomyelitis, or indwelling medical devices, such as central venous catheters, prosthetic joints and pacemakers, are common sites for biofilm formation, providing an impediment to effective treatment using antibiotics alone.
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Minimal resistance potential.
To date, preclinical studies demonstrate that the propensity for bacteria to develop resistance to
CF-301
is very low.
CF-301
has also been shown to suppress the emergence of resistance to SOC antibiotics when used in combination.
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Minimal competition.
There are only two FDA approved drugs for the treatment of MRSA bacteremia - vancomycin and daptomycin.
CF-301
works synergistically with both
of these drugs and is intended to be used in addition to, not as a replacement for, SOC antibiotics.
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Patent protection.
Our issued composition of matter patent on
CF-301
provides protection through 2032 and additional patents, if issued as we expect, could provide
further protection beyond 2032.
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CF-301:
Preclinical Data
A key feature of lysins is their ability to target pathogenic antibiotic-resistant bacteria, as well as those that are antibiotic-sensitive.
Table 2 sets forth our findings of
CF-301s
effect on
Staph aureus
isolates, showing that
CF-301
killed all
Staph aureus
isolates tested, regardless
of their antibiotic-resistance profile. In this experiment, we tested 250 different drug sensitive and resistant isolates of
Staph aureus
. The isolates (which are classified by the particular drugs they are sensitive or resistant too) tested
included MSSA, MRSA, VRSA, linezolid-resistant (LRSA) and daptomycin-resistant (DRSA)
Staph aureus
. The isolates were all analyzed to determine their sensitivity to
CF-301
and
SOC antibiotics as measured by the Minimum Inhibitory Concentration (MIC) value. The MIC value is the minimum dose of drug that is required to kill a standard amount of bacteria over a
24-hour
period. Based on demonstrated MIC values,
CF-301
was shown to be active against all the strains tested (+), while subsets of the
Staph aureus
strains were resistant to daptomycin, vancomycin
or linezolid ().
Table 2: In Vitro Sensitivity of Antibiotic-Sensitive and Antibiotic-Resistant Strains to
CF-301
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Strain
(n=250)
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CF-301
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Daptomycin
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Vancomycin
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Linezolid
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MRSA (120)
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+
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+
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+
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+
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MSSA (103)
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+
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+
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+
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+
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DRSA (8)
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+
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-
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+
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+
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VRSA (14)
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+
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+
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-
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+
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LRSA (5)
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+
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+
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+
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-
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Lysins have been shown to kill bacteria upon contact and demonstrate bactericidal activity (defined as a
3-log
drop in colony forming units (CFU) per mL) in minutes. The figure below compares the rate at which lysins kill bacteria to the rates at which SOC antibiotics kill bacteria (with all drugs being
administered at a concentration of 1X MIC).
CF-301
reduced the number of
Staph aureus
bacteria in tests on 62 strains (20 MSSA; 42 MRSA) by
3-logs
(99.9%) within 30 minutes. In contrast, daptomycin required six hours to achieve the same level of cell killing, while vancomycin failed to achieve a
2-log,
or 99%, cell kill during the same
six-hour
test period. The rapid bactericidal activity of lysins is one of the primary reasons we believe they could be a highly desirable therapeutic option for the treatment of rapidly advancing bacterial
infections.
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Figure 2: CF 301s Rapid Bactericidal Activity In Vitro
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The star symbols indicate the limit of detection in the plating assay.
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CF-301:
Synergy with
Standard-of-Care
Antibiotics
Synergy is defined as
the interaction of two or more agents so that their combined effect is greater than the sum of their individual effects. We discovered a strong synergy between lysins and several SOC antibiotics, including daptomycin, vancomycin and oxacillin
through our in vitro testing (data not shown). In these preclinical tests, when used together, lysins and antibiotics offered a dual attack on pathogenic bacteria that was far greater than the sum of their individual contributions. The result was
significantly improved killing of bacteria.
To demonstrate this synergy in vivo, we have developed animal models where
CF-301
could be tested as single agent (monotherapy) or combined with a SOC antibiotic (combination therapy). Our Standard Bacteremia Model utilizes animals infected with 10 million (10
7
) CFU of MRSA and treated 3 hours later with various doses of therapy or buffer. When used alone,
CF-301
has potent anti-Staph activity that demonstrates a
dose/response effect. Figure 3 below presents the dose/response of animals treated with various doses of
CF-301
in the Standard Bacteremia Model. As pictured on the graph below, all mice receiving at least 0.5
mg/kg of
CF-301
demonstrated at least 90% survival, whereas doses below 0.5 mg/kg resulted in lower survival rates.
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Figure 3:
CF-301
Dose Response in Mice in the Standard
Bacteremia Model
We also developed the Drug Failure Bacteremia Model, where the bacterial infection burden (one billion (10
9
) CFU) was so high that SOC antibiotics used at their human equivalent doses as monotherapies failed to produce significant cure rates. We tested daptomycin, vancomycin and oxacillin in this
model (data not shown for vancomycin and oxacillin). We then adjusted the dose of
CF-301
so that
CF-301
monotherapy would also fail to have significant cure rates under
these intense infection conditions. To test whether the synergy that we had observed in vitro between
CF-301
and SOC antibiotics would lead to improved efficacy
in vivo
, we then treated groups of
animals in the Drug Failure Bacteremia Model with the drugs as monotherapies and also in combinations to evaluate if there was an improvement in efficacy.
Figure 4 below presents the results of the combination of
CF-301
and daptomycin when used in the Drug
Failure Bacteremia Model. All control mice treated with buffer (diamonds) succumbed to bacterial infection within 18 hours. Administration of a clinical dose of daptomycin as a single agent (squares) resulted in clinical failure, as only 31% of mice
survived. When
CF-301
(triangles) was dosed as a single agent at this chosen dose, only 18% of mice survived. In contrast, when mice received the
combination
of
CF-301
plus daptomycin (circles), 82% survived the bacterial challenge, demonstrating superiority of the combination therapy over the single-drug regimens.
Figure 4: Combination Therapy of
CF-301
with Daptomycin in Drug Failure Bacteremia Model
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We have tested the combination of
CF-301
with daptomycin,
vancomycin and oxacillin in 30 different experiments (including both the Standard and Drug Failure Bacteremia Models). In each experiment, the combination therapy was shown to be superior to monotherapy with a single drug alone. As a result, we
believe this provides a strong foundation on which to pursue clinical development of the combination of
CF-301
and SOC antibiotics for the treatment of
Staph aureus
bacteremia, as
CF-301s
first indication.
To further explore the activity of
CF-301
in combination with SOC antibiotics for the treatment of life-threatening, drug-resistant infections, we engaged the LA Biomed Research Institute at Harbor-UCLA Medical Center (UCLA) to
perform a study in their rat infective endocarditis model (IE Model). The IE Model has become a well-established experimental animal model and has been used for assessing possible efficacy of therapeutic agents in infective endocarditis.
The primary endpoint of the IE Model is a reduction in the amount of bacteria (measured as CFUs) on the heart valve, in the kidney and in the spleen. Survival during the course of the treatment period was considered a secondary endpoint, as the
study was not designed to see the long-term effects of the treatment on overall survival. Our study examined the activity of
CF-301
alone and in combination with daptomycin, in UCLAs prototypical
high-burden biofilm-based IE Model. We worked directly with UCLA to design the study, and the description of the methods and results follows below.
Figure 5 presents the results of the combination of
CF-301
alone and in combination with daptomycin as
compared to both buffer and daptomycin alone in the IE Model. In this study, a single dose of
CF-301
significantly increased the activity of daptomycin. This study was designed to mimic the planned clinical
approach (single dose of
CF-301
on top of multiple days of SOC antibiotic therapy) in a difficult to treat biofilm-based infection. In this study, a single dose of
CF-301,
when combined with four days of daptomycin treatment, resulted in a
3-log
(99.9%) drop in bacterial burden in the cardiac vegetations and
>2-log
(99%) drop in the kidney and spleen of infected animals relative to daptomycin treatment alone. Importantly, in the combination treatment groups 4 of 9 animals were determined to be culture negative,
whereas no animals in any other treatment arms approached this level of microbial eradication.
Figure 5: Single Dose of
CF-301
with Daptomycin in Rat Infective Endocarditis Model
As a result, we believe this additional data strongly supports our human clinical study plan to evaluate
the combination of
CF-301
and SOC antibiotics for the treatment of patients with invasive
Staph aureus
infections, including endocarditis, caused by MSSA or MRSA.
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CF-301:
Impact on Antibiotic-Resistant Biofilms
Biofilm formation is a common protective mechanism for bacteria and a key feature associated with bacterial pathogenesis. Biofilms are
characterized by densely packed bacterial cells that grow in communities and are enclosed within a complex matrix of dead bacteria and excess cell wall components. Biofilm bacteria exhibit significant tolerance of various antimicrobial agents,
rendering biofilm cells up to
1,000-fold
less susceptible than the same bacteria grown in a planktonic, or free-floating,
non-biofilm
culture. Infected human tissues,
such as the heart valve in endocarditis or bone in osteomyelitis, or indwelling medical devices, such as central venous catheters, prosthetic joints and pacemakers, are common sites for biofilm formation, providing a hurdle for effective treatment
with antibiotics alone. Novel treatment strategies and antimicrobial agents with activity toward biofilms remain a serious unmet medical need as there is no product currently indicated for the treatment of biofilms.
Since
CF-301
disrupts the outer wall of
Staph aureus
by enzymatic lysis, we performed studies
to determine if
CF-301
would also disrupt biofilms. For this purpose, we cultured MRSA for 24 hours within wells of polystyrene dishes typically used for the culture of cells, at which point a dense biofilm
formed on the dish surface. Dishes were incubated for up to 24 hours with high-dose (1,000X MIC) daptomycin, vancomycin or linezolid, or lower-dose
(1XMIC) CF-301.
After the four-hour treatment, dishes
were washed and stained with a dye that stains the biomass of a biofilm a dark blue color. In dishes treated with
CF-301,
there was no visual biofilm present after two hours of treatment, whereas in dishes
treated with antibiotics for up to 24 hours, the biofilm biomass remained intact (images shown in Figure 6 below). These
in vitro
findings demonstrate the inability of these antibiotics to penetrate and clear biofilm material whereas
CF-301
effectively destroyed bacterial biofilms.
Figure 6: Sensitivity of
Staph
Aureus
(MRSA) Biofilms to
CF-301
Versus SOC Antibiotics
To microscopically visualize
CF-301s
disruption of biofilms,
we inoculated MRSA onto a medically relevant device (a catheter) where it attached to the wall of the plastic and formed a dense three-dimensional structure. We then treated the interior of the catheter with
CF-301
at 1x MIC. At various time intervals after treatment the interior of the catheter was sectioned and examined by scanning electron microscopy (SEM), select images shown below in Figure 7. In
the untreated catheter (left panel) the majority of MRSA cells (little circles in the pictures below) were found within a biofilm. However, within 30 seconds of exposure to
CF-301,
the dense biofilm was
largely removed and only single cells were observed (middle panel). Fifteen minutes following exposure to
CF-301
(right panel), the biofilm was completely stripped and residual MRSA cells which had been
beneath the biofilm were killed, in effect, sterilizing the catheter. These images emphasize the rapid and potent activity of
CF-301
against bacterial biofilms. Taken together with the lack of efficacy that
antibiotics display against biofilms, we believe
CF-301
potentially represents a new therapeutic option against what were previously untreatable biofilms.
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Figure 7: Sensitivity of
Staph Aureus
(MRSA) Biofilms Grown on Catheters
to
CF-301
CF-301:
Product Development
Product development is generally accomplished in four steps, which may overlap: (1) preclinical activities to demonstrate consistent
manufacturing, safety and efficacy in animals; (2) Phase 1 clinical trials, in healthy volunteers, to determine pharmacokinetics (PK), safety, tolerability, immunogenicity, dosing, effects in special populations, and other issues;
(3) Phase 2 clinical trials in patients to determine dose, efficacy, safety, tolerability, PK and immunogenicity; and (4) Phase 3 clinical trials, the pivotal trials in patients to confirm efficacy and safety at the proposed commercial
dose.
Non-Clinical
Activities
Chemistry, Manufacturing and Controls
Manufacturing of
CF-301
utilizes a proprietary engineered
E. coli
strain that expresses the
product in a recombinant manner during the fermentation process. This technology allows production of up to nine grams of
CF-301 per
liter of fermentation broth. After fermentation, the broth containing
CF-301
is separated and purified through a process containing two chromatographic columns. The resulting product has greater than 99% purity. The
CF-301
produced by this
process has been used in animal studies submitted in our IND and completed Phase 1 clinical trial and may be used for our planned Phase 2 clinical trial.
We intend to further optimize the manufacturing process for increased purity and yield. Once completed, we plan to begin a program to
manufacture Phase 3 material. The process will then be scaled up from the current 100 liter fermentation and validated in a series of manufacturing batches to demonstrate consistency. In parallel to the validation, we intend to conduct a
comparability program that demonstrates comparability between the final product used in Phase 3 and commercial manufacturing. We intend to include the results in the biologics license application (BLA) that we expect to submit to the
FDA. Following submission, the FDA will conduct
pre-approval
inspections of all manufacturing facilities and determine whether it agrees that our commercial material is sufficiently comparable to our Phase 3
material.
Safety Pharmacology and Toxicology
Preclinical safety pharmacology and toxicology studies have been completed in connection with our IND application for
CF-301.
In these studies
CF-301
was well tolerated in rats for a single
two-hour
IV administration of doses up to 25mg/kg (determined
by us to be the no observable adverse effect level, or NOAEL) and that a single dose of 2.5mg/kg was not associated with any effects, adverse or not, and was therefore determined to be the no observable effect level (NOEL).
CF-301
was also well tolerated in these studies in both rats and dogs for seven consecutive days of once daily
two-hour
IV infusions of up to 2.5mg/kg. In a
non-GLP
pilot study in rats, 1.0 mg/kg/day was well tolerated for up to seven consecutive days of once daily
two-hour
IV infusions or IV boluses.
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Dose dependent adverse effects were seen in both species at doses above 25 mg/kg/day for 1 day in
the rat and above 2.5 mg/kg/day for seven-consecutive days in both the rat and the dog. The dose limiting toxicity observed was a localized inflammation surrounding certain blood vessels. In accordance with industry practice, we intend to study
CF-301
in clinical trials at doses much lower than those that caused adverse effects in animals, and we believe these doses to be within the efficacious range of the drug.
Upon first exposure to
CF-301,
no hypersensitivity reaction was observed in any of our animal studies.
Upon administration of a second course of
CF-301,
given two weeks after completion of the first course, hypersensitivity or hypersensitivity-like findings were observed in mice, rats and dogs. In a dedicated
hypersensitivity studies in rats, findings of Type III hypersensitivity were observed after a two week delayed
re-challenge
with a second course of
CF-301
and were not
dose dependent. In general, Type I hypersensitivity is an allergic anaphylaxis-like response (e.g., an immediate and potentially life-threatening allergic reaction) and Type III hypersensitivity is a serum sickness-like response (e.g., fever, joint
pain, protein in urine, vascular changes). While the nature of hypersensitivity reactions in rats may not necessarily be predictive of hypersensitivity reactions that may occur in humans, we have also considered the risk of hypersensitivity
occurring upon first administration of
CF-301
due to potential prior exposure to the active protein component of
CF-301
from the environment, as it is a naturally
occurring protein. Testing for
anti-CF-301
antibodies was performed in Phase I subjects. No clinical hypersensitivity related to
CF-301
was observed in subjects dosed in our Phase 1 study.
Clinical Studies
Phase 1.
In 2015, we concluded a Phase 1 single ascending dose study in healthy volunteers. This trial was a randomized, double-blind,
placebo-controlled trial designed to evaluate the safety, tolerability and PK of four different intravenous doses of
CF-301
alone. Subjects were randomized to receive a single IV dose of
CF-301
or placebo, each administered as a two hour infusion.
In this Phase 1 trial, there were no
clinical adverse safety signals, no serious adverse events (AEs), and no study stopping rules were met. In addition, no AEs of hypersensitivity related to
CF-301
were reported. A total of five
non-serious
AEs were reporting during the study. Two subjects who received
CF-301
reported a total of three
non-serious
AEs
(headache, contact dermatitis, and allergic rhinitis). Two subjects who received placebo reported a total of two
non-serious
AEs (viral upper respiratory tract infection and viral infection). All of these
events were mild in intensity and resolved. No patients withdrew from the study due to an AE. Exposure was dose dependent and intra-subject variability was low. Estimated effective exposure, based on animal models of
Staph aureus
infections,
was attained at the 0.25mg/kg dose. Nine out of 13 subjects dosed with
CF-301
developed anti-drug antibodies (ADAs) in the study. These ADAs were waning or absent by day 180, and were not correlated with
markers of allergic immune response.
Phase 2.
We expect to proceed into Phase 2 to assess the safety, tolerability, PK, and
efficacy of
CF-301
used in addition to
standard-of-care
(SOC) antibiotics. We expect the Phase 2 clinical trial to be
a multicenter, double-blind, randomized study that evaluates the safety and efficacy of
CF-301
used in addition to SOC antibiotics and SOC antibiotics alone in patients with
Staph aureus
bacteremia,
including endocarditis, caused by MSSA or MRSA. The study is expected to enroll 115 patients randomized 3:2 to receive a single dose of 0.25 mg/kg of
CF-301
administered via 2 hour IV infusion or placebo. The
primary endpoint of early clinical response at Day 14, based on a series of objective clinical response criteria (including reduction/resolution of symptoms, lack of progression of infection, lack of need for additional antibiotics). Additional
exploratory clinical, microbiologic and health resource utilization endpoints will be measured in the trial.
Phase 3.
If the Phase
2 results are consistent with our expectations regarding the safety and efficacy profile of
CF-301,
we expect to enter into Phase 3. We expect any Phase 3 clinical trial to be a global, multicenter,
double-blind, randomized study that evaluates the efficacy and safety of
CF-301
plus SOC antibiotics compared
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to SOC antibiotics alone among patients with bacteremia caused by MSSA or MRSA. Specific parameters for Phase 3 will be based on the outcomes of previously completed clinical trials and relevant
guidance from regulatory authorities.
Our Lysin Discovery Platform
We employ bioinformatics and a series of metagenomic-based techniques to clone bacteriophage lysins from bacterial, viral, and environmental
sources. The field of metagenomics is based on the bulk extraction of DNA/RNA from environmental samples (e.g., soil, water, etc.) without prior isolation of individual microbial sources. This is useful when one considers that less than 1% of
microbes are culturable under standard laboratory conditions. Once extracted, the metagenomic DNA can then be examined using sequence-based methods or by proprietary functional screens. These functional screens for bacteriophage lysin activity form
the basis for our lysin discovery work.
For the functional metagenomic work that we perform, environmental genes are expressed in a
recombinant format in a standard host organism (i.e.,
Escherichia coli
) and cells are monitored for the acquisition of a desired phenotype. We can vary both the source of environmental DNA and the way we monitor for desired phenotypes to
focus only on environmental populations enriched for bacteriophage lysins that can actively kill a pathogen of interest. We sample various DNA sources including viral, prophage, and pathogen-amplified viral metagenomics. Multiple methods for both
DNA library construction and for functional screening are used in parallel in order to maximize lysin identification.
We have also
established additional discovery methodologies, including bioinformatics analysis of the rapidly expanding databases of bacterial genomic sequences. The highly conserved modular structure of lysins, combined with sequence homologies amongst
different lysin classes, enable the rapid analysis of putative lysins from DNA databases. Such sequences can be readily synthesized and screened for lytic activity against any pathogen of interest.
The application of these methods enables the large scale identification of lysins, enabling the production of lysin banks specific for any
particular pathogen. We believe the ability to rapidly identify lysins specific for any pathogen of interest, either by in vitro or in silico methods, will provide a steady pipeline of novel lysins for consideration as potential antimicrobial
therapeutic candidates.
We intend to pursue preclinical and clinical development of additional lysins. In addition to the lysins we have
licensed from Rockefeller and our
in-house
lysin discovery program, we have an active collaborative research agreement where we provide funding for the discovery of new lysins with Dr. Vincent
Fischettis Laboratory of Bacterial Pathogenesis and Immunology at Rockefeller, where we have the first right to negotiate a license to all discoveries concerning lysins through October 2019. The primary focus of our
in-house
and sponsored research is the discovery of lysins to target gram-negative bacteria.
Monoclonal Antibodies
We are exploring combination therapy with mAbs that bind to target bacteria or viruses and block certain biological activities or
recruit other parts of the immune system to destroy the pathogenic target. The strategies of our mAb program include: (1) targeting conserved regions of the virus or bacteria which are not prone to mutation and (b) targeting multiple
proteins expressed from different genes within a bacteria or virus to prevent therapeutic escape and (c) combining mAbs to cover multiple strains for superior outcomes.
Our antibodies are generated by genetic engineering using phage display libraries, isolated directly from human blood samples or other
available technologies, enabling the screening of billions of human mAbs with different binding sites. Once the best monoclonal antibodies are isolated, we use protein engineering techniques to optimize important antibody attributes such as
pharmacokinetic profile, effector function engagement, antibody format (such as Fabs and bispecifics), and manufacturing efficiency. The common properties provide for a unique ability to create a therapeutic combination of mAbs.
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Our Lead mAb Program:
CF-404
We intend to develop
CF-404,
a combination of three human mAbs against influenza, as a treatment for
life-threatening seasonal and pandemic influenza infections, a disease that kills as many as 49,000 people annually in the U.S. alone. Our preclinical studies to date have shown that
CF-404
may have the
following attributes:
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Broad activity against influenza in one combination drug.
CF-404
exhibits broad activity against influenza strains, including the three principal strains (H1, H3 and
B). By targeting a conserved region on the virus, we believe
CF-404
bypasses the effects of seasonal change, which allows (1) our mAbs to cross-react and neutralize many different influenza strains;
(2) for the production of a single therapeutic combination of only three mAbs covering all human seasonal and most pandemic influenza strains; and (3) for an immediate therapeutic effect that cannot be obtained by vaccination which
typically requires weeks.
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Minimal resistance potential
.
Our mAbs react with the principal protein, hemagglutinin, on the surface of influenza at a region referred to as the hemagglutinin stalk. Because the hemagglutinin
stalk is genetically stable and therefore represents a conserved region of the virus, it does not vary from one season to another.
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Minimal competition.
There are only four approved drugs for the treatment of influenzaTamiflu, Relenza, Symmetrel and Flumadinealthough only Tamiflu is widely used in practice. Influenza has
demonstrated an increasing resistance to Tamiflu, and the clinical benefit of Tamiflu is greatest when antiviral treatment is administered early, especially within 48 hours of influenza illness onset. Based on preclinical data, we believe treatment
with our mAbs may be effective even when given up to 96 hours after infection.
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Influenza Research
In preclinical studies,
CF-404
cross-reacts with all strains of influenza, including the three
principal strains (H1, H3 and B). These mAbs react with the principal protein, hemagglutinin, on the surface of influenza at a region referred to as the hemagglutinin stalk which is genetically stable and does not vary from one season to another. We
have produced mAbs that are reactive with the stalk region of hemagglutinin for the entire natural history of the H3 influenza (1968-present), H1 influenza (1918-present; seasonal and swine flu), other strains of Type A influenza (including H5), and
Type B influenza.
We have tested our mAbs in mouse models to evaluate protection against lethal infection with influenza in
proof-of-concept
experiments. These data demonstrated that our
anti-H1
(CF-401),
anti-H3
(CF-402)
and
anti-B
mAbs
(CF-403)
were able to protect animals from lethal challenge.
Importantly, our
in vivo
animal studies show that treatment with our mAbs appears to provide greatly enhanced potency compared to treatment with other mAbs.
Figure 8 below shows the results of an experiment using
CF-401
in a mouse model of H1N1 influenza
infection, in which body weight loss is used as a proxy of disease progression (and ultimately, death). In this figure, we also demonstrate that at the same dose of 1 mg/kg,
CF-401
was far superior to a
competitors mAb currently in clinical development. Control mice treated with buffer (diamonds) succumbed to viral infection within 9 days. Administration of a single treatment, 24 hours post-infection, of a competitors antibody
(triangles) resulted in clinical failure at an identical rate as the no treatment group. When
CF-401
(circles) was administered as a single treatment, 24 hours post-infection, the mice appeared perfectly
healthy, with weight changes identical to animals that did not receive challenge with influenza (squares).
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Figure 8: Effectiveness of
CF-401
in Mouse Model of
Influenza
As the goal of our influenza program is to produce a combination of mAbs with efficacy against all human
seasonal strains of influenza, we have formulated
CF-404
and tested it in animal models of disease. Figure 9 below shows how
CF-404
cured mice infected with three
different strains of influenza, regardless of the strain (H1N1, H3N2 or B). Control mice treated with buffer (triangles) all succumbed to viral infection within
7-9
days. By contrast, when we administered a
single treatment of
CF-404
(squares) 24 hours post-infection, the infected mice appeared perfectly healthy, with weight changes comparable to healthy mice (not pictured).
Figure 9: Effectiveness of
CF-404
in Mouse Model
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Currently, the SOC treatment for influenza is Tamiflu. Tamiflu, however, has several limitations,
including emerging resistance. In 2009, just prior to the emergence of the pandemic H1N1 swine flu, the CDC cautioned against the use of Tamiflu for the treatment of H1N1 seasonal influenza due to nearly complete drug-resistance of the virus (in
2006 <1% of H1N1 were resistant, by 2009 that figure jumped to >98%). As previously discussed, due to the targeting of conserved regions on the hemagglutinin, we do not anticipate resistance will occur to our mAbs.
The second major limitation of Tamiflu is its narrow time window to treat a patient and still be efficacious. The clinical benefit of Tamiflu
is greatest when administered early in a patients infection, especially within 48 hours of illness onset. To compare the
time-to-treat
windows of our mAbs to
Tamiflu, H1N1
influenza-infected
mice were treated with either a single administration of
CF-401
or a 5 day course of Tamiflu beginning
24-96
hours post infection (HPI). Figure 10 below shows the findings of that study, including the finding that Tamiflu treatment had to have been initiated by 24 HPI to cure mice, while treatments
beginning at 48, 72 or 96 HPI resulted in 100% death by day 14. In contrast, a single treatment with
CF-401
resulted in 100% survival when given any time up to 72 HPI and in 80% survival when given 96 HPI.
This result suggests that our mAb treatment may provide effective treatment to influenza patients at later times post-infection when Tamiflu is no longer effective.
Figure 10:
CF-401
Provides Greater Therapeutic Window than Tamiflu
®
in Mouse Model
We believe our combination for the treatment of influenza is a novel approach addressing a high unmet
medical need and would offer competitive advantages to the only product widely used on the market today if successfully developed and approved.
Intellectual Property
Our goal is to
obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the
United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our product candidates, proprietary information and proprietary technology through a
combination of contractual arrangements and patents, both in the United States and abroad. However, patent protection may not afford us with complete protection against competitors who seek to circumvent our patents.
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We also depend upon the skills, knowledge, experience and
know-how
of our management and research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary
know-how,
which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to
protect our interests. To this end, we will require all of our employees, consultants, and other contractors (including any consultants or contractors we may retain for purposes of any of our ad hoc Clinical Advisory Boards) 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 lysin portfolio consists of twelve (12) U.S. patents, fifteen (15) foreign patents and fifty-eight (58) U.S. and
international patent applications that we have licensed from Rockefeller and/or developed
in-house.
The patents and patent applications are directed to compositions and methods for the treatment of infections
caused by Group B Streptococci, Staphylococcus aureus, Streptococcus pneumonia, Bacillus anthracis (anthrax), Enterococcus faecalis, Enterococcus faecium and Pseudomonas aeruginosa. These patents and patent applications (if granted) would expire
between 2023 and 2036.
Our influenza patent portfolio consists of two (2) foreign patents and
forty-five
(45) U.S. and foreign patent applications, which we have licensed from Trellis and/or developed
in-house.
The patent applications are directed to
compositions relating to influenza antibodies as well as to pharmaceutical compositions for administration to patients and to methods for their use in conferring passive immunity against various influenza strains and clades. These patents and patent
applications (if granted) would expire between 2031 and 2035.
The U.S. patent system permits the filing of provisional and
non-provisional
patent applications. A
non-provisional
patent application is examined by the United States Patent and Trademark Office (USPTO), and can issue as a
patent once the USPTO determines that the claimed invention meets the various standards for patentability. A provisional patent application is not examined or prosecuted, and automatically expires 12 months after its filing date if a
non-provisional
application is not filed based on the provisional application within that
12-month
period. Provisional applications are often used, among other things, to
establish a priority filing date for the subsequently filed
non-provisional
patent application. The term of individual patents depends upon the legal term for patents in the countries in which they are filed.
In most countries in which we file, the patent term is 20 years from the earliest filing date of a
non-provisional
patent application. In the United States, a patents term may be lengthened by patent
term adjustment, which compensates a patentee for administrative delays by the USPTO in granting a patent. Alternatively, a patents term may be shortened if a patent is terminally disclaimed over another patent.
The term of a patent that covers an
FDA-approved
drug may also be eligible for patent term extension
(PTE), which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, permits a
PTE of up to five years beyond the expiration of the patent. The length of the PTE is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from
the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the
future, if and when our pharmaceutical product candidates receive FDA or other regulatory approval, we may be able to apply for or receive the benefit of PTEs on patents covering those products.
License AgreementsThe Rockefeller University
We have entered into the following license agreements with Rockefeller:
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On July 12, 2011, we entered into a license agreement for the worldwide, exclusive right to a provisional
patent application, upon which a
non-provisional
patent application has since been filed,
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covering the composition of matter for the lysin PlySS2 for the treatment and prevention of diseases caused by gram-positive bacteria (the
CF-301
License). We rebranded PlySS2 as
CF-301.
This license gives us the right to exclusively develop, make, have made, use, import, lease, sell and offer for sale products that would otherwise infringe a
claim of this patent application or patent.
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On June 1, 2011, we entered into a license agreement for the exclusive rights to Rockefellers interest in a joint patent application, which is presently pending, covering the method of delivering antibodies
through the cell wall of a gram-positive bacteria to the periplasmic space. This intellectual property was developed as a result of the sponsored research agreement between us and Rockefeller, and was jointly discovered and filed by the two parties.
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On September 23, 2010, we entered into a license agreement for the worldwide, exclusive right to develop, make, have made, use, import, lease and sell, and offer for sale products that would otherwise infringe a
claim of the suite of patents and patent applications covering the composition of matter for eight individual lysin molecules for the treatment and prevention of diseases caused by gram-positive bacteria. The lysins in this suite have activity
against Group B
Streptococci
,
Staphylococcus aureus
,
Streptococcus pneumonia
,
Bacillus anthracis
,
Enterococcus faecalis
and
Enterococcus faecium
.
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In consideration for the licenses, we paid Rockefeller license initiation fees in cash and stock and may be required to pay an annual
maintenance fee, milestone payments and royalties on net sales from products to Rockefeller. We are allowed to grant sublicenses to third parties without prior approval, subject to certain conditions and the payment of a certain percentage of all
payments we receive from sublicensees.
Each license agreement terminates upon the later of (i) the expiration or abandonment of the
last licensed patent under the license agreement to expire or become abandoned, or (ii) 10 years after the first commercial sale of the first licensed product. Rockefeller may terminate any license agreement in the event of a breach of such
agreement by us or if we challenge the validity or enforceability of the underlying patent rights. We may terminate any license agreement at any time on 60 days notice.
License AgreementTrellis Bioscience LLC
On January 29, 2014, we entered into a license agreement with Trellis that gives us exclusive rights to all Trellis mAbs in the field of
influenza discovered from their CellSpot platform. Particularly, the license provides us with three fully human mAbs that bind, neutralize and protect animals from all strains of H1, H3 and B influenza, and that will also cross bind, neutralize and
protect animals from other seasonal or pandemic influenza strains that may arise (including H5N1 and H7N9). We have selected our three lead mAbs for the H1, H3, and B influenzas and are currently producing these antibodies at scale using
manufacturing-grade expression systems and performing
IND-enabling
studies.
In consideration for
the license, we paid Trellis licensing fees in cash and stock and may be required to make specified development and regulatory milestone payments and make additional payments upon the achievement of future sales and a royalty on net sales from
products to Trellis. We are allowed to grant sublicenses to third parties.
The license agreement terminates upon the earlier of
(i) our decision to terminate the agreement at will or for safety reasons, (ii) material breach by either party that is not cured within ninety (90) days, or (iii) either partys insolvency.
On August 14, 2014, we amended the license agreement to include research conducted pursuant to a government grant.
Collaborative Research AgreementsThe Rockefeller University
Beginning in October 2009, we entered into a research agreement with Rockefeller, which is now expired, where we provided funding for research
focused on producing and testing monoclonal antibodies against proteins
17
of
Staph aureus
. On October 24, 2011, we entered into a second research agreement with Rockefeller, where we provided funding for the research primarily to identify lysins, enzymes or
small molecules that will kill gram-negative bacteria, and to identify and characterize lysins from
Clostridia difficile
to be engineered into gut commensal bacteria. This agreement expired on October 24, 2016. On October 25, 2016, we
entered into a third research agreement with Rockefeller, where we provide funding for the identification of novel lysin therapeutic candidates that target Gram-negative pathogens. The research collaboration will focus on Gram-negative pathogens
such as
Pseudomonas aeruginosa, Escherichia coli,
and
Klebsiella
, including antibiotic-resistant strains.
Our current
agreement runs through October 24, 2019. Either party may terminate the agreement upon breach of the agreement, following 30 days written notice and failure to cure such breach. Following the expiration or termination of the agreement, each
party will have a
non-exclusive
license to use for internal research purposes all research results, including joint intellectual property. If Rockefeller or joint intellectual property develops from these
programs, we will have the
right-of-first
refusal to negotiate to acquire a royalty-bearing license to utilize such intellectual property for commercial purposes.
Competition
The pharmaceutical and
biotechnology industries are intensely competitive. While we believe that our technology and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical,
specialty pharmaceutical and biotechnology companies and academic and research organizations in developing therapies to treat diseases.
CF-301
is a
first-in-class
drug candidate and we believe will be among the first lysins to enter human clinical trials. We believe
there is currently no clinical competitor to
CF-301
as it was designed with at least six attributes that no single antibiotic possesses, including: (1) a novel mechanism of action, (2) specificity
for a target bacteria (only
Staph aureus
), (3) rapid speed of action, (4) activity across all drug-sensitive and drug-resistant strains of the target bacteria (including MRSA, VRSA and DRSA), (5) the ability to eradicate
biofilms, and (6) synergy with antibiotics.
Staph aureus
bacteremia is typically treated with oxacillin, or for MRSA strains, daptomycin and vancomycin. We do not see market competition with these drugs, as our strategy is to combine
CF-301
with these drugs to aim for superiority over any one of those drugs alone.
We are not aware of
any other lysins in clinical development under an IND in the United States, iNtRon Biotechnology Inc., a biotechnology company located in South Korea, completed a Phase 1 human clinical trial for
SAL-200,
an
endolysin-based drug candidate for multidrug-resistant
Staph aureus
infections. We will continue to monitor the advancements of
SAL-200
as data become available.
CF-404
is intended for the treatment of life-threatening seasonal and pandemic influenza infections.
We believe
CF-404
has competitive advantages in that it potentially addresses the short-comings of currently marketed products (Tamiflu, Relenza and Rapivab) and other products in development for the following
reasons: (1) it may not be prone to drug-resistance due to targeting conserved regions of the influenza virus, (2) it may provide for an increased
time-to-treat
window compared to Tamiflu, Relenza and Rapivab, which are indicated to be used within 48 hours of symptom onset, and (3) it may provide
complete coverage against all seasonal and most potential pandemic strains of human influenza without the need for annual reformulation, including influenza B.
CF-404
may directly or indirectly compete with other products already in development from F.
Hoffmann-La
Roche Ltd., Genentech, Inc., Johnson & Johnson, Inc., Theraclone Sciences, Inc., Toyama Chemical Co., Ltd., Romark Laboratories, L.C., Aviragen, Inc., Vectura Group plc, Far East
Bio-Tec
Co. Ltd, Visterra Inc., MedImmune LLC, Ansun Biopharma, Inc. and others with early stage product candidates.
Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved medicines than we do. We compete with companies that have products on the market or in
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development for the same indications as our product candidates. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being
concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical
trials. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety,
convenience, price and the availability of reimbursement from government and other third-party payors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that are safer, more effective,
have fewer or less severe side effects, are more convenient or are less expensive than any medicines that we may develop. Our competitors also may obtain FDA or other regulatory approval for their medicines 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.
Manufacturing
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to
rely, on third parties for the manufacture of our product candidates for preclinical or clinical manufacturing, testing, as well as for commercial manufacture of any products that we may commercialize. We employ the services of Fujifilm UK to supply
the drug substance for
CF-301.
We do not yet have contracts to produce a commercial supply of the drug substance for
CF-301;
however, we intend to pursue agreements with
Fujifilm UK to do so. We employ the services of Emergent BioSolutions to produce
CF-301
in its final vialed drug product form. We do not have contracts for the commercial supply of
CF-301.
We intend to pursue agreements with third party manufacturers regarding commercial supply of vialed drug product at an appropriate future time. We may choose to locate second fill finish third party
manufacturers to supply other world regions such as the European Union or Asia.
Sales, Marketing and Distribution
We do not currently have an organization for the sales, marketing and distribution of pharmaceutical products. We may rely on licensing and
co-promotion
agreements with strategic partners for the commercialization of our products in the United States and other territories. If we choose to build a commercial infrastructure to support marketing in the
United States, such commercial infrastructure could be expected to include a targeted sales force supported by sales management, internal sales support, an internal marketing group and distribution support. To develop the appropriate commercial
infrastructure internally, we would have to invest financial and management resources, some of which would have to be deployed prior to any confirmation that any of our other products will be approved.
Research and Development Expenses
We
have invested $22.1, $15.0 million and $8.9 million in research and development expenses for the years ended December 31, 2016, 2015 and 2014, respectively.
Government Regulation
The production,
distribution, and marketing of products employing our research and intellectual property or that we may license from third parties are subject to extensive governmental regulation in the United States and in other countries. In the United States,
our products will be regulated as biologics and subject to the Federal Food, Drug, and Cosmetic Act, as amended (the FDC Act), the Public Health Service Act, as amended (the PHSA) and the regulations of the FDA, as well as to
other federal, state, and local statutes and regulations. These laws, and similar laws outside the United States, govern the research, development, clinical and preclinical testing, manufacture, safety, effectiveness, approval, labeling,
distribution, sale, import, export, storage, record-
19
keeping, reporting, advertising, and promotion and marketing of our products. Product development and approval within this regulatory framework, if successful, will require the expenditure of
substantial resources and take years to achieve. Violations of regulatory requirements at any stage may result in various adverse consequences, including the FDAs and other health authorities delay in approving or refusal to approve a
product and may result in enforcement actions and administrative or judicial sanctions.
The following provides further information on
certain legal and regulatory requirements that have the potential to affect our operations and the future marketing of our products.
FDA Approval
Process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The FDC Act and other
federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting,
sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under the FDC Act, except the section of the FDC Act
which governs the approval of new drug applications (NDAs). Biological products are approved for marketing under provisions of PHSA, via a BLA. However, the application process and requirements for approval of BLAs are very similar to
those for NDAs, and biologics are associated with similar approval risks and costs as drugs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to
approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves
preclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug
for each indication for which FDA approval is sought. Satisfaction of FDA
pre-market
approval requirements typically takes many years and the actual time required may vary substantially based upon the type,
complexity, and novelty of the product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation, and
toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices. The
results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests,
such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.
A
30-day
waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this
30-day
period, the clinical trial proposed in the IND may begin.
Clinical trials involve the
administration of the investigational new drug or biologic to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in
compliance with good clinical practice (GCP), an international standard meant to protect the rights and health of healthy volunteers or patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as
(iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on healthy volunteers or patients in the U.S. and
subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA may order the temporary, or permanent,
discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA
20
requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an IRB
for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRBs requirements, or may impose other conditions.
Clinical trials to support NDAs or BLAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap.
In Phase 1, the initial introduction of the drug or biologic into healthy human subjects or patients, the product is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if
possible, early evidence of effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug or biologic for a particular indication, dosage tolerance, and optimum dosage, and to identify
common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and
safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug or biologic and to provide adequate information for the labeling of
the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug or biologic. A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances
where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious
outcome and confirmation of the result in a second trial would be practically or ethically impossible.
After completion of the required
clinical testing, an NDA or BLA is prepared and submitted to the FDA. FDA approval of the NDA or BLA is required before marketing of the product may begin in the United States. The NDA or BLA must include the results of all preclinical, clinical,
and other testing and a compilation of data relating to the products pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA or BLA is substantial. The submission of most NDAs and BLAs is additionally
subject to a substantial application user fee. For fiscal year 2017, the application user fee is $2,038,100. The manufacturer and/or sponsor under an approved NDA or BLA are also subject to annual product and establishment user fees, currently set
at $94,750 per product and $512,200 per establishment. These fees are typically adjusted annually.
The FDA has 60 days from its receipt
of an NDA or BLA to determine whether the application will be accepted for filing based on the agencys threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA
begins an
in-depth
review. The FDA has agreed to certain performance goals in the review of NDAs and BLAs. The FDA aims to review applications for standard review drug or biologic products within twelve months
of the submission of the application, and the goal is to review applications for priority review drugs or biologics in eight months of the date of submission. Priority review can be applied to applications for drugs or biologics that are intended to
treat a serious disease or condition and that, if approved, would provide a significant improvement in safety or effectiveness. The review process for both standard and priority review may be extended by the FDA for three additional months to
consider certain late-submitted information, or information intended to clarify information already provided in the submission.
The FDA
may also refer applications for novel drug or biologic products, or drug or biologic products that present difficult questions of safety or efficacy, to an advisory committeetypically a panel that includes clinicians and other expertsfor
review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA or BLA, the FDA
will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with current
good manufacturing practices (cGMPs) is satisfactory and the NDA or BLA contains data that provide substantial evidence that the drug or biologic is safe and effective in the indication studied.
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After the FDA evaluates the NDA or BLA and the manufacturing facilities, it issues either an
approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If,
or when, those deficiencies have been addressed to the FDAs satisfaction in a resubmission of the NDA or BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the
type of information included.
An approval letter authorizes commercial marketing of the drug or biologic with specific prescribing
information for specific indications. As a condition of NDA or BLA approval, the FDA may require a risk evaluation and mitigation strategy (REMS), to help ensure that the benefits of the drug or biologic outweigh the potential risks.
REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing,
dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, product approval may require
substantial post-approval testing and surveillance to monitor the products safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following
initial marketing.
Changes to some of the conditions established in an approved application, including changes in indications, labeling,
or manufacturing processes or facilities, require submission and FDA approval of a new NDA or BLA or NDA or BLA supplement before the change can be implemented. An NDA or BLA supplement for a new indication typically requires clinical data similar
to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA or BLA supplements as it does in reviewing NDAs or BLAs.
Post-Approval Requirements
Once an NDA or BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the
post-approval marketing and promotion of drugs and biologics, including standards and regulations for
direct-to-consumer
advertising,
off-label
promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs and biologics may be marketed only for the approved indications and in
accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic reports is required following
FDA approval of an NDA or BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the
distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biologic manufacturers and certain of their subcontractors are required
to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with
cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a
company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Fast Track Designation and Accelerated Approval
The FDA administers a number of programs to facilitate the development, and expedite the review, of drugs or biologics that are intended for
the treatment of serious or life-threatening diseases or conditions. For instance, a sponsor may seek the FDAs designation of its product candidate as a fast track product. Fast track products are those products intended for the
treatment of a serious or life-threatening disease or condition and which demonstrate the potential to address unmet medical needs for such disease or condition. Drugs that qualify as a qualified infectious disease product, or QIDP, under the
Generating Antibiotic Incentives Now, or GAIN Act, are also eligible for fast track designation.
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Under the fast track program, the sponsor of a new drug or biologic candidate may request that
the FDA designate the candidate for a specific indication as a fast track drug or biologic concurrent with, or after, the filing of the IND for the candidate. The FDA must determine if the drug or biologic candidate qualifies for fast track
designation within 60 days of receipt of the sponsors request. If fast track designation is obtained, the FDA may initiate review of sections of the marketing application before the application is complete. This rolling review is
available if the applicant provides and the FDA approves a schedule for the remaining information. However, the FDAs time period goal for reviewing an application does not begin until the last section of the NDA or BLA is submitted.
Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. In addition, a product candidate that receives fast track
designation is eligible for more frequent meetings with the FDA to discuss the products development plan and ensure collection of appropriate data needed to support approval and more frequent communications from FDA regarding such things as
the design of the proposed clinical trials and use of biomarkers, as applicable. In August 2015, the FDA granted fast track designation to
CF-301
for the treatment of
Staph aureus
bacteremia, including
endocarditis.
In some cases, a fast track product may be approved under the accelerated approval program, which means that the approval
may be made on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an
effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. In clinical trials, a surrogate endpoint is a
measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical
endpoints.
A drug or biologic candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including
the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw
the drug or biologic from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
Breakthrough Therapy Designation
The FDA is required to expedite the development and review of the application for approval of drugs that are intended to treat a serious or
life-threatening disease or condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Under the breakthrough therapy
program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate. The FDA must determine if
the drug candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsors request.
Pediatric Information
Under the Pediatric Research Equity Act (PREA), NDAs or BLAs or supplements to NDAs or BLAs must contain data to assess the safety
and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial
waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.
Additional Controls for Biologics
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for
products whose attributes cannot be precisely defined. The PHSA also
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provides authority to the FDA to immediately suspend licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical
public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases in the United States and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing
process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to
the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturers tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some
products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological
products. As with drugs, after approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.
Biosimilars
The
Biologics Price Competition and Innovation Act of 2009 (BPCIA), created an abbreviated approval pathway for biological products shown to be highly similar to or interchangeable with an
FDA-licensed
reference biological product. Biosimilarity sufficient to reference a prior
FDA-approved
product requires that there be no differences in conditions of use, route of administration, dosage form, and strength,
and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown through analytical studies, animal studies, and at least one clinical study,
absent a waiver by the Secretary. A biosimilar product may be deemed interchangeable with a prior approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same clinical results as the reference product
and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the
reference biologic. To date, only four biosimilars have been licensed under the BPCIA, though no interchangeable products have been approved under the BPCIA to date. Complexities associated with the larger, and often more complex, structures of
biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation which are still being evaluated by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the
reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this
12-year
period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that companys own preclinical
and clinical data from adequate and well-controlled trials to demonstrate the safety, and efficacy of their product. The first biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the
reference product may also enjoy a period of exclusivity. At this juncture, it is unclear whether products deemed interchangeable by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of
FDA-regulated
products, including drugs, are required to register and
disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration.
Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results
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of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the
progress of development programs.
Other Domestic Regulatory Requirements
In the United States, the research, manufacturing, distribution, sale, and promotion of drug and biological products are potentially subject to
regulation by various federal, state, and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services (e.g., the Office of the
Inspector General), the United States Department of Justice and individual United States Attorneys offices within the Department of Justice, and state and local governments. For example, sales, marketing, and scientific/educational grant
programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, the privacy and security provisions of the Health Insurance Portability and Accountability Act, or HIPAA, as amended by the
Health Information Technology and Clinical Health Act, or HITECH, and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and
the Veterans Health Care Act of 1992, each as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also
potentially subject to federal and state consumer protection, unfair competition, and other laws, and violations of these laws may result in imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal
healthcare programs.
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal
laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program Anti-Kickback Statute prohibits, among
other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under
Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. In
addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Violations of the Anti-Kickback Statute are punishable by imprisonment, criminal fines, civil
monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions,
the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal
government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they
report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the
product. In addition, certain marketing practices, including
off-label
promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal
anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
HIPAA also created new 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, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare
offense, and knowingly and willfully falsifying, concealing or
25
covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to
the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposes new reporting requirements on drug manufacturers for payments made
by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of
$165,786 per year (or up to an aggregate of $1,105,241 per year for knowing failures), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual
submission. Drug manufacturers are required to submit reports to the government by the 90th day of each calendar year. Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices
and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.
We may also be subject to data
privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013,
imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAAs privacy and security standards directly applicable to business
associates, defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also
increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal
courts to enforce the federal HIPAA laws and seek attorneys fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which
differ from each other in significant ways, thus complicating compliance efforts.
Moreover, ContraFect is now, and in the future may
become, subject to additional federal, state, and local laws, regulations, and policies relating to safe working conditions, laboratory practices, the experimental use of animals, and/or the use, storage, handling, transportation, and disposal of
human tissue, waste, and hazardous substances, including radioactive and toxic materials and infectious disease agents used in conjunction with our research work.
Physician Drug Samples
As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The
Prescription Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs unless the state licensing program
meets certain federal guidelines that include minimum standards for storage, handling and record keeping. In addition, the PDMA sets forth civil and criminal penalties for violations.
New Legislation and Regulations
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing
the testing, approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and
our products. It is impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be.
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For example, in December 2016, the 21st Century Cures act, or Cures Act, was signed into law. The
Cures Act, among other things, is intended to modernize the regulation of drugs and biologics and spur innovation, but its ultimate implementation remains unclear. Among other things, the Cures Act provides a new limited population
approval pathway for antibacterial and antifungal drugs intended to treat serious or life-threatening infections.
Foreign
Regulation
In addition to regulations in the United States, we may become subject to widely varying foreign regulations, which may
be quite different from those of the FDA, governing clinical trials, manufacture, product registration and approval, and pharmaceutical sales. Whether or not FDA approval has been obtained, we must obtain a separate approval for a product by the
comparable regulatory authorities of foreign countries prior to the commencement of product marketing in these countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.
In certain countries, regulatory authorities also establish pricing and reimbursement criteria. In addition, under current United States law, there are restrictions on the export of products not approved by the FDA, depending on the country involved
and the status of the product in that country.
European Medicines Agency (EMA) Small and Medium Enterprise (SME) Designation
The SME designation was established by EMA to promote innovation and the development of new medicinal products by smaller
companies. Companies with SME status are eligible to receive financial incentives as well as administrative and regulatory support through national and regional level programs. These benefits include access to dedicated EMA personnel during the
clinical development process as well as reductions in fees associated with regulatory procedures such as Scientific Advice, Marketing Authorizations, and inspections. Companies with SME status are also eligible for early application (prior to proof
of concept) to the priority medicines (PRIME) scheme. PRIME provides enhanced support for the development of medicines that target an unmet medical need. In August 2016, the EMA granted SME designation to the Company.
Pharmaceutical Coverage, Pricing and Reimbursement
Our ability to commercialize our product candidates successfully will depend in part on the extent to which the United States and foreign
governmental authorities, private health insurers and other third-party payors establish appropriate coverage and reimbursement levels for our product candidates and related treatments. In many of the markets where we would commercialize a product
following regulatory approval, the prices of pharmaceutical products are subject to direct price controls (by law) and to drug reimbursement programs with varying price control mechanisms. Public and private health care payors control costs and
influence drug pricing through a variety of mechanisms, including through negotiating discounts with the manufacturers and through the use of tiered formularies and other mechanisms that provide preferential access to certain drugs over others
within a therapeutic class. Payors also set other criteria to govern the uses of a drug that will be deemed medically appropriate and therefore reimbursed or otherwise covered. In particular, many public and private health care payors limit
reimbursement and coverage to the uses of a drug that are either approved by the FDA or that are supported by other appropriate evidence (for example, published medical literature) and appear in a recognized drug compendium. Drug compendia are
publications that summarize the available medical evidence for particular drug products and identify which uses of a drug are supported or not supported by the available evidence, whether or not such uses have been approved by the FDA.
Healthcare Reform
In the United States,
there have been a number of legislative and regulatory changes to the healthcare system in ways that could affect our future revenues and profitability and the future revenues and profitability of our potential customers. For example, the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (the MMA) revised the payment methodologies for many drugs, which resulted in reduced reimbursement to providers. Additionally, the MMA created an outpatient prescription drug
benefit which became effective on January 1, 2006. This benefit is administered by private pharmacy benefit managers and other managed care organizations and is putting increased pressure on the pharmaceutical industry to reduce prices.
27
In March 2010, the Affordable Care Act was passed, which substantially changes the way health
care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars,
addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by
manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and 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.
We expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain
provisions of, the Affordable Care Act. In January 2017, the House and Senate passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the Affordable Care Act and permits such legislation
to pass with a majority vote in the Senate. The President has also recently issued an executive order in which he stated that it is his administrations policy to seek the prompt repeal of the Affordable Care Act and directed executive
departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the burdensome provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertainty with respect to the
impact the Presidents administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were
authorized by the Affordable Care Act.
In addition, other legislative changes have been proposed and adopted in the United States since
the Affordable Care Act was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislations automatic reduction to several government programs. This includes aggregate reductions of
Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, due to subsequent legislative amendments to the statute, and will remain in effect through 2025 unless additional Congressional action is taken. On
January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and
increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently there has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their
marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies. For example, the Cures Act changes the reimbursement methodology for
infusion drugs and biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs.
If additional state and federal healthcare reform measures are adopted in the future, any of which could limit the amounts that federal and
state governments will pay for healthcare products and services, we could expect such measures to result in reduced demand for our product candidates or additional pricing pressures.
Segment Reporting
We are engaged solely
in the discovery and development of therapeutic protein and antibody products for life-threatening, drug-resistant infectious diseases. Accordingly, we have determined that we operate in one operating segment.
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Employees
As of March 7, 2017, we had 23 full-time employees, including 11 employees with advanced degrees. Of these full-time employees, 11
employees are engaged in research and development activities. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
Our Corporate Information
We were
incorporated under the laws of the State of Delaware in March 2008. Our executive offices are located at 28 Wells Avenue, 3rd Floor, Yonkers, NY 10701, and our telephone number is
(914) 207-2300.
Our
website address is www.contrafect.com. References to our website are inactive textual references only and the content of our website should not be deemed incorporated by reference into this Form
10-K.
Available Information
Our Annual Reports
on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K
and any amendments to these reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website located at www.contrafect.com as soon as reasonably practicable after they are filed with or furnished to the
Securities and Exchange Commission (the SEC). These reports are also available at the SECs Internet website at www.sec.gov. The public may also read and copy any materials filed with the SEC at the SECs Public Reference Room
at 100 F Street, N.E., Washington D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
A
copy of our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Whistleblower Policy and the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are posted on our website,
www.contrafect.com, under Corporate Governance and are available in print to any person who requests copies by contacting us by calling
(914) 207-2300
or by writing to ContraFect Corporation,
Attn: General Counsel, 28 Wells Avenue, 3rd Floor, Yonkers, NY 10701.
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Item 1A. Risk Factors
You should carefully consider the following risk factors, as well as the other information in this report, and in our other public filings.
Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the
Companys actual results of operations and financial condition to vary materially from past, or from anticipated future, results of operations and financial condition. Any of these factors, in whole or in part, could materially and adversely
affect the Companys business, financial condition, results of operations and common stock price. Other factors may exist that we do not consider significant based on information that is currently available. In addition, new risks may emerge at
any time, and we cannot predict those risks or estimate the extent to which they may affect us. Past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to
anticipate results or trends in future periods.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses since our inception and do not expect to generate revenue for at least the next several years. We expect to incur
losses for at least the next several years and may never achieve or maintain profitability.
We are a clinical-stage
biopharmaceutical company with no approved products, and we have not generated any revenue from product sales to date. To date, we have focused exclusively on developing our product candidates and have funded our operations primarily through the
sale of common stock and warrants, convertible preferred stock and issuances of convertible debt to our investors. We have not yet demonstrated an ability to overcome many of the risks and uncertainties frequently encountered by companies in the
pharmaceutical industry, and you should analyze our company in light of such risks and uncertainties.
Since inception, we have incurred
significant losses. Our net losses were $28.5 million and $25.1 million for the years ended December 31, 2016 and 2015, respectively. We have devoted substantially all of our efforts to research and development. We expect to continue
to incur significant expenses and increasing operating losses for at least the next several years. The net losses we incur may fluctuate significantly from quarter to quarter and year to year.
We anticipate that our expenses will increase substantially as clinical trials for any of our product candidates commence or progress. Our
expenses will increase if and as we:
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seek to discover or develop additional product candidates;
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seek marketing approvals for any of our product candidates that successfully complete clinical trials;
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in-license
or acquire other products and technologies;
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maintain, expand and protect our intellectual property portfolio;
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hire additional clinical, quality control and scientific personnel; and
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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.
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Our recurring losses from operations could raise substantial doubt regarding our ability to continue as a going concern.
We currently operate with limited resources. We believe that our cash, cash equivalents and marketable securities balance of
$35.2 million as of December 31, 2016 will be sufficient to fund our projected operations
30
into the second quarter of 2018. Depending on the level of cash used in or generated from operations, additional capital may be required to sustain operations. We have incurred significant losses
since our inception and have never generated revenue or profit, and it is possible we will never generate revenue or profit. Meaningful revenues will likely not be available until and unless any future product candidates are approved by the FDA or
comparable regulatory agencies in other countries and successfully marketed, either by us or a partner, an outcome which may not occur. There is no assurance that other financing will be available when needed to allow us to continue as a going
concern. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. If we are unable to continue as a going concern, you
could lose all or part of your investment in our Company.
We currently have no source of product revenue and have not yet generated any revenues
from product sales.
To date, we have not completed the development of any products and have not generated any revenues from
product sales. Our ability to generate revenue from product sales and achieve profitability will depend upon our ability to successfully commercialize products, including any of our current product candidates, or other product candidates that we may
in-license
or acquire in the future. Even if we are able to successfully achieve regulatory approval for these product candidates, we may never generate revenues that are significant enough to achieve
profitability. Our ability to generate revenue from product sales from our current or future product candidates also depends on a number of additional factors, including our ability to:
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successfully complete development activities, including the necessary clinical trials;
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complete and submit biologics license applications (BLAs) to the FDA, and obtain regulatory approval for indications for which there is a commercial market;
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complete and submit applications to, and obtain approval from, foreign regulatory authorities;
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set a commercially viable price for our products;
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develop a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves in the markets which we choose to commercialize on our own;
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find suitable distribution partners to help us market, sell and distribute our products in other markets; and
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obtain coverage and adequate reimbursement from third parties, including government and private payors.
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In addition, because of the numerous risks and uncertainties associated with product development, including that any of our product candidates
may not advance through development or achieve the desired endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we
are able to complete the development and regulatory process for any product candidates, we anticipate incurring significant costs associated with commercializing these products.
Even if we are able to generate revenues from the sale of our products, we may not become profitable. If we do achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital to expand our business or continue our
operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We have a need for substantial
additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of
CF-301
and preclinical development of
CF-404,
and, possibly, acquire and develop
31
new product candidates or technologies. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when
needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
Our future capital requirements will depend on many factors, including:
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the complexity, timing and results of our clinical trials of our product candidates;
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the costs, timing and outcome of regulatory review of our product candidates;
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the costs of developing our product candidates for additional indications;
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our ability to establish scientific or business collaborations on favorable terms, if at all;
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the costs of preparing, filing and prosecuting patent or other intellectual property applications, maintaining and protecting our intellectual property rights and defending against intellectual property-related claims;
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the extent to which we
in-license
or acquire other product candidates or technologies; and
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the scope, progress, results and costs of product development for our product candidates.
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Conducting clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the
necessary data or results to obtain marketing approval and achieve product sales. In addition, if approved,
CF-301,
CF-404
or any other product candidate that we develop
may not achieve commercial success. Accordingly, we may need to continue to rely on additional financing to achieve our business objectives. In addition, we may seek additional capital due to favorable market conditions or strategic considerations,
even if we believe that we have sufficient funds for our current or future operating plans. Adequate additional financing may not be available to us on acceptable terms, or at all.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or
product candidates.
Until such time, if ever, as we can generate substantial product revenues, we may finance our cash needs
through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt
financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market
ourselves.
Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future
viability.
We were incorporated in 2008 and commenced active research operations in 2010. Our operations to date have been
limited to organizing and staffing our company, business planning, raising capital and acquiring and developing
CF-301,
CF-404
and other potential product candidates. We
have not yet demonstrated our ability to successfully complete Phase 2 or Phase 3 clinical trials, obtain marketing approval, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct sales and marketing
activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
32
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other
known and unknown factors. We will need to transition from a company with a product development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.
The timing of the milestone and royalty payments we are required to make under certain agreements, including to Rockefeller and Trellis, is uncertain
and could adversely affect our cash flows and results of operations.
We are party to certain agreements, including with
Rockefeller and Trellis, pursuant to which we have acquired licenses to certain patents and patent applications and other intellectual property related to a series of compounds, including
CF-301
and
CF-404,
to develop and commercialize therapeutics. Under our agreements with Rockefeller and Trellis, we have obligations to achieve diligence minimums and to make payments upon achievement of specified development
and regulatory milestones. We will also make additional payments upon the achievement of future sales milestones and for royalties on future net sales.
The timing of milestone payments under our licenses and sponsored research agreements is subject to factors relating to the clinical and
regulatory development and commercialization of products, many of which are beyond our control. We may become obligated to make a milestone payment when we do not have the cash on hand to make such payment, which could require us to delay our
clinical trials, curtail our operations, scale back our commercialization and marketing efforts or seek funds to meet these obligations on terms unfavorable to us.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the Code), if a corporation
undergoes an ownership change (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporations ability to use its
pre-change
net
operating loss carryforwards and other
pre-change
tax attributes to offset its post-change income may be limited. As a result of our past transactions, we may have experienced an ownership change.
At this time, we have not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since our formation, due to the costs and complexities
associated with such a study. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. Thus, our ability to utilize carryforwards of our net operating losses and other tax attributes to reduce
future tax liabilities may be substantially restricted. Further, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, we may not be able to take full advantage of these carryforwards for
federal or state tax purposes. As of December 31, 2016, we had federal and state net operating loss carryforwards of approximately $120.5 million and $125.3 million, respectively, and federal research and development credits of
approximately $1.8 million, the use of which could be limited or eliminated by virtue of one or more ownership changes.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We are heavily dependent on the success of our leading product candidates,
CF-301
and
CF-404.
The approval process of the FDA and comparable foreign regulatory authorities is lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for
CF-301,
CF-404
or any other product candidate our business will be substantially harmed.
Our near-term business prospects are substantially dependent on our ability to develop and commercialize
CF-301
and
CF-404.
We cannot market or sell
CF-301,
CF-404
or any other product candidate
in the United States without FDA approval, but this approval, if ever issued, is at least several years away. To commercialize
CF-301,
CF-404
or any other product
candidate outside of the United States, we will need applicable foreign regulatory approvals. The clinical development of
CF-301,
CF-404
or any other product candidate
is susceptible
33
to the inherent risks of any drug development program, including a failure to achieve efficacy across a broad population of patients, the potential occurrence of severe adverse events and the
risks that the FDA or any applicable foreign regulatory authority will determine that a drug product is not approvable.
The process
required to obtain approval for commercialization from the FDA and similar foreign authorities is unpredictable, and typically takes many years even after the commencement of clinical trials, depending on numerous factors. In addition, approval
policies, regulations, or the type and amount of clinical data necessary to obtain regulatory approval may change during the course of a products clinical development. We may fail to obtain regulatory approval for
CF-301,
CF-404
or any other product candidate for many reasons, including the following:
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we may not be able to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that
CF-301,
CF-404
or any
other product candidate is safe and effective for any indication;
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the results of clinical trials may not meet the level of clinical or statistical significance required for approval by the FDA or comparable foreign regulatory authorities;
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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
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we may not be able to demonstrate that
CF-301,
CF-404
or any other product candidates clinical and other benefits outweigh its safety
risks;
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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
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the FDA or comparable foreign regulatory authorities may identify deficiencies in data generated at our clinical trial sites;
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the FDA or comparable foreign regulatory authorities may identify deficiencies in the clinical practices of the third-party contract research organizations (CROs) we use for clinical trials; and
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the FDA or comparable foreign regulatory authorities may identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators enter into agreements for
clinical and commercial supplies.
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This lengthy approval process as well as the unpredictability of future clinical trial
results may prevent us from obtaining regulatory approval to market
CF-301,
CF-404
or any other product candidate, which would significantly harm our business.
If clinical trials of
CF-301,
CF-404
or any other product candidate that
we develop fail to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States or do not otherwise produce positive results, we may incur additional costs or experience delays in
completing, or ultimately be unable to complete, the development and commercialization of
CF-301,
CF-404
or any other product candidate.
Before obtaining marketing approval from regulatory authorities for the sale of
CF-301,
CF-404
or any other product candidate, we must complete preclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is
expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials
may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses,
and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
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We may experience numerous unforeseen events during, or as a result of, clinical trials that
could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
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clinical trials of our product candidates may produce negative or inconclusive results, or significant adverse side effects, and we may decide, or regulators may require us, to conduct additional clinical trials or
abandon product development programs;
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these
clinical trials at a higher rate than we anticipate;
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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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regulators or institutional review boards (IRBs) may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
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we may voluntarily suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;
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regulators or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being
exposed to unacceptable health risks;
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the cost of clinical trials of our product candidates may be greater than we anticipate;
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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials.
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If we are required to conduct additional clinical trials or other testing of
CF-301,
CF-404
or any other product candidate that we develop beyond those that we contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these
trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval or sales revenues for our product candidates;
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not obtain marketing approval at all;
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
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be subject to additional post-marketing testing requirements; or
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have the product removed from the market after obtaining marketing approval.
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Our product
development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant
clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or may allow our competitors to bring products to market before we do and may impair our ability to
successfully commercialize our product candidates and may harm our business and results of operations.
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We may be required to suspend or discontinue clinical trials due to adverse side effects or other safety
risks that could preclude approval of
CF-301,
CF-404
or any other product candidates.
Our clinical trials may be suspended at any time for a number of reasons. For example, it is possible that exposure to
CF-301
could result in adverse clinical events such as localized inflammation in the region surrounding blood vessels, or having a hypersensitivity reaction, such as serum sickness or anaphylaxis. A clinical trial
may be prevented from commencing or may be suspended or terminated by us, our collaborators, IRBs, the FDA or other regulatory authorities due to the risks of or occurrence of such adverse events, an unacceptable safety risk to participants, a
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, presentation of unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the investigational drug,
changes in governmental regulations or administrative actions, lack of adequate funding to continue the clinical trial, or negative or equivocal findings of the data safety monitoring board or IRBs for a clinical trial. We may voluntarily suspend or
terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants. If we elect or are forced to suspend or terminate any clinical trial of any product candidates that we develop, the commercial prospects
of such product candidates will be harmed and our ability to generate product revenues, if at all, from any of these product candidates will be delayed or eliminated. Any of these occurrences may significantly harm our business.
Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize, delay or prevent
our ability to obtain regulatory approval and commence product sales as currently contemplated.
We may experience delays in
clinical trials of our product candidates. Our planned clinical trials might not begin on time, might need to be redesigned, might not enroll a sufficient number of patients or might not be completed on schedule, if at all. Clinical trials can be
delayed for a variety of reasons, including the following:
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imposition of a clinical hold by the FDA or other regulatory authorities;
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delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
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delays in recruiting suitable patients to participate in a trial;
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delays in having patients complete participation in a trial or return for post-treatment
follow-up;
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clinical sites dropping out of a trial to the detriment of enrollment;
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adverse side effects in patient populations;
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time required to add new sites;
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delays resulting from negative or equivocal findings of the data safety monitoring board for a trial;
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delays in completing, or as a result of findings from, preclinical studies; or
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delays in developing adequate processes for manufacture of, or formulations for, sufficient supplies of clinical trial materials. For example, our contract manufacturer recently produced a lot of CF-301 investigational
drug product that did not meet manufacturing release specifications, resulting in the delay of our Phase 2 study.
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Patient
enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design
of the clinical trial, competing clinical trials and clinicians and patients perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for
the indications we are investigating. Any of these delays in completing our clinical trials could increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenues.
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We are significantly dependent on our license agreements with Rockefeller that relate to
CF-301.
Under our various license agreements with Rockefeller, we are obligated to use our
diligent efforts to develop and commercialize licensed products, including
CF-301.
Rockefeller may terminate the agreement in the event of our breach of the terms of the license agreements. In the event of
such termination, Rockefeller has the right to retain its license and other rights under the agreement, subject to continuing royalties and other obligations. Our breach of the agreement, including
non-payment
of any milestone payment, and Rockefellers subsequent termination of the agreement, could result in the loss of our rights to develop and commercialize
CF-301,
which would seriously harm our ability to
generate revenues or achieve profitability.
We rely on CROs to conduct our preclinical studies and will rely on CROs to conduct our clinical
trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of
CF-301,
CF-404
or any other product candidates.
We have
relied and will continue to rely on CROs for the execution of our preclinical studies and to recruit patients and monitor and manage data for our clinical programs for
CF-301,
CF-404
or any other product candidate. We control only certain aspects of our CROs activities, but we are responsible for ensuring that each of our studies is conducted in accordance with the applicable
protocol and legal, regulatory and scientific standards. Our reliance on the CROs does not relieve us of these regulatory responsibilities. We and our CROs are required to comply with the FDAs regulations and current good clinical practices
(GCPs), which is an international guideline meant to protect the rights and health of clinical trial subjects. The FDA enforces its regulations and GCPs through periodic inspections of trial sponsors, principal investigators and clinical
trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA may require us to perform additional clinical trials before approving our product
candidates. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs. In addition, to evaluate the safety and effectiveness of
CF-301,
CF-404
or any other product candidate to a statistically significant degree, our clinical trials will require an adequately large number of test subjects. Any clinical trial that a CRO conducts abroad on our behalf
is subject to similar regulation. Accordingly, if our CROs fail to comply with these regulations or recruit a sufficient number of patients, we may have to repeat clinical trials, which would delay the regulatory approval process.
In addition, our CROs are not our employees and we cannot control whether or not they devote sufficient time and resources to our
non-clinical,
preclinical or clinical programs. Our CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug
development activities, which could impede their ability to devote appropriate time to our clinical programs. If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced,
or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we
may not be able to obtain regulatory approval for or successfully commercialize
CF-301,
CF-404
or any other product candidate that we seek to develop. As a result, our
financial results and the commercial prospects for
CF-301,
CF-404
or any other product candidate that we seek to develop would be harmed, our costs could increase and
our ability to generate revenues could be delayed or ended.
We have no experience as a company in bringing a drug to regulatory approval.
As a company, we have never obtained regulatory approval for, or commercialized, a drug or biologic. It is possible that the FDA
may refuse to accept any or all of our planned BLAs for substantive review or may conclude after review of our data that our application is insufficient to obtain regulatory approval of
CF-301,
CF-404
or any other product candidate. If the FDA does not accept or approve any or all of our planned BLAs, it may require that we conduct additional preclinical, clinical or manufacturing validation studies, which
may be
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costly, and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA required studies, approval of any BLA or application that we submit may
be significantly delayed, possibly for several years, or may require us to expend more resources than we have available. Any delay in obtaining, or an inability to obtain, regulatory approvals would prevent us from meeting our timelines for
commercializing
CF-301,
CF-404
or any other product candidate, generating revenues and achieving and sustaining profitability.
Even if the FDA approves
CF-301,
CF-404
or any other product candidate,
adverse effects discovered after approval could adversely affect our markets.
If we obtain regulatory approval for
CF-301,
CF-404
or any other product candidate that we develop, and we or others later discover that our products cause adverse effects, a number of potentially significant
negative consequences could result, including:
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regulatory authorities may withdraw their approval of the product;
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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications or imposition of a risk management strategy;
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we may be required to change the way the product is administered, conduct additional clinical studies or restrict the distribution of the product;
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we could be sued and held liable for harm caused to patients and our liability insurance may not adequately cover those claims; and
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our reputation may suffer.
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Any of these events could prevent us from maintaining market
acceptance of the affected product candidate and could substantially increase the costs of, or prevent altogether, the commercialization of our product candidates.
There are underlying risks associated with the manufacture of our product candidates, which could include cost overruns, new impurities, difficulties in
process or formulation development, scaling up or reproducing manufacturing processes and lack of timely availability of raw materials.
We do not currently have nor do we plan to build the infrastructure or capability internally to manufacture
CF-301,
CF-404
or any other product candidates.
We employ
the services of Fujifilm Diosynth Biotechnologies UK LTD (Fujifilm UK) to supply the active pharmaceutical ingredient for
CF-301
and Fujifilm Diosynth Biotechnologies U.S.A., Inc, to supply the
active pharmaceutical ingredient for
CF-404.
We have not yet manufactured supplies for late phase human clinical trials, scaled up the process for manufacture of such supplies, validated the processes, or
contractually secured our commercial supplies.
We employ the services of Emergent BioSolutions to produce
CF-301
in its final vialed drug product form. We do not have contracts for the commercial supply of
CF-301
drug product.
We intend to pursue agreements with third-party manufacturers regarding commercial supply at an appropriate future time. We intend to locate
second fill finish third-party manufacturers to supply other world regions such as the European Union or Asia.
Late stage process
development activities, including manufacturing process scale up and validation of the bulk drug substance, pose inherent risks that may be greater for biological products than for small molecules. The process will undergo scale up from the current
clinical process and then be repeated under protocol successfully three times for validation.
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In addition, regulatory requirements could pose barriers to the manufacture of our active
pharmaceutical ingredient and finished drug product for our product candidates. Our third-party manufacturers are required to comply with current good manufacturing practices (cGMPs). As a result, the manufacturing facilities and
processes used by Fujifilm UK and any of our future manufacturers must pass inspection by the FDA as part of our BLA review and before approval of the applicable product candidate. Similar regulations apply to manufacturers of our products for use
or sale in foreign countries. If our manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, we will not be able to
secure the applicable approval for our product candidates. If these facilities are not deemed compliant with cGMPs for the commercial manufacture of our product candidates, we may need to find alternative manufacturing facilities, which would result
in significant delays of up to several years in obtaining approval. In addition, our manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and
similar regulatory requirements.
If Fujifilm UK, or any alternate supplier of active pharmaceutical ingredient, or Emergent BioSolutions,
or any alternate supplier of finished drug product for our product candidates experiences any significant difficulties in its respective manufacturing processes, does not comply with the terms of its agreement with us or does not devote sufficient
time, energy and care to providing our manufacturing needs, we could experience significant interruptions in the supply of our product candidates, which could impair our ability to supply our product candidates at the levels required for our
clinical trials and commercialization and prevent or delay its successful development and commercialization. For example, a lot of the CF-301 investigational drug product did not meet manufacturing release specifications, resulting in the delay of
our Phase 2 study.
Developments by competitors, many of which have greater financial and other resources than we do, may render our products or
technologies obsolete or
non-competitive.
The pharmaceutical and biotechnology industries
are intensely competitive. We compete directly and indirectly with other pharmaceutical companies, biotechnology companies and academic and research organizations in developing therapies to treat diseases. Smaller or early-stage companies may also
prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and
development staff and experienced marketing and manufacturing organizations and well-established sales forces. We compete with companies that have products on the market or in development for the same indications as our product candidates. We may
also compete with organizations that are developing similar technology platforms. Competitors may develop more effective, more affordable or more convenient products or may achieve earlier patent protection or commercialization of their products.
These competing products may render our product candidates obsolete or limit our ability to generate revenue from our product candidates. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources
being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in
developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or less costly than
CF-301,
CF-404
and our other product candidates.
The level of commercial success of
CF-301,
CF-404
and any other
product candidates that we develop will depend upon attaining significant market acceptance of these products among physicians and payors.
Even if
CF-301,
CF-404
or any other product candidates that we
develop is approved by the appropriate regulatory authorities for marketing and sale, physicians may not prescribe the approved product. Market acceptance of
CF-301,
CF-404
and any other product candidate that we develop by physicians, patients and payors will depend on a number of factors, many of which are beyond our control, including:
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the indications for which the product is approved;
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acceptance by physicians and payors of each product as a safe and effective treatment;
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the availability, efficacy and cost of competitive drugs;
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the effectiveness of our or any third-party partners sales force and marketing efforts;
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the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations;
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whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;
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the availability of adequate reimbursement by third parties, such as insurance companies and other health care payors, and/or by government health care programs, including Medicare and Medicaid;
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limitations or warnings contained in a products
FDA-approved
labeling; and
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prevalence and severity of adverse side effects.
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Even if the medical community accepts that
our product candidates are safe and efficacious for their approved indications, physicians may not immediately be receptive to the use or may be slow to adopt our product candidates as accepted treatments for their approved indications. While we
believe our product candidates may demonstrate significant advantages in clinical studies, we cannot assure you that labeling approved by the FDA will permit us to promote these advantages. In addition, our efforts to educate the medical community
and third-party payors on the benefits of any product candidates that we develop may require significant resources and may never be successful.
Coverage and reimbursement may not be available for
CF-301,
CF-404
or
any other product candidates that we develop, which could make it difficult for us to sell our products profitably.
Market
acceptance and sales of
CF-301,
CF-404
or any other product candidate that we develop will depend on coverage and reimbursement policies and may be affected by health
care reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. We cannot be sure that reimbursement
will be available for
CF-301,
CF-404
or any other product candidate that we develop. Also, we cannot be sure that the amount of reimbursement available, if any, will not
reduce the demand for, or the price of, our products. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize
CF-301,
CF-404
or any other product candidate that we develop.
In both the United States and some foreign
jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. In the United States, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act (MMA), changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by those
covered by Medicare under a new Part D and introduced a new reimbursement methodology based on average sales prices for Medicare Part B physician-administered drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to
use formularies whereby they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to
contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could seriously harm our business. While the MMA applies only to
drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and therefore any reduction in Medicare reimbursement may result in a similar
reduction in payments from private payors.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act (collectively, the Affordable Care Act), became law in the United States. The
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goal of the Affordable Care Act is to reduce the cost of health care and substantially change the way health care is financed by both governmental and private insurers. The Affordable Care Act,
among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees on
manufacturers of certain branded prescription drugs, required manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D and promoted programs that increase the federal governments comparative
effectiveness research, which will impact existing government healthcare programs and will result in the development of new programs. An expansion in the governments role in the United States healthcare industry may further lower rates of
reimbursement for pharmaceutical products.
We expect that the new presidential administration and U.S. Congress will seek to modify,
repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. In January 2017, the House and Senate passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the
Affordable Care Act and permits such legislation to pass with a majority vote in the Senate. President Trump has also recently issued an executive order in which he stated that it is his administrations policy to seek the prompt repeal of the
Affordable Care Act and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the burdensome provisions of the Affordable Care Act to the maximum extent permitted by law. There is
still uncertainty with respect to the impact President Trumps administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items
and services covered by plans that were authorized by the Affordable Care Act. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.
Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. On August 2, 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years
2013 through 2021, was unable to reach required goals, thereby triggering the legislations automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which
went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed
into law, or the ATRA, which, among other things, further reduced Medicare payments to several providers. Recently there has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products,
which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies. For example, the Cures Act changes the reimbursement methodology for infusion drugs and
biologics furnished through durable medical equipment in an attempt to remedy over- and underpayment of certain drugs.
While we cannot
predict the impact these new laws will have in general or on our business specifically, they may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of
CF-301
or any future products.
We expect to experience pricing pressures in connection with the
sale of
CF-301,
CF-404
and any other product candidate that we develop, due to the trend toward managed health care, the increasing influence of health maintenance
organizations and additional legislative proposals. If we fail to successfully secure and maintain coverage and reimbursement for our products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our
products and our business will be harmed.
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Even if we obtain FDA approval of
CF-301,
CF-404
or any other product candidate, we may never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.
In order to market
CF-301,
CF-404
or any other products
outside of the United States, we must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other
countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional
administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory
requirements can vary widely from country to country and satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in the
United States or any foreign country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in the United States or any foreign country and we do not have
experience as a company in obtaining regulatory approval in international markets.
We currently have no marketing and sales organization and have
no experience in marketing drug products. If we are unable to establish our own marketing and sales capabilities, or enter into agreements with third parties, to market and sell our products after they are approved, we may not be able to generate
revenues.
We do not have the capabilities to market, sell and distribute any of our drug products. In order to commercialize any
products, we must develop these capabilities on our own or make arrangements with third parties for the marketing, sales and distribution of our products. The establishment and development of our own sales force would be expensive and time consuming
and could delay any product launch, and we cannot be certain that we would be able to successfully develop this capability. As a result, we may seek one or more third parties to handle some or all of the sales, marketing or distribution for
CF-301,
CF-404
or any other product candidate in the United States or elsewhere. However, we may not be able to enter into arrangements with third parties to sell
CF-301,
CF-404
or any other product candidate on favorable terms or at all. In the event we are unable to develop our own marketing and sales force or collaborate with a
third-party marketing and sales organization, we would not be able to commercialize
CF-301,
CF-404
or any other product candidate that we develop, which would negatively
impact our ability to generate product revenues. Further, whether we commercialize products on our own or rely on a third party to do so, our ability to generate revenue will be dependent on the effectiveness of the sales force. In addition, to the
extent we rely on third parties to commercialize our approved products, we may likely receive less revenues or profits than if we commercialized these products ourselves.
We may form or seek strategic alliances in the future, and we may not realize the benefits of such alliances.
We may form or seek strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that
we believe will complement or augment our development and commercialization efforts with respect to
CF-301,
CF-404
and any future product candidate that we may develop.
Any of these relationships may require us to incur
non-recurring
and other charges, increase our
near-and
long-term expenditures, issue securities that dilute our
existing stockholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our
efforts to establish a strategic partnership or other alternative arrangements for
CF-301,
CF-404
and any future product candidate because it may be deemed to be at too
early of a stage of development for collaborative effort and third parties may not view
CF-301,
CF-404
and any future product candidate as having the requisite potential
to demonstrate safety and efficacy. Any delays in entering into new strategic partnership agreements could delay the development and commercialization of
CF-301,
CF-404
and any other product candidate that we develop, which would harm our business prospects, financial condition and results of operations.
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Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance
Matters
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize,
or will be delayed in commercializing,
CF-301,
CF-404
and any future product candidate, and our ability to generate revenue will be materially impaired.
CF-301,
CF-404
and any other product candidate that we develop
and the activities associated with their development and commercialization, including their design, testing, manufacture, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, importation and exportation are subject
to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product
candidate. We have not received approval to market any product from regulatory authorities in any jurisdiction. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various
regulatory authorities for each therapeutic indication to establish the product candidates safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection
of manufacturing facilities by, the relevant regulatory authority.
CF-301,
CF-404
and any other product candidate that we develop may not be effective, may be only
moderately effective or may prove to have undesirable or unintended side effects or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained
at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of
additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial
discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. If we experience delays in obtaining approvals or if
we fail to obtain approval of our product candidates that we develop, our ability to generate revenues will be materially impaired.
We face
extensive regulatory requirements and our products may face future development and regulatory difficulties.
Even if we obtain
regulatory approval in the United States, the FDA may still impose significant restrictions on the indicated uses or marketing of the approved product, or impose ongoing requirements for potentially costly post-approval studies or post-market
surveillance. The holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. The holder of an approved BLA must also submit new or supplemental applications and
obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable
federal and state laws.
In addition, drug product manufacturers and their facilities are subject to payment of user fees and continual
review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMPs and adherence to commitments made in the BLA. If we or a regulatory agency discovers previously unknown problems with a product such as adverse
events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or
withdrawal of the product from the market or suspension of manufacturing.
If the FDA or a comparable foreign regulatory authority
approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising,
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promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information
and reports, registration requirements and continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.
If we or our partners fail to comply with applicable regulatory requirements following approval of any of our future product candidates, a
regulatory agency may:
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issue a warning or untitled letter asserting that we are in violation of the law;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
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refuse to approve a pending BLA or supplements to a BLA submitted by us;
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refuse to allow us to enter into supply contracts, including government contracts.
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Any
government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to
commercialize our future products and generate revenues.
In addition, we cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of President Trumps administration may impact our business and industry. Namely, the
administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDAs ability to engage in routine regulatory and oversight
activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. Notably, on January 23, 2017, the President ordered a hiring freeze for all executive departments and agencies,
including the FDA, which prohibits the FDA from filling employee vacancies or creating new positions. Under the terms of the order, the freeze will remain in effect until implementation of a plan to be recommended by the Director for the Office of
Management and Budget, or OMB, in consultation with the Director of the Office of Personnel Management, to reduce the size of the federal workforce through attrition. An under-staffed FDA could result in delays in FDAs responsiveness or in its
ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, on January 30, 2017, the President issued an Executive Order, applicable to all
executive agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by
law. These requirements are referred to as the two-for-one provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including
repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the
total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the
two-for-one provisions may apply not only to agency regulations, but also to significant agency guidance documents. Further, on February 24, 2017, the President issued an Executive Order requiring each agency to designate a
regulatory reform officer and create a regulatory reform task force to evaluate existing regulations and make recommendations regarding their repeal, replacement, or modification. It is difficult to predict how these requirements will be
implemented, and the extent to which they will impact the FDAs ability to exercise its regulatory authority. If these executive actions impose constraints on FDAs ability to engage in oversight and implementation activities in the normal
course, our business may be negatively impacted.
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If foreign approval for
CF-301,
CF-404
or any other product candidate is obtained, there are inherent risks in conducting business in international markets.
Commercialization of our product candidates in international markets is an element of our long-term strategy. If approved for
commercialization in a foreign country, we intend to enter into agreements with third parties to market
CF-301,
CF-404
or any other product candidate whenever it may be
approved and wherever we have the right to market it. Consequently, we expect that we will be subject to additional risks related to entering into international business relationships, including:
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potentially reduced protection for intellectual property rights;
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the potential for
so-called
parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with
low or lower prices) rather than buying them locally;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with laws for employees working and traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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production shortages resulting from any events affecting active pharmaceutical ingredient and/or finished drug product supply or manufacturing capabilities abroad;
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business interruptions resulting from
geo-political
actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires; and
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failure to comply with the rules and regulations of the Office of Foreign Asset Control, the Foreign Corrupt Practices Act and other applicable anti-bribery rules and regulations in other jurisdictions.
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These and other risks may materially adversely affect our ability to attain or sustain revenue from international markets
and therefore materially adversely affect our business.
Product liability lawsuits against us could divert our resources, cause us to incur
substantial liabilities and limit commercialization of any products that we may develop.
We face an inherent risk of product
liability exposure related to the testing of
CF-301,
CF-404
and any other product candidate that we develop in human clinical trials and we will face higher degrees of
this risk if we commercially sell any products that we develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
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distraction of our management or other internal resources from pursuing our business strategies;
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decreased demand for any product candidates or products that we may develop;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend the related litigation;
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substantial monetary awards to trial participants or patients;
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the inability to commercialize any products that we may develop.
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We maintain product
liability insurance coverage in relation to our clinical trials. Such coverage may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we fail to comply with environmental, health and safety laws
and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the
handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may
also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and wastes, we cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury
resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure
to comply with such laws and regulations.
Although we maintain workers compensation insurance to cover us for costs and expenses we
may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Our product candidates may face competition sooner than anticipated.
The Patient Protection and Affordable Care Act, or Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the
Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an
FDA-licensed
reference
biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar
product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this
12-year
period of exclusivity, another company may still market a
competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsors own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and
potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to
implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the
12-year
period of exclusivity. However, there is a risk that this exclusivity could be shortened due to
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congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic
competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be
substituted for any one of our reference products in a way that is similar to traditional generic substitution for
non-biological
products is not yet clear, and will depend on a number of marketplace and
regulatory factors that are still developing.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback,
fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates
for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial
arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
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the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. A person or entity
does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, 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;
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the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the
federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme
to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for
healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
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the federal transparency requirements under the Affordable Care Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the
Childrens Health Insurance Program (with certain exceptions) to report to the Department of Health and Human Services information related to physician payments and other transfers of value and ownership and investment interests held by
physicians and their immediate family members and payments or other transfers of value made to such physician owners; and
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analogous state laws and regulations, such as state anti-kickback and false claims laws, and transparency laws,
may apply to sales or marketing arrangements and claims involving healthcare
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items or services reimbursed by
non-governmental
third-party payors, including private insurers, and some state laws require pharmaceutical companies to
comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to
physicians and other health care providers or marketing expenditures and pricing information.
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Efforts to ensure that
our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may
apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.
If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from
government funded healthcare programs.
The adverse outcome of litigation or arbitration proceedings commenced by or against us could materially
harm our business.
The adverse outcome of any litigation or arbitration proceedings commenced by or against us could have a
material adverse effect on our business and impede the achievement of our development and commercialization objectives.
In the ordinary
course of our operations, claims involving our actions, actions of third parties or agreements to which we are a party may be brought by and against us. The claims and charges can involve actual damages, as well as contractually agreed upon
liquidated sums. These claims, if not resolved through negotiation, are often subject to lengthy and expensive litigation or arbitration proceedings.
Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to attract and retain qualified personnel, and changes in management may negatively affect our business.
We are dependent on the principal members of our management and scientific teams. Our success and the execution of our growth
strategy depend largely on the continued service of these employees. Although we have formal employment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time. The loss of
the services of any of these persons could be disruptive to our operations, impede our ability to raise additional funding or delay the achievement of our development and commercialization objectives. Additionally, we cannot be certain that changes
in management will not lead to additional management departures or changes, affect our ability to hire or retain key personnel, or otherwise negatively affect our business. We do not maintain key person insurance for any of our
executives or other employees.
Recruiting and retaining qualified scientific and clinical personnel is critical to our success. We may
not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also compete for the hiring of scientific and clinical personnel from
universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be
employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
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We expect to expand our development, regulatory and sales, marketing and distribution capabilities, and as
a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience
growth in the number of our employees and the scope of our operations, particularly in the areas of drug discovery, drug development, regulatory affairs and commercialization. To manage our anticipated future growth, we must continue to implement
and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the various levels of experience of our management team
in managing a company with significant anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant
costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
Risks Related to Our Intellectual Property
If we or our licensors are unable to obtain and maintain patent protection for our owned or licensed technology and products, or if the scope of the
patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
Our success depends in large part on our and our licensors ability to obtain and maintain patent protection in the United
States and other countries with respect to our proprietary technology and products or technology or products that may have been licensed to us. Similar to our licensors, we seek to protect our proprietary position by filing patent applications in
the United States and abroad related to our novel technologies and product candidates that are important to our business. This process is expensive and time-consuming, and we or our licensors may not be able to file and prosecute all necessary or
desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors will fail to identify patentable aspects of either our or their research and development output before it is too late to obtain
patent protection. Moreover, if we license technology or product candidates from third parties in the future, these license agreements may not permit us to control the preparation, filing and prosecution of patent applications, or to maintain the
patents, covering this intellectual property. These agreements could also give our licensors the right to enforce the licensed patents without our involvement, or to decide not to enforce the patents without our consent. Therefore, in these
circumstances, we could not be certain that these patents and applications would 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 and has in recent years been the subject of
much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights and any patent rights we may license from a third party are highly uncertain. Our or our licensors pending and future patent
applications may not result in issued patents that 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 or our licensors patents or narrow the scope of such patent protection.
The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law
restricts the patentability of methods of treatment of the human body more than United States law does. Assuming the other requirements for patentability are met, historically, in the United States, the first to make the claimed invention was
entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. The United States currently uses a
first-inventor-to-file
system in which, assuming the other requirements for patentability are met, the first inventor to file a patent application will be entitled to
the patent. Publications of discoveries in the scientific literature often
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lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Moreover, we may be subject to a third
party preissuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, reexamination, litigation, inter partes review or interference proceedings, in the United States or elsewhere,
challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology
or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our
patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if our or our licensors 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 prevent 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 of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized and
such patents may not be able to claim the benefits of any patent term extension laws or regulations. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to
ours.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming
and unsuccessful, and which could result in our patents or other intellectual property rights becoming invalidated.
Competitors
may infringe our or our licensors patents, trademarks, copyrights or other intellectual property. To stop infringement or unauthorized use, we or our licensors may be required to file infringement claims, which can be expensive and time
consuming. Any claims we or our licensors assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that some or all of our patents or other intellectual property rights are not valid or that we or
our licensors infringe their patents or other intellectual property rights. In addition, in a patent infringement proceeding, a court may decide that a patent of ours or our licensors is invalid or unenforceable, in whole or in part, construe the
patents claims narrowly, or may refuse to stop the other party from using the technology at issue on the grounds that such patents do not cover the technology in question and therefore cannot be infringed. Similarly, if we assert trademark
infringement claims, a court may determine that the marks we have asserted are invalid, unenforceable, or not infringed, or that the party against whom we have asserted trademark infringement claims has superior rights to the marks in question. In
this case, we could ultimately be forced to cease use of such marks. In any infringement litigation, any award of monetary damages may be unlikely or very difficult to obtain, and any such award we may receive may not be commercially valuable.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that we could incur substantial litigation costs or that some of our confidential information could be
compromised by disclosure during this type of litigation.
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Third parties may initiate legal proceedings alleging that we or our licensors are infringing their
intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability to develop, manufacture, market, or sell our or our licensors product candidates and use
our proprietary technologies without infringing the intellectual property and other proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become
party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including reexamination or interference proceedings before the U.S. Patent and Trademark
Office. Third parties may assert infringement claims against us based on existing or future intellectual property rights.
If we or our
licensors are found to infringe a third partys intellectual property rights, we or our licensors could be enjoined from further using certain products and technology or may be required to obtain a license from such third party to continue
developing and marketing such products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be
non-exclusive,
thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In
addition, we could be found liable for monetary damages, including treble damages and attorneys fees if we are found to have willfully infringed a patent or other intellectual property rights of a third party. A finding of infringement could
prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties
could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees 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 use customary
non-disclosure
agreements and 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 we or these employees 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 we typically 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, or such agreements may be inadequately drafted
at times thereby not ensuring assignment to us of all potential intellectual property rights. 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.
Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to
incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or
developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses
and reduce the resources available for development,
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sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct or defend such litigation or proceedings. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have
a material adverse effect on our ability to compete in the marketplace.
In addition to seeking patents for some of our technology and
products, we also rely on trade secrets, including unpatented
know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by
entering into
non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers,
consultants, advisors and other third parties. However, we cannot guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets, nor can we guarantee that such agreements will always be
adequately drafted so as to be enforceable. If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
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, because of potential differences in laws in different jurisdictions, 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 were to be
disclosed to or independently developed by a competitor, our competitive position would be harmed.
We have not yet registered our trademarks in all
of our potential markets, and failure to secure those registrations could adversely affect our business.
Our future trademark
applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections from the U.S. Patent and Trademark Office or other applicable
foreign intellectual property offices. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections, or have to expend additional resources to secure registrations, such as commencing cancellation
proceedings against third-party trademark registrations to remove them as obstacles to our trademark applications. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreign jurisdictions, third parties are given
an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure
registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.
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In addition, we have not yet proposed a proprietary name for our product candidates in any
jurisdiction. Any proprietary name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a
review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an
effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
Risks Related to Our Securities
The price of our common stock may be volatile and you could lose all or part of your investment.
There has been significant volatility in the market price and trading volume of equity and derivative securities, which is unrelated to the
financial performance of the companies issuing the securities. In addition, equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of biotechnology and also newly public
companies for a number of reasons, including reasons that may be unrelated to the business or operating performance of the companies. These broad market fluctuations may negatively affect the market price of our common stock.
Prior to our initial public offering, there was no public market for our common stock. The trading price of our securities is likely to be
highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this Risk Factors section and
elsewhere in this Annual Report, these factors include:
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our ability to implement our preclinical, clinical and other development or operational plans;
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adverse regulatory decisions;
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strategic actions by us or our competitors, such as acquisitions or restructurings;
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new laws or regulations, or new interpretations of existing laws or regulations, applicable to our business;
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actual or anticipated fluctuations in our financial condition or annual or quarterly results of operations;
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public reaction to our press releases, other public announcements and filings with the SEC;
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changes in investor and financial analyst perceptions of the risks and condition of our business;
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changes in, or our failure to meet, performance expectations of investors or financial analysts (including, without limitation, with respect to the status of development of our lead product candidates);
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changes in market valuations of biotechnology companies;
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changes in key personnel;
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sales of common stock by us or members of our management team;
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trading volume of our common stock;
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issuances of debt or equity securities;
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the granting or exercise of employee stock options or other equity awards;
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changes in accounting standards, policies, guidance, interpretations or principles;
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ineffectiveness of our internal controls;
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actions by institutional or other large shareholders;
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significant lawsuits, including patent or stockholder litigation;
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general political, market and economic conditions; and
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other events or factors, many of which are beyond our control.
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In addition, the stock market
in general, and the NASDAQ Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad
market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of
volatility in the market price of a companys securities. This type of litigation, if instituted, could result in substantial costs and a diversion of managements attention and resources, which would harm our business, operating results
or financial condition.
We are required to meet the NASDAQ Capital Markets continued listing requirements and other NASDAQ rules, or we may
risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.
We are required to meet the continued listing requirements of the NASDAQ Capital Market and other NASDAQ rules, including those regarding
director independence and independent committee requirements, minimum stockholders equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed
common stock of $1.00 per share. If we do not meet these continued listing requirements, our common stock could be delisted. Delisting from the NASDAQ Capital Market would cause us to pursue eligibility for trading of these securities on other
markets or exchanges, or on the pink sheets. In such case, our stockholders ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction
delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of these securities. There can be no assurance that our securities, if delisted from the NASDAQ Capital Market in the future, would be listed on a
national securities exchange, a national quotation service, the
over-the-counter
markets or the pink sheets. Delisting from the NASDAQ Capital Market, or even the
issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our securities, decrease securities analysts coverage of
us or diminish investor, supplier and employee confidence.
We may issue additional shares of common stock, warrants or other securities to finance
our growth.
We may finance the development of our product pipeline or generate additional working capital through additional
equity financing. Therefore, subject to the rules of the NASDAQ, we may issue additional shares of our common stock, warrants and other equity securities of equal or senior rank, with or without shareholder approval, in a number of circumstances
from time to time. The issuance by us of shares of our common stock, warrants or other equity securities of equal or senior rank will have the following effects:
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the proportionate ownership interest in us held by our existing shareholders will decrease;
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the relative voting strength of each previously outstanding share of common stock may be diminished; and
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the market price of our common stock may decline.
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In addition, if we issue shares of our common stock and/or warrants in a future offering (or, in
the case of our common stock, the exercise of outstanding warrants to purchase our common stock), it could be dilutive to our security holders.
Future sales of our common stock or warrants may cause the market price of our securities to decline.
Sales of substantial amounts of shares of our common stock or warrants in the public market, or the perception that these sales may occur,
could adversely affect the price of our securities and impair our ability to raise capital through the sale of additional equity securities. We have approximately 41.7 million shares of common stock outstanding. As of March 7, 2017,
approximately 39.5 million shares of our outstanding common stock are freely tradable, or may become freely tradable, without restriction, in the public market unless held by our affiliates, as defined under Rule 144 of the
Securities Act of 1933, as amended (the Securities Act). Additionally, we have warrants to purchase approximately 2.4 million shares of common stock (PIPE Warrants) and warrants to purchase 14.0 million shares of
our common stock (CMPO Warrants, and together with the PIPE Warrants, the Warrants) outstanding as of March 7, 2017. All shares of common stock underlying the Warrants will be freely tradable upon exercise unless held by
our affiliates.
We have registered 3,358,270 shares of our common stock as of March 7, 2017 that we may issue under our employee
benefit plans. These shares can be freely sold in the public market upon issuance, unless pursuant to their terms these stock awards have transfer restrictions attached to them. Additionally, pursuant to the 2014 Omnibus Incentive Plan (the
2014 Plan), our management is authorized to grant stock options and other equity linked award to our employees, directors and consultants. The number of shares available for future grant under our 2014 Plan will automatically increase on
January 1st each year, from January 1, 2015 through January 1, 2024, by an amount equal to four percent of all shares of our capital stock outstanding as of December 31st of the preceding calendar year, subject to the ability of
our board of directors to take action to reduce the size of such increase in any given year. Unless our board of directors elects not to increase the number of shares underlying our 2014 Plan each year, our stockholders may experience additional
dilution, which could cause our stock price to decline.
Our executive officers and directors hold a significant concentration of our common stock,
which could limit the ability of our other stockholders to influence the direction of our Company.
As calculated by the SEC rules
of beneficial ownership, the current executive officers and directors of our Company own 9.3% of our outstanding common stock as of March 7, 2017. Accordingly, they collectively have the ability to significantly influence or determine the
election of all of our directors or the outcome of most corporate actions requiring stockholder approval such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets and (iii) amendments to our
certificate of incorporation or bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous
to our stockholders with interests different from those individuals. These individuals also have significant control over our business as officers and directors of our Company. There is a risk that they may exercise this ability in a manner that
advances their best interests and not necessarily those of our other stockholders.
If shares of our common stock become subject to the penny stock
rules, it would become more difficult to trade them.
The SEC has adopted regulations which generally define a penny
stock to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions, including an exemption for any securities listed on a national securities
exchange. The rules impose additional sales practice requirements on broker-dealers for transactions involving penny stock, with some exceptions. If shares of our common stock were delisted from the NASDAQ Capital Market and determined
to be penny stock, broker-dealers may find it more difficult to trade such securities and investors may find it more difficult to acquire or dispose of such securities on the secondary market.
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There can be no assurance that we will ever provide liquidity to our investors through a sale of our
company
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While acquisitions of pharmaceutical companies like ours are not uncommon, potential investors are cautioned that
no assurances can be given that any form of merger, combination, or sale of our company will take place, or that any merger, combination, or sale, even if consummated, would provide liquidity or a profit for our investors. You should not invest in
our company with the expectation that we will be able to sell the business in order to provide liquidity or a profit for our investors.
We incur
significant increased costs as a result of operating as a public company and our management is required to devote substantial time to complying with public company regulations.
We completed an initial public offering on August 1, 2014. As a public company, we incur significant legal, accounting and other
expenses, including costs associated with our public company reporting requirements under the Securities Exchange Act of 1934, as amended (the Exchange Act). We must also follow the rules, regulations and requirements subsequently
adopted by the SEC and the NASDAQ and any failure by us to comply with such rules and requirements could negatively affect investor confidence in us and cause the market price of our common stock to decline. Our executive officers and other
personnel will also need to devote substantial time and financial resources to comply with these rules, regulations and requirements.
We
expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our
management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss, and may
require us to reduce costs in other areas of our business. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur
substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for
us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
If we do not develop
and implement all required accounting practices and policies, we may be unable to provide the financial information required of a U.S. publicly traded company in a timely and reliable manner.
Prior to the IPO, we did not adopt all of the financial reporting and disclosure procedures and controls required of a U.S. publicly traded
company because we were a privately held company. The implementation of all required accounting practices and policies and the hiring of additional financial staff have increased our operating costs and requires significant time and resources from
our management and employees. If we fail to maintain effective internal controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports that a U.S. publicly traded company is
required to provide in a timely and reliable fashion. Any such delays or deficiencies could penalize us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and hurt our reputation and
could thereby impede our ability to implement our strategy.
Reports published by analysts, including projections in those reports that exceed our
actual results, could adversely affect the price and trading volume of our common stock.
The projections of securities research
analysts may vary widely and may not accurately predict the results we actually achieve. The price of our common stock may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of
the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, the price of our common stock could decline. If one or more of these analysts ceases coverage of us or fails to publish
reports on us regularly, the price or trading volume of our common stock could decline.
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If securities or industry analysts do not publish research or reports about our business, the prices of our
securities and trading volume could decline.
The trading market for our securities depends, in part, on the research and reports
that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If no securities or industry analysts commence coverage of our company, the trading prices for our securities may be negatively
impacted.
We have broad discretion in the use of the net proceeds from our public offerings and private placement and may not use them effectively.
Our management has broad discretion in the application of the net proceeds from our public offerings and private placement and
could spend the proceeds in ways that do not enhance the value of our common stock. Because of the number and variability of factors that will determine our use of the net proceeds from our completed offerings, their ultimate use may vary
substantially from their currently intended use. The failure by our management to apply these funds effectively could delay the development of our product candidates or have a material adverse effect on our business. Pending their use, we may invest
the net proceeds from the offerings in a manner that does not produce income or that loses value. If we do not apply or invest the net proceeds from the offerings in ways that enhance stockholder value, we may fail to achieve expected financial
results, which could cause the price of our securities to decline.
We are an emerging growth company, and the reduced disclosure
requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an
emerging growth company, as defined in the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain
disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing
additional information about the audit and the financial statements;
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reduced disclosure obligations regarding executive compensation; and
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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We have taken advantage of certain reduced reporting burdens. We cannot predict whether investors will find our securities less attractive if
we rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our common stock, and the prices for our securities may be more volatile.
We have no present intention to pay cash dividends and, even if we change that policy, we may be restricted from paying cash dividends on our common
stock.
We do not intend to pay cash dividends for the foreseeable future. We currently expect to retain all future earnings, if
any, for use in the development, operation and expansion of our business. Any determination to pay cash dividends in the future will depend upon, among other things, our results of operations, plans for expansion, tax considerations, available net
profits and reserves, limitations under law, financial condition, capital requirements and other factors that our board of directors considers to be relevant.
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Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which
may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us
that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for our securities,
thereby depressing the market prices of our securities. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to
replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
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allow the authorized number of our directors to be changed only by resolution of our board of directors;
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limit the manner in which stockholders can remove directors from the board of directors;
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establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
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require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
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limit who may call stockholder meetings;
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authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a shareholder rights plan, or
so-called
poison
pill, that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
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require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
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Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation
Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner.
Risks Related to Cybersecurity
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to
suffer.
In the ordinary course of our business, we store sensitive data, including intellectual property, proprietary business
information and personally identifiable information, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures,
our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such breach could compromise our networks and the information stored there could be
accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, and damage our reputation.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.
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