Overview
RXi is a clinical-stage company developing innovative therapeutics based on our proprietary self-delivering RNAi
(sd-rxRNA
®
) platform and Samcyprone, a topical immunomodulator, which address significant unmet medical needs. The Companys clinical
development programs include
RXI-109,
an
sd-rxRNA
for the treatment of dermal and ocular scarring, and Samcyprone, for the treatment of warts. In January 2017, RXi
acquired MirImmune Inc. (
MirImmune
), a privately-held company focused on the development of next generation immunotherapies for the treatment of cancer. With the acquisition of MirImmune, the Companys development programs
have expanded from dermatology and ophthalmology to also include cell-based cancer immunotherapy. The Companys pipeline, coupled with our extensive patent portfolio, provides for product development and business development opportunities
across a broad spectrum of therapeutic areas.
Our Pipeline
Our pipeline focuses on three areas: dermatology, including cosmetic product development, ophthalmology and cell-based cancer immunotherapy.
Our RNAi therapies are designed to silence, or down-regulate, the expression of a specific gene that may be over-expressed in a disease condition and our topical immunotherapy agent, Samcyprone, treats diseases by inducing,
enhancing or suppressing an immune response in the skin. The following is a summary of our current product candidates and their development status:
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Dermatology Franchise
RXI-109
Dermal Scarring
The Companys lead product candidate and first RNAi clinical product candidate,
RXI-109,
is a
self-delivering RNAi compound
(sd-rxRNA)
that commenced human clinical trials in 2012.
RXI-109
is designed to reduce the expression of connective tissue growth factor
(
CTGF
), a critical regulator of several biological pathways involved in fibrosis, including scar formation in the skin and eye.
RXI-109
is currently being evaluated in a Phase 2 clinical
trial, Study 1402, to prevent or reduce dermal scarring following scar revision surgery of an existing hypertrophic scar.
The Company
initially conducted two Phase 1 clinical trials evaluating
RXI-109
in a surgical setting. Both trials demonstrated the safety and tolerability of
RXI-109
in ascending
single and multi-doses, and also provided the first evidence of clinical activity in a surgical setting. With the successful completion of the Phase 1 trials, in November 2013 the Company initiated its Phase 2 program for
RXI-109
with Study 1301, a Phase 2 clinical trial evaluating the use of
RXI-109
to prevent the recurrence of hypertrophic scars following scar revision surgery. Enrollment and
dosing for this study have been completed.
Preliminary data observations from Study 1301 were used in the design of the Companys
second Phase 2 clinical trial in hypertrophic scars, Study 1402, which commenced in July 2014. In October 2015, we reported that preliminary data from Study 1402 demonstrated that scars at revision sites were judged to be better at three months
after a treatment regimen with five mg/cm intradermal administration of
RXI-109
than scars at untreated revision sites in those same subjects. Based in part on this new information, two more cohorts were added
to Study 1402 in November 2015. For these two cohorts, the number of doses was increased to either eight or nine doses of
RXI-109
over a
six-month
period to better cover
the extended wound healing/scarring profile of hypertrophic scars. Enrollment of subjects into these two new cohorts completed ahead of schedule during the third quarter of 2016.
In December 2016, the Company announced that preliminary data from the first two cohorts from Study 1402 at nine months confirmed the positive
differentiation of treated surgery incisions from untreated for a subset of subjects treated with five mg/cm of
RXI-109
that was observed at three months. In addition, these data extend this observation to all
time points, including the post-treatment
follow-up
period through nine months post-surgery.
RXI-109
was safe and well tolerated. A complete
read-out
of the whole study, including all four cohorts with
follow-up
until nine months post-surgery, is expected in the second half of 2017.
Scarring represents a high unmet medical need as there are currently no U.S. Food and Drug Administration (
FDA
) approved
therapies in the U.S. for the treatment and prevention of scars in the skin. Scar revision surgery is one treatment option, but often the scar recurs. If approved,
RXI-109
could be a
first-in-class
RNAi treatment for the prevention or reduction of post-surgical dermal scarring. Given the large number of surgical procedures, there is a
significant market for a scar prevention therapeutic such as
RXI-109.
Samcyprone
Warts
In December 2014, the Company broadened its clinical pipeline with an exclusive, global license to
Samcyprone, our second clinical candidate. Samcyprone is a proprietary topical formulation of the small molecule diphenylcyclopropenone (
DPCP
), an immunomodulator that works by initiating a
T-cell
response. The use of Samcyprone allows sensitization using much lower concentrations of DPCP than are used with existing compounded DPCP solutions, avoiding hyper-sensitization to subsequent challenge
doses. DPCP, the active ingredient in Samcyprone, has long been used to treat warts and has also been used for several other indications, such as to stimulate hair
re-growth
in alopecia areata and to
clear cutaneous metastases of melanoma. In March 2015, the FDA granted Orphan Drug Designation to the Company for Samcyprone for the treatment of malignant melanoma stages IIb to IV. Samcyprone is currently being evaluated in a Phase 2a
clinical trial, Study 1502, for the clearance of common warts.
Study 1502, initiated in December 2015, includes a sensitization phase in
which a spot on the subjects upper arm and one or more warts are treated with Samcyprone. After being sensitized in this way, the subjects will enter into the treatment phase where up to four warts are treated on a once weekly basis for
ten weeks with a
ten-fold
lower concentration of Samcyprone than in the sensitization phase. During the trial, the warts are scored, photographed and measured to monitor the level of clearance. The
Company has added a second cohort to the study and is currently enrolling subjects to explore the opportunity to reduce the sensitization dose level and potentially reduce the treatment length. With this second cohort, enrollment is expected to be
completed in the second half of 2017.
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In December 2016, the Company announced the results from a preliminary review of sensitization
and wart clearance data from a subset of subjects that have completed the
ten-week
treatment phase of Study 1502. Results showed that greater than 90% of the subjects demonstrated a sensitization response, a
prerequisite to be able to develop a therapeutic response. Additionally, more than 60% of the subjects responded to the treatment by exhibiting either complete or greater than 50% clearance of all treated warts with up to ten weekly treatments.
Samcyprone
treatment has been generally safe and well tolerated and has had drug-related adverse events relating to local reactions, which are typically expected for this type of treatment
due to the sensitization and challenge responses in the skin. The complete readout of the final study is anticipated in the second half of 2017.
Cutaneous warts are extremely common, being experienced by most people at some time during their lives. Although most warts will spontaneously
disappear without treatment, treatment is sought for recalcitrant warts and to prevent recurrence. There are many different treatment modalities for warts, including physical destruction and immunomodulation. However, treatment of warts is
complicated by low success rates, prolonged duration of therapy and the potential for recurrence. There is a clear unmet need for new therapies for warts, and if approved, Samcyprone could be a more effective and convenient treatment than the
currently available therapies.
Additional Dermatology Programs
In addition to our dermal scarring and wart programs, we continue to advance our preclinical and discovery programs with our
sd-rxRNA
technology. The Company has selected tyrosinase (
TYR
) and collagenase (
MMP1
) as targets for our self-delivering platform because they are relevant for both consumer
health and therapeutic development. TYR is a key enzyme in the synthesis of melanin. Melanin is produced by melanocytes and is the pigment that gives human skin, hair and eyes their color. The inhibition of TYR can play a key role in the management
of skin conditions including cutaneous hyperpigmentation disorders such as lentigines (freckles, age spots and liver spots) and possibly melanoma. MMP1 is a key enzyme involved in the breakdown of extracellular matrix. Reduction of MMP1 may be
beneficial in the treatment of skin aging disorders, arthritis, acne scarring, blistering skin disorders, corneal erosions, endometriosis and possibly cancer metastasis.
Cosmetic Development
Cosmetics are compounds that affect the appearance of the skin and make no preventative or therapeutic claims. These compounds may be developed
more rapidly than therapeutics, therefore the path to market may be much shorter and less expensive. In October 2015, we announced the selection of lead compounds targeting TYR and MMP1 for cosmetic development.
RXI-231
Uneven Skin Tone and Pigmentation
RXI-231,
an
sd-rxRNA
compound targeting TYR, is in development
as a cosmetic ingredient that may improve the appearance of uneven skin tone and pigmentation. Efficacy and toxicity testing in cell culture and skin equivalents for
RXI-231
was successfully completed in
December 2016. The Company is currently coordinating with a U.S. clinical testing site to initiate human testing of
RXI-231
in the second quarter of 2017.
RXI-231
has
been manufactured in sufficient quantities to support this activity. In addition to evaluating safety, the effect of
RXI-231
on the appearance of skin pigmentation will be assessed.
RXI-185 Wrinkles and Skin Laxity
RXI-185, an sd-rxRNA compound targeting MMPI, is in development as a cosmetic ingredient that may improve the appearance of wrinkles or skin
laxity. Results from studies by the Company have shown a pronounced reduction in MMPI mRNA levels that correspond to a similar reduction in MMPI enzyme activity in cell culture in vitro.
Ophthalmology Franchise
RXI-109
Retinal Scarring
As in dermal scarring,
RXI-109
can also be used to target CTGF in the eye, where CTGF is known to be
involved in retinal scarring. Building on the work in our dermal clinical program, the Company filed a new investigational drug application (
IND
) in July 2015 for
RXI-109
as a potential
therapeutic for the scarring component of retinal diseases in the eye, such as wet
age-related
macular degeneration (
AMD
). In November 2015, we initiated a Phase 1/2 clinical trial to
evaluate the safety and clinical activity of
RXI-109
in reducing the progression of retinal scarring.
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Study 1501 is a multi-dose, dose escalation study conducted in subjects with AMD with evidence of
subretinal fibrosis. Each subject will receive four doses of
RXI-109
by intraocular injection at one month intervals for a total dosing period of three months. The safety and tolerability of
RXI-109,
as well as the potential for clinical activity, will be evaluated over the course of the study using numerous assessments to monitor the health of the retina and to assess visual acuity. The first two
cohorts in Study 1501 have been completely enrolled and dosing in the third cohort at the highest planned dose level has begun. To date there have been no safety issues that precluded continuation of dosing. Complete enrollment is anticipated in the
first half of 2017, ahead of our original plan, with complete subject participation anticipated in the second half of 2017.
Currently,
there is no effective way to prevent the formation or progression of retinal scars that may occur as a consequence of a number of debilitating ocular diseases. In advanced
neo-vascular
or
wet-AMD,
our first area of study, retinal scarring often results in continued vision loss even if the patient is being treated with an anti-vascular endothelial growth factor (
VEGF
) therapy.
RXI-109
has the potential to fill this unmet medical need by reducing this continuing damage to the retina and in doing so help preserve these patients vision for a longer period of time.
Additional Ophthalmology Programs
In addition to the clinical trial for the use of
RXI-109
as a potential therapeutic for retinal
scarring, we are advancing other early-stage ophthalmology programs. Currently, the Company is directing its development efforts toward advancing
RXI-109
for the treatment of corneal scarring. To date, our
preclinical studies have shown that CTGF protein levels are reduced in a dose-dependent manner in both the retina and cornea following an intravitreal injection of
RXI-109
in monkeys. Elevated CTGF is
implicated in the formation of corneal scarring that can occur after eye injury or after certain infections, and it has been proposed that a reduction of CTGF may be an important step towards reducing corneal scarring. Scarring of the cornea can
impact the transparency of the cornea, and thus negatively impact vision. We are currently working towards a
non-invasive
delivery formulation of
RXI-109
to reduce CTGF
in the front of the eye.
Cell-based Cancer Immunotherapy
In January 2017, the Company entered into a Stock Purchase Agreement (the
Stock Purchase Agreement
) pursuant to which it
acquired 100% of the issued and outstanding shares of capital stock of MirImmune for an aggregate of 2,750,351 shares of common stock of the Company and 1,115,579 shares of Series C Convertible Preferred Stock (the
Series C Preferred
Stock
), subject to a holdback of 3% of the aggregate closing consideration for any purchase-price adjustments. Under the terms of the Stock Purchase Agreement, if certain development or commercial milestones are achieved within two years,
the Company will be required to either (i) issue to the sellers a number of shares of common stock or (ii) pay the equivalent value in cash.
Prior to its acquisition by the Company, MirImmune was a privately held biopharmaceutical company engaged in the development of cancer
immunotherapies. The Company previously granted an exclusive license to MirImmune in March 2015 to utilize the Companys novel and proprietary
sd-rxRNA
technology for use in developing ex vivo cell-based
cancer immunotherapies.
Our approach to immunotherapy builds on well-established methodologies of adoptive cell transfer. Immune cells,
such as
T-lymphocytes,
are isolated from specific patients or retrieved from allogeneic immune cell banks and then expanded and sometimes processed to express tumor-binding receptors. Our method will introduce
a new and important step in ex vivo processing of immune cells. This step uses our
sd-rxRNA
technology to reduce or eliminate the expression of immunosuppressive receptors or proteins by the therapeutic immune
cells, potentially making them less sensitive to tumor resistance mechanism and thus improving their ability to destroy the tumor cells.
The Companys approach builds on current immunotherapy approaches but provides some key advantages. One major advantage is that
pre-treatment
with our targeted compounds allows multiple immune checkpoints to be attenuated within the same therapeutic cell, an improvement which could dramatically increase their tumor cell killing capability.
In addition, these therapeutic immune cells may lack some known side effects associated with the checkpoint inhibitor toxicity while potentially improving efficacy over current immunotherapy approaches.
5
Using our
sd-rxRNA
technology, MirImmune demonstrated in
vitro that multiple
sd-rxRNA
compounds can be used alone or in combination to target and silence extracellular, as well as intracellular, checkpoints in immune cells. Additional in vitro data demonstrated that
PD-1
silencing by
sd-rxRNA
in patient-derived tumor infiltrating lymphocytes (TILs) resulted in enhanced killing of melanoma tumor cells from the same patient in
culture. MirImmune also showed in a mouse model of human ovarian cancer that in vivo treatment with mesothelin-targeting CAR
T-cells
transfected with a
PD-1
targeting
sd-rxRNA
significantly reduced the rate of tumor growth as compared to vehicle control. Furthermore, the silencing of
PD-1
in the CAR
T-cells
isolated from these tumors persisted for at least one month.
In December 2016, new data
was provided by MirImmune demonstrating silencing of a number of undisclosed immunosuppressive targets in natural killer cells (NK cells) using our
sd-rxRNA
compounds. This adds to a remarkable set of immune
checkpoint modulation studies in human T cells, including CAR T-cells and TILs. In immune cells tested to date, the
sd-rxRNA
treatment results in potent silencing while maintaining close to 100% transfection
efficiency and nearly full cell viability. Moreover, the silencing effect has been validated in a number of clinically used cell treatment protocols.
MirImmune identified lead
sd-rxRNA
compounds for each of six different checkpoints, including
PD-1,
CTLA-4
and other extracellular and intracellular targets. The Company plans to build on the work completed by MirImmune prior to its acquisition by the Company to
advance the potential of our
sd-rxRNA
platform for use in cell-based cancer immunotherapy. In 2017, the Company plans to (i) initiate an internal program to evaluate the reduction of cytokines involved in
cytokine release syndrome, (ii) release data on multiple checkpoint inhibiting
sd-rxRNA
compounds
co-transfected
in CAR
T-cells
in mouse models for solid tumors and (iii) share preclinical results on our use of
sd-rxRNA
with TILs in melanoma.
Market Opportunity
As there are
currently no
FDA-approved
drugs to prevent scar formation, a therapeutic of this type could have great benefit for trauma and surgical patients, particularly as a treatment during the surgical revision of
existing unsatisfactory scars. According to the American Society for Plastic Surgery, there are approximately 180,000 scar revision surgeries in the United States every year. In addition to cosmetic and reconstructive surgeries, medical
interventions which could incorporate an anti-scarring agent include treatment of scarring that results from trauma, surgery or burns (especially relating to raised or hypertrophic scarring or contracture scarring), and surgical revision of existing
unsatisfactory scars. Moreover, there are over 42 million medical procedures in the U.S. each year that could potentially benefit from a therapeutic treatment that could successfully reduce or prevent scarring; thus, the market potential is
quite large.
AMD is the leading cause of severe vision loss in adults over age 50. According to the National Eye Institute, in 2010
approximately 2.07 million people had AMD. The National Eye Institute further states that as the proportion of people in the U.S. age 65 and older grows larger, more people are developing
age-related
diseases, such as AMD. Due to the aging population, this number is expected to double to an estimated 5.44 million people in the year 2050. There is no cure for AMD and over 50% of patients start to develop scarring after 2 years on anti-VEGF
therapy, the current standard of care. This represents a large number of patients with an unmet medical need that could benefit from a therapeutic treatment that could successfully reduce or prevent scarring in the retina, and thereby improve vision
loss.
Overexpression of CTGF is implicated in dermal scarring, subretinal fibrosis and other fibrotic diseases. Because of this, we
believe that
RXI-109
or other CTGF-targeting RNAi compounds may be able to treat the fibrotic component of numerous additional indications. These indications are as wide ranging as acute spinal injury,
endometriosis, organ fibrosis including liver and pulmonary fibrosis, cutaneous scleroderma and vascular restenosis, in addition to numerous ocular diseases that result in retinal scarring. If the current clinical trials of
RXI-109
produce successful results, we may explore opportunities in these additional indications that can be accessed by local administration, starting with intradermal or intravitreal injection. Although the
Company does not intend to develop systemic uses of
RXI-109
at this time, the Company is open to business development and
out-licensing
opportunities for those
applications.
DPCP, the active ingredient in Samcyprone, is a small molecule that has been used since the late 1970s to stimulate
regrowth of hair in patients with alopecia areata. Recent publications have supported its use as an immunomodulator for the treatment of alopecia areata, warts and cutaneous metastases of malignant melanoma, a combined market potential of over an
estimated $1 billion. Although it has been used by physicians for several decades, it has never been reviewed or approved by a regulatory authority as a drug. If FDA approval is granted, Samcyprone, RXis proprietary formulation of
DPCP, is expected to achieve market exclusivity.
6
Despite many advances, there is still a significant unmet need for cancer treatments. There are
currently close to 180 therapies across various phases of development in the T-cell immunotherapy market. This growth is supported by robust and opportunistic pipelines targeting various indications. Pharmaceutical and large biotechnology companies
are actively looking for complementary technology platforms that enhance their cellular pipelines. Initial clinical trials of adoptive cell transfer, our approach to immunotherapy, have shown limited success in treatment of solid tumors. One of the
major issues is the immunosuppressive tumor microenvironment. Multiple inhibitory receptors, or immune checkpoints, are responsible for immunosuppression. Our
sd-rxRNA
treatment can be seamlessly integrated in
existing and new adoptive cell transfer therapies to overcome immunosuppression issues. Our
sd-rxRNA
compounds silence various immunosuppressive genes and boost the ability of therapeutic cells to kill tumors,
while offering a safe and versatile approach to reduction of immunosuppression in therapeutic cells.
Introduction to RNAi
RNAi is a naturally occurring phenomenon where short, double-stranded RNA molecules interfere with the expression of targeted genes. The
discovery of RNAi is regarded as a significant advancement in the scientific community, as evidenced by the 2006 Nobel Prize in Medicine awarded to the
co-discoverers
of RNAi, including Dr. Craig Mello,
one of the founders of RXi.
RNAi offers a novel approach to the drug development process because RNAi compounds can potentially be
designed to target any one of the thousands of human genes, many of which are undruggable by other modalities. The specificity of RNAi is achieved by an intrinsic, well-understood biological mechanism based on designing the sequence of
an RNAi compound to match the sequence of the targeted gene. The sequence of the entire human genome is now known, and the mRNA coding sequence for many proteins is already available. Supported by numerous gene-silencing reports and our own
research, we believe that this sequence information can be used to design RNAi compounds to interfere with the expression of almost any specific gene.
Our RNAi Therapeutic Platform
The first
design of RNAi compounds to be pursued for the development of human therapeutics were short, double-stranded RNAs that included at least one overhanging single-stranded region and limited modifications, known as small-interfering RNA, or siRNA,
which we will also refer to as classic siRNA.
We believe that classic siRNAs have drawbacks that may limit the usefulness of those agents
as human therapeutics, and that we may be able to utilize the technologies we have licensed and developed internally to optimize RNAi compounds for use as human therapeutic agents. For
sd-rxRNA,
it is the
combination of the duplex length, the nucleotide sequence and the configuration of chemical modifications that are important for effective RNAi therapeutics.
Drug delivery has been the primary challenge in developing RNAi therapeutics since its initial discovery. One conventional solution to the
delivery problem involves encapsulation into a lipid-based particle, such as a liposome, to improve circulation time and cellular uptake. Scientists at RXi have used an alternative approach to delivery in which drug-like properties were built into
the RNAi compound itself. These novel compounds are termed self-delivering RNAi compounds or
sd-rxRNA.
sd-rxRNAs
are hybrid oligonucleotide compounds that the Company believes combine the beneficial
properties of both conventional RNAi and antisense technologies. Traditional, single-stranded antisense compounds have favorable tissue distribution and cellular uptake properties. However, they do not have the intracellular potency that is a
hallmark of double-stranded RNAi compounds. Conversely, the duplex structure and hydrophilic character of traditional RNAi compounds results in poor tissue distribution and cellular uptake. In an attempt to combine the best properties of both
technologies,
sd-rxRNA
have a single-stranded phosphorothioate region, a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical modifications. The combination of these
features allows
sd-rxRNA
to achieve efficient spontaneous cellular uptake and potent, long-lasting intracellular activity.
7
We believe that our next generation
sd-rxRNA
compounds
offer significant advantages over siRNAs used by other companies developing RNAi therapeutics, highlighted by the following characteristics:
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Efficient cellular uptake in the absence of a delivery vehicle;
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More resistant to nuclease degradation than unformulated oligonucleotides;
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Able to suppress long
non-coding
RNAs, both in cytoplasm and the nucleus;
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Potentially more specific for the target gene; and
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More reliable at blocking immune side effects than classic siRNA.
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Our Route of Administration
The route by which an RNAi therapeutic is brought into contact with the body depends on the intended organ or tissue to be treated. Delivery
routes can be simplified into two major categories: (1) local (when a drug is delivered directly to the tissue of interest); and (2) systemic (when a drug accesses the tissue of interest through the circulatory system). Local delivery may
avoid some hurdles associated with systemic approaches such as rapid clearance from circulation and inefficient tissue extravasation (crossing the endothelial barrier from the blood stream). However, the local delivery approach can only be applied
to a limited number of organs or tissues (
e.g.
, skin, eye, lung and potentially the central nervous system).
The key to
therapeutic success with RNAi lies in delivering intact RNAi compounds to the target tissue and the interior of the target cells. To accomplish this, we have developed a comprehensive platform that includes chemically synthesized RNAi compounds that
are optimized for stability and efficacy and combine efficient cellular uptake with a local delivery approach.
Our
sd-rxRNA
molecules have unique properties that improve tissue and cell uptake. We have studied
sd-rxRNA
molecules in animal models for dermal and ocular delivery. Direct
administration of
sd-rxRNA
via injection with no additional delivery vehicle to the skin or to the eye demonstrates that target gene silencing can be measured after local administration. The dose levels
required for these direct-injection methods are small and suitable for clinical development. The Company has a number of clinical trials currently ongoing with
RXI-109,
an
sd-rxRNA
compound, for local delivery in the skin and the eye. Other target tissues that are potentially accessible for local delivery using
sd-rxRNA
compounds include
the lung, the central nervous system, mucosal tissues and sites of inflammation and tumor (direct administration).
We have also studied
our
sd-rxRNA
compounds for use in the well-established methodologies of adoptive cell transfer. Immune cells are isolated from specific patients or retrieved from allogeneic immune cell banks and then expanded
and possibly processed to express tumor-binding receptors. Our process involves ex vivo treatment of the immune cells with our
sd-rxRNA
compounds to inhibit the expression of immune checkpoint genes. The
enhanced cells are then returned and used to treat the same patient.
Introduction to Samcyprone
Immunotherapy is the treatment of disease by inducing, enhancing or suppressing an immune response. Active agents in immunotherapy are
collectively called immunomodulators. They are a diverse array of recombinant, synthetic and natural preparations that help to regulate or normalize the immune system.
Our Samcyprone Therapeutic Pipeline
Samcyprone, licensed by the Company in 2014, is a proprietary topical formulation of the small molecule DPCP. DPCP has been used for
decades as a treatment to stimulate hair
re-growth
in patients with alopecia areata and more recently as a treatment for recalcitrant wart removal and as an aid in the reduction of cutaneous metastases of
melanoma. As it is currently used, a doctor must prescribe DPCP to be formulated by a compounding facility, generally in acetone.
8
There are no standardized methods of formulation or procedures for use. Because it works by causing an immune response, the level of response can vary greatly from person to person. Moreover,
some pharmacies will not even compound it, even if it is prescribed.
Samcyprone works by initiating a
T-cell
response.
T-cells
or T lymphocytes are a type of white blood cell that play a key role in cell-mediated immunity. The use of Samcyprone will improve ease of use,
allow for lower sensitizing and challenge doses than in current use and should result in an improved safety margin and a more consistent immune response.
There will be several advantages to using an FDA regulated formulation like the one we are developing. First, the amount of DPCP used in our
own ointment formulation is lower than that generally used in acetone formulation. This should result in reduced side effects that happen due to accidental over-sensitization when a higher than necessary concentration is used. Second, we are
developing an optimized dosing regimen so that a standardized response can be expected. And third, the ointment formulation will be easier to prescribe and to use than an acetone formulation, allowing for ease of application at the appropriate site
on the skin.
Intellectual Property
We protect our proprietary information by means of United States and foreign patents, trademarks and copyrights. In addition, we rely upon
trade secret protection and contractual arrangements to protect certain of our proprietary information and products. We have pending patent applications that relate to potential drug targets, compounds we are developing to modulate those targets,
methods of making or using those compounds and proprietary elements of our drug discovery platform.
Much of our technology and many of
our processes depend upon the knowledge, experience and skills of key scientific and technical personnel. To protect our rights to our proprietary
know-how
and technology, we require all employees, as well as
our consultants and advisors when feasible, to enter into confidentiality agreements that require disclosure and assignment to us of ideas, developments, discoveries and inventions made by these employees, consultants and advisors in the course of
their service to us, and we vigorously defend that position with partners, as well as with employees who leave the Company.
We have also
obtained rights to various patents and patent applications under licenses with third parties, which require us to pay royalties, milestone payments, or both. The degree of patent protection for biotechnology products and processes, including ours,
remains uncertain, both in the United States and in other important markets, because the scope of protection depends on decisions of patent offices, courts and lawmakers in these countries. There is no certainty that our existing patents or others,
if obtained, will afford us substantial protection or commercial benefit. Similarly, there is no assurance that our pending patent applications or patent applications licensed from third parties will ultimately be granted as patents or that those
patents that have been issued or are issued in the future will stand if they are challenged in court. We assess our license agreements on an ongoing basis, and may from time to time terminate licenses to technology that we do not intend to employ in
our technology platforms, or in our product discovery or development activities.
Patents and Patent Applications
We are actively prosecuting
thirty-two
patent families, including those acquired from MirImmune,
covering our compounds and technologies, including
RXI-109
and Samcyprone. A combined summary of these patents and patent applications is set forth below in the following table:
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Pending
Applications
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Issued
Patents
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United States
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21
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31
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Canada
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9
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1
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Europe
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11
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31
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Japan
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7
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7
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Other Markets
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12
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9
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Patents and Patent Applications Relating to RNAi
Our RNAi portfolio includes seventy-eight issued patents, fourteen of which cover our self-delivering RNAi platform. These fourteen patents
broadly cover both the composition and methods of use of our self-delivering platform technology and uses of our
sd-rxRNAs
targeting CTGF for the treatment of fibrotic disorders (including
RXI-109
for the treatment of dermal and ocular fibrosis), as well as
sd-rxRNAs
targeting immune checkpoint targets for ex vivo cell-based cancer immunotherapies. These patents
are scheduled to expire between 2029 and 2035. Furthermore, there are fifty-seven patent applications, encompassing what we believe to be important new RNAi compounds and their use as therapeutics and/or cosmetics, chemical modifications of RNAi
compounds that improve the compounds suitability for therapeutic uses (including delivery) and compounds directed to specific targets (
i.e.
, that address specific disease states).
The patents and any patents that may issue from these pending patent applications will, if issued, be set to expire between 2022 and 2035, not
including any patent term extensions that may be afforded under the Federal Food, Drug, and Cosmetic Act (and the equivalent provisions in foreign jurisdictions) for any delays incurred during the regulatory approval process relating to human drug
products (or processes for making or using human drug products).
Patent and Patent Applications Relating to Samcyprone
The Samcyprone portfolio includes one issued patent and three patent applications. The patent and patent applications cover both the
compositions and methods of use of Samcyprone for the treatment of warts, human papilloma virus (HPV) skin infections, skin cancer (including melanoma) and immunocompromised patients.
The patent and any patents that may issue from the pending applications will be set to expire between 2019 and 2031, not including any patent
term extensions that may be afforded under the Federal Food, Drug, and Cosmetic Act (and the equivalent provisions in foreign jurisdictions) for any delays incurred during the regulatory approval process relating to human drug products (or processed
for making or using human drug products).
Intellectual Property License Agreements
We have secured exclusive and
non-exclusive
rights to develop therapeutics by licensing key RNAi
technologies, Samcyprone and patent rights from third parties. These rights relate to chemistry and configuration of compounds, delivery technologies of compounds to cells and therapeutic targets. As we continue to develop our own proprietary
compounds, we continue to evaluate both our
in-licensed
portfolio as well as the field for new technologies that could be
in-licensed
to further enhance our intellectual
property portfolio and unique position in the RNAi and immunotherapy space.
Advirna LLC.
In September 2011, we entered into an
agreement with Advirna, LLC (
Advirna
) pursuant to which Advirna assigned to us its existing patent and technology rights related to
sd-rxRNA
technology in exchange for our agreement to issue
5% of the Companys fully-diluted shares, pay an annual maintenance fee of $100,000 and pay a
one-time
milestone payment of $350,000 upon the issuance of the first patent with valid claims covering the
assigned technology. The common shares of the Company were issued to Advirna in 2012 and the
one-time
milestone payment was paid in 2014. Additionally, we will be required to pay a 1% royalty to Advirna on any
license revenue received by us with respect to future licensing of the assigned Advirna patent and technology rights. We also granted back to Advirna a license under the assigned patent and technology rights for fields of use outside human
therapeutics and diagnostics.
Our rights under the Advirna agreement will expire upon the later of: (i) the expiration of the
last-to-expire
of the patent rights (as defined therein) or (ii) the abandonment of the
last-to-be
abandoned of such patents, unless earlier terminated in accordance with the provisions of the agreement.
We may terminate the Advirna agreement at any time upon 90 days written notice to Advirna, and Advirna may terminate the agreement upon
90 days prior written notice in the event that we cease using commercially reasonable efforts to research, develop, license or otherwise commercialize the patent rights or royalty-bearing products (as defined therein), provided
that we may refute such claim within such
90-day
period by showing budgeted expenditures for the research, development, licensing or other commercialization consistent with other technologies of similar stage
of development and commercial potential as the patent rights or royalty-bearing products. Further, either party at any time
10
may provide to the other party written notice of a material breach of the agreement. If the other party fails to cure the identified breach within 90 days after the date of the notice, the
aggrieved party may terminate the agreement by written notice to the party in breach.
Hapten
Pharmaceuticals, LLC
. In
December 2014, the Company entered into an Assignment and License Agreement with Hapten Pharmaceuticals, LLC (
Hapten
) under which Hapten agreed, effective at a closing that was subject to the satisfaction of certain closing
conditions which occurred in February 2015, to sell and assign to us certain patent rights and related assets and rights, including an investigational new drug application and clinical data, for Haptens Samcyprone products for
therapeutic and prophylactic use. Under the Assignment and License Agreement and upon the closing, Hapten received a
one-time
upfront cash payment of $100,000 and we issued to Hapten 20,000 shares of common
stock of the Company. Pursuant to the Assignment and License Agreement, Hapten will be entitled to receive: (i) future milestone payments tied to the achievement of certain clinical and commercial objectives (all of which payments may be made
at our option in cash or through the issuance of common stock) and (ii) escalating royalties based on product sales by us and any sublicensees.
We have certain customary diligence obligations under the Assignment and License Agreement requiring us to use commercially reasonable efforts
to develop and commercialize one or more products covered by the Assignment and License Agreement, which obligations, if not performed, could result in rights assigned or licensed to us reverting back to Hapten.
In addition to the license agreements listed above, the Company has entered into and may enter into other license agreements that may benefit
us as we develop our RNAi and Samcyprone pipelines.
Other Strategic Agreements
OPKO
Health, Inc
. In March 2013, the Company entered into an Asset Purchase Agreement with OPKO Health, Inc.
(
OPKO
) (the
Asset Purchase Agreement
), in which we acquired substantially all of its RNAi-related assets, which included patents and patent applications, licenses, clinical and preclinical data and other related
assets. In exchange for the assets that we purchased from OPKO, we issued 166,667 shares of our common stock and agreed to pay, if applicable: (i) up to $50 million in development and commercialization milestones for the successful
development and commercialization of each Qualified Drug (as defined therein) and (ii) royalty payments equal to: (a) a
mid-single-digit
percentage of Net Sales (as defined
therein) with respect to each Qualified Drug sold for an ophthalmologic use during the applicable Royalty Period (as defined therein) and (b) a
low-single-digit
percentage of Net Sales with
respect to each Qualified Drug sold for a
non-ophthalmologic
use during the applicable Royalty Period.
We have certain customary diligence obligations under the Asset Purchase Agreement requiring us to use commercially reasonable efforts to
develop and commercialize one or more products covered by the Asset Purchase Agreement, which obligations, if not performed, could result in assets transferred and rights assigned or licensed to us reverting back to OPKO.
MirImmune
Inc
. In March 2015, RXi granted an exclusive license to MirImmune to utilize the Companys novel and proprietary
sd-rxRNA
technology for MirImmunes use in developing ex vivo cell-based cancer immunotherapies to target immune inhibitory pathways (checkpoints) which are responsible for limiting the efficacy of cancer
immunotherapies. Under the terms of the agreement, MirImmune was responsible for all research, development, manufacturing, regulatory and commercialization activities for the licensed products.
On October 7, 2016, RXi entered into an exclusive option agreement pursuant to which the Company had the exclusive option, but not the
obligation, to purchase 100% of the outstanding capital stock of MirImmune. In January 2017, the Company exercised the option and entered into the Stock Purchase Agreement pursuant to which it acquired 100% of the outstanding shares of capital stock
of MirImmune for an aggregate of 2,750,371 shares of common stock of the Company and 1,115,579 shares of Series C Preferred Stock, subject to a holdback of 3% of the aggregate closing consideration for any purchase-price adjustments. Under the terms
of the Stock Purchase Agreement, if certain development or commercial milestones are achieved within two years, the Company will be required to either (i) issue to MirImmunes shareholders a number of shares of common stock or
(ii) pay the equivalent value in cash.
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Thera Neuropharma, Inc
. In May 2016, RXi granted an exclusive license to Thera
Neuropharma, Inc. (
Thera
) to the Companys novel and proprietary
sd-rxRNA
platform to develop therapeutics for neurodegenerative diseases. Under the terms of the agreement, Thera will
be responsible for all research, development, manufacturing, regulatory and commercialization activities for the licensed products. Theras initial focus will be on
sd-rxRNA
compounds targeting superoxide
dismutase 1 (SOD1) for use in developing innovative treatments for amyotrophic lateral sclerosis (ALS), commonly known as Lou Gehrigs disease. Upon execution of the license agreement, RXi was issued shares of common stock of Thera and was
granted a five year warrant to purchase additional shares of common stock of Thera pursuant to the terms of the license agreement. The Company is eligible to receive future cash, additional equity and royalties based on the achievement of certain
milestones.
Research and Development
To date, our research programs have primarily focused on developing technology necessary to make RNAi compounds available by local
administration for diseases for which we intend to develop an RNAi therapeutic, identifying and testing RNAi compounds against therapeutically relevant targets in the fields of dermatology and ophthalmology and identifying lead product candidates
and moving those product candidates into the clinic. With our recent acquisition of MirImmune, our research programs will also focus on developing, identifying and testing RNAi therapeutics in the field of cell-based cancer immunotherapy. Since we
commenced operations, research and development has composed a significant proportion of our total operating expenses and is expected to compose the majority of our spending for the foreseeable future.
There are risks in any new field of drug discovery that preclude certainty regarding the successful development of a product. We cannot
reasonably estimate or know the nature, timing and costs of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from, any product candidate. Our inability to make these
estimates results from the uncertainty of numerous factors, including but not limited to:
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Our ability to advance product candidates into preclinical research and clinical trials;
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The scope and rate of progress of our preclinical program and other research and development activities;
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The scope, rate of progress and cost of any clinical trials we commence;
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The cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;
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Clinical trial results;
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The terms and timing of any collaborative, licensing and other arrangements that we may establish;
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The cost and timing of regulatory approvals;
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The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop;
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The cost and timing of establishing sales, marketing and distribution capabilities;
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The effect of competing technological and market developments; and
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The effect of government regulation and insurance industry efforts to control healthcare costs through reimbursement policy and other cost management strategies.
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Failure to complete any stage of the development of our product candidates in a timely manner could have a material adverse effect on our
operations, financial position and liquidity.
Research and Development Expense
Research and development expense consists of compensation-related costs for our employees dedicated to research and development activities,
fees related to our Scientific Advisory Board members, expenses related to our ongoing research and development efforts primarily related to our clinical trials, drug manufacturing, outside contract services, licensing and patent fees and laboratory
supplies and services for our research programs. We expect research and development expenses to increase as we expand our discovery, preclinical and clinical activities.
12
Total research and development expense for the years ended December 31, 2016 and 2015 was
$5,415,000 and $6,925,000, respectively.
Competition
We believe that numerous companies are investigating or plan to investigate a variety of proposed anti-scarring therapies or cell-based
immunotherapies in clinical trials or are working in the RNAi area generally. Many other companies are pursuing
non-RNAi-based
therapies for one or more fibrotic disease indications, including ocular scarring
or other indications that we may seek to pursue. The companies include large and small pharmaceuticals, chemical and biotechnology companies, as well as universities, government agencies and other private and public research organizations.
We believe that other companies currently developing anti-scarring therapies, both dermal and ocular, include CoDa Therapeutics, Inc.,
Sirnaomics, Inc., FirstString Research, Inc., Promedior, Inc., FibroGen, Inc., miRagen Therapeutics, Inc., Ophthotech Corporation, Vascular BioSciences, Allergan plc, and Suneva Medical, Inc.
We believe that other companies currently developing cell-based cancer immunotherapies include Juno Therapeutics, Inc., Kite Pharma, Inc.,
Cellectis S.A., Adaptimmune Therapeutics plc, Lion Biotechnologies, Inc., Bellicum Pharmaceuticals, Inc., and NantKwest, Inc. Many larger pharmaceutical companies such as Novartis International AG, Celgene Corporation, Pfizer Inc., GlaxoSmithKline
plc, Amgen, Inc., Johnson & Johnson and EMD Serono, Inc. have entered the field through major deals with biotechnology companies and academia.
We believe that other companies working in the RNAi area, generally, include Alnylam Pharmaceuticals, Inc., Benitec Biopharma Limited, Silence
Therapeutics plc, Quark Pharmaceuticals, Inc., Arbutus Biopharma Corporation, Arrowhead Pharmaceuticals, Inc., Dicerna Pharmaceuticals, Inc., Sylentis, S.A. and Roche Innovation Center Copenhagen A/S, as well as a number of large pharmaceutical
companies.
We do not believe that there are any companies developing treatments for cutaneous warts that would be considered direct
competitors with the Company; however, there are several existing treatments for cutaneous warts with which Samcyprone could potentially compete. Current topical medicinal treatments for warts include salicylic acid, off label use of Imiquimod
and Picato
®
and the most common ablative treatments include removal through medical procedures, such as cryotherapy, surgery or chemical peels.
Government Regulation
The United States
and many other countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of drugs and biologic products. The FDA regulates
pharmaceutical and biologic products under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations.
To obtain approval of our future product candidates from the FDA, we must, among other requirements, submit data supporting safety and
efficacy for the intended indication as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive laboratory tests and preclinical and clinical trials. The collection of
these data, as well as the preparation of applications for review by the FDA involve significant time and expense. The FDA also may require post-marketing testing to monitor the safety and efficacy of approved products or place conditions on any
approvals that could restrict the therapeutic claims and commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we encounter problems at any time
following initial marketing of our products.
The first stage of the FDA approval process for a new biologic or drug involves completion
of preclinical studies and the submission of the results of these studies to the FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data and other information submitted to the FDA in an IND application,
must become effective before human clinical trials may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and animal studies to assess the efficacy and safety of the product candidate.
13
After the IND becomes effective, a company may commence human clinical trials. These are
typically conducted in three sequential phases, but the phases may overlap. Phase 1 trials consist of testing the product candidate in a small number of patients or healthy volunteers, primarily for safety at one or more doses. Phase 2 trials, in
addition to safety, evaluate the efficacy of the product candidate in a patient population somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for safety and clinical efficacy in an expanded population at
multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of the Institutional Review Board (
IRB
) at the institutions participating in the trials, prior to commencement of each clinical
trial.
To obtain FDA marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing,
together with, among other things, detailed information on the manufacture and composition of the product candidate, in the form of a new drug application (an
NDA
), or, in the case of a biologic, a biologics license application (a
BLA
).
The amount of time taken by the FDA for approval of an NDA or BLA will depend upon a number of factors,
including whether the product candidate has received priority review, the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question and the workload
at the FDA.
The FDA may, in some cases, confer upon an investigational product the status of a fast track product. A fast track product
is defined as a new drug or biologic intended for the treatment of a serious or life threatening condition that demonstrates the potential to address unmet medical needs for this condition. The FDA can base approval of an NDA or BLA for a fast track
product on an effect on a surrogate endpoint, or on another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data suggests that a fast track product may be effective, the FDA may initiate review of
entire sections of a marketing application for a fast track product before the sponsor completes the application.
We anticipate that our
products will be manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the
manufacturing facilities are in compliance with the FDAs current good manufacturing practices (
cGMP
), which are regulations that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also
must comply with the FDAs general biological product standards. Our manufacturers also will be subject to regulation under the Occupational Safety and Health Act, the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act
and the Resource Conservation and Recovery Act and other applicable environmental statutes. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the cGMP. Our manufacturers
will have to continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing or recall or seizure of product. Adverse patient
experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not
maintained or if problems concerning safety or efficacy of the product occur following approval.
The labeling, advertising, promotion,
marketing and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission requirements which include, among others, standards and regulations for
off-label
promotion, industry sponsored scientific and educational activities, promotional activities involving the internet, and
direct-to-consumer
advertising. We also will be
subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of hazardous materials, including chemicals and radioactive and biological materials. In addition, we will be subject to various laws
and regulations governing laboratory practices and the experimental use of animals. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay
issuance of product approvals, seize or recall products and deny or withdraw approvals.
We will also be subject to a variety of
regulations governing clinical trials and sales of our products outside the United States. Whether or not FDA approval has been obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must
be obtained prior to the commencement of marketing the product in those countries. The approval process varies from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the European Union,
Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the United States.
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Environmental Compliance
Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials,
chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste products. We are also subject to numerous
environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of
bio-hazardous
materials. The cost of
compliance with these laws and regulations could be significant and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements.
Employees
As of March 15, 2017, we
had fifteen full-time employees, eight of whom were engaged in research and development, and seven of whom were engaged in management, administration and finance. None of our employees are represented by a labor union or covered by a collective
bargaining agreement nor have we experienced any work stoppages.
Corporate Information
RXi was incorporated in the state of Delaware in 2011. Our executive offices are located at 257 Simarano Drive, Suite 101, Marlborough, MA
01752, and our telephone number is (508)
767-3861.
Investor Information
The Companys website address is
http://www.rxipharma.com
. We make available on our website, free of charge, copies of our annual
reports on Form
10-K,
our quarterly reports on Form
10-Q
and our current reports on Form
8-K,
and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the Securities and Exchange
Commission (the
SEC
).
You may read and copy any materials the Company files with the SEC at the SECs Public
Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding RXi and other issuers that file electronically with the SEC. The SECs website address is
http://www.sec.gov
.
Risks Relating to Our Business and Industry
We are dependent on the success of our lead drug candidates, which may not receive regulatory approval or be successfully commercialized.
RXI-109,
our lead drug candidate and first RNAi-based product candidate, is designed to
reduce the expression of connective tissue growth factor (
CTGF
), a critical regulator of several biological pathways involved in fibrosis. Samcyprone, our second drug candidate, is a proprietary topical formulation of the
small molecule diphenylcyclopropenone (
DPCP
), an immunomodulator that works by initiating a
T-cell
response. We began the clinical program to reduce the formation of hypertrophic scars with
RXI-109
in June 2012, and are currently conducting a Phase 2 clinical trial for
RXI-109
in this indication and a Phase 1/2 clinical trial in retinal scarring. We initiated our
Phase 2 clinical trial for the treatment of cutaneous warts with Samcyprone in December 2015. The U.S. Food and Drug Administration (
FDA
) may require additional information from the Company regarding our current or planned
trials at any time, and such information may be costly to provide or cause potentially significant delays in development. There is no assurance that we will be able to successfully develop
RXI-109,
Samcyprone or any other product candidate.
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We have no commercial products and currently generate no revenue from commercial sales or
collaborations and may never be able to develop marketable products. The FDA or similar foreign governmental agencies must approve our
non-cosmetic
products in development before they can be marketed. The
process for obtaining FDA approval is both time-consuming and costly, with no certainty of a successful outcome. Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive preclinical tests and successful
clinical trials to demonstrate the safety and efficacy of our product candidates in humans. For example, although the results of our Phase 1 clinical trials and preliminary results of our Phase 2 clinical trials of
RXI-109
are promising, additional clinical trials will be required to establish the safety and efficacy of
RXI-109.
While DPCP has been used by physicians for decades,
we have not yet shown safety or efficacy in humans for Samcyprone or for any of our other product candidates. A failure of any preclinical study or clinical trial can occur at any stage of testing. The results of preclinical and initial
clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. Preliminary observations made in early stages of clinical trials with small numbers of subjects are inherently
uncertain. Investors are cautioned that initial clinical trial results are not necessarily indicative of results that will be obtained when full data sets are analyzed or in subsequent clinical trials.
A number of different factors could prevent us from obtaining regulatory approval or commercializing our product candidates on a timely
basis, or at all.
We, the FDA or other applicable regulatory authorities, or an Institutional Review Board
(
IRB
) may suspend clinical trials of a drug candidate at any time for various reasons, including if we or they believe the subjects participating in such trials are being exposed to unacceptable health risks. Among other reasons,
adverse side effects of a drug candidate on subjects in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug candidate for any or all indications of
use.
Clinical trials of a new drug candidate require the enrollment of a sufficient number of subjects, including subjects who are
suffering from the disease or condition the drug candidate is intended to treat and who meet other eligibility criteria. Rates of subject enrollment are affected by many factors, and delays in subject enrollment can result in increased costs and
longer development times.
Clinical trials also require the review and oversight of IRBs, which approve and continually review clinical
investigations and protect the rights and welfare of human subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or
information derived from a clinical investigation not subject to initial and continuing IRB review and approval.
Numerous factors could
affect the timing, cost or outcome of our drug development efforts, including the following:
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Delays in filing or acceptance of initial drug applications for our product candidates;
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Difficulty in securing centers to conduct clinical trials;
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Conditions imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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Problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;
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Difficulty in enrolling subjects in conformity with required protocols or projected timelines;
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Third-party contractors failing to comply with regulatory requirements or to meet their contractual obligations to us in a timely manner;
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Our drug candidates having unexpected and different chemical and pharmacological properties in humans than in laboratory testing and interacting with human biological systems in unforeseen, ineffective or harmful ways;
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The need to suspend or terminate clinical trials if the participants are being exposed to unacceptable health risks;
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Insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical trials;
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Effects of our drug candidates not being the desired effects or including undesirable side effects or the drug candidates having other unexpected characteristics;
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The cost of our clinical trials being greater than we anticipate;
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Negative or inconclusive results from our clinical trials or the clinical trials of others for similar drug candidates or inability to generate statistically significant data confirming the efficacy of the product being
tested;
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Changes in the FDAs requirements for testing during the course of that testing;
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Reallocation of our limited financial and other resources to other clinical programs; and
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Adverse results obtained by other companies developing similar drugs.
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It is possible that
none of the product candidates that we may attempt to develop will obtain the appropriate regulatory approvals necessary to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses
for which we may market the product. The time required to obtain FDA and other approvals is unpredictable, but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis we
perform of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material
adverse effect on our ability to generate revenue from the particular drug candidate.
We also are subject to numerous foreign regulatory
requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described
above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of the United States.
The approach we are taking to discover and develop novel therapeutics using RNAi is unproven and may never lead to marketable products.
RNA interference is a relatively new scientific discovery. Our RNAi technologies have been subject to only limited clinical
testing. To date, no company has received regulatory approval to market therapeutics utilizing RNAi, and a number of clinical trials of RNAi technologies by other companies have been unsuccessful. The scientific evidence to support the feasibility
of developing drugs based on these discoveries is both preliminary and limited. To successfully develop RNAi-based products, we must resolve a number of issues, including stabilizing the RNAi material and delivering it into target cells in the human
body. We may spend large amounts of money trying to resolve these issues and may never succeed in doing so. In addition, any compounds that we develop may not demonstrate in subjects the chemical and pharmacological properties ascribed to them in
laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or even harmful ways.
Samcyprone represents a novel approach, topical immunotherapy, to the treatment of skin disorders that presents development
challenges to us and may never lead to marketable products.
Although DPCP, the active ingredient in Samcyprone, has been
used by physicians for several decades to stimulate regrowth of hair in patients with alopecia areata and to clear common warts, it has never been reviewed or approved by a regulatory authority as a drug. Other immunomodulatory compounds, such as
Imiquimod and Picato
®
, have been approved for topical use in other indications by the FDA. Our formulation of DPCP, Samcyprone, has been subject to only limited clinical testing. Further
testing may show that Samcyprone may interact with human biological systems in unforeseen or ineffective ways. In addition, to successfully develop Samcyprone we must resolve a number of development challenges, including developing a
consistent process for the safe administration of the product and establishing a consistent manufacturing process in line with the good manufacturing practice regulations. We may spend significant amounts of money to resolve these development
challenges and to obtain regulatory approval for Samcyprone and may never succeed in doing so.
We have limited experience as
a company in the cell-based cancer immunotherapy field.
Prior to the Companys acquisition of MirImmune Inc.
(
MirImmune
) in January 2017, the Companys efforts were focused on the development of therapeutics in the areas of dermatology and ophthalmology. While we are currently conducting multiple research studies using our sd-rxRNA
technology for use in developing ex vivo cell-based cancer immunotherapies, we have limited experience as a company in developing immunotherapy technologies. Because of the number of companies and intense competition in immunotherapy, we may not
have the ability to successfully overcome many of the risks and uncertainties that companies face in this field. In part because of this lack of experience, we cannot be certain that we will be successful in developing cell-based cancer
immunotherapies.
The use of our RNAi compounds in cell-based cancer immunotherapy is a new approach to the treatment of cancer
which may present us with development challenges.
Our approach to immunotherapy builds on well-established methodologies of
adoptive cell transfer. Immune cells, such as
T-lymphocytes,
are isolated from specific patients or retrieved from allogeneic immune cell banks and then expanded and sometimes processed to express
tumor-binding receptors. To successfully develop drugs based on our approach, we must overcome a number of challenges such as developing a consistent process for the safe administration of enhanced cells to be returned to the patient, developing a
manufacturing process in line with good manufacturing practices and demonstrating that our therapies achieve an adequate response compared to their risks. While there have been a number of immunotherapy drugs approved by the FDA, there have been no
FDA drug approvals using the approach that we are taking. We will be subjected to thorough regulatory review by the FDA and there is limited experience in this area with a few precedents. We may spend large amounts of money trying to resolve these
issues and may never succeed in doing so.
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The FDA could impose a unique regulatory regime for our therapeutics.
The compounds we intend to develop may represent a new class of drug, and the FDA has not yet established any definitive policies, practices
or guidelines in relation to these drugs. While we expect any product candidates that we develop will be regulated as a new drug under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other products we may develop
as biologics under the Public Health Service Act. The lack of policies, practices or guidelines may hinder or slow review by the FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining
requirements that we may not have anticipated.
Even if we receive regulatory approval to market our product candidates, our product
candidates may not be accepted commercially, which may prevent us from becoming profitable.
The product candidates that we are
developing are based on new technologies and therapeutic approaches. For example, RNAi products may be more expensive to manufacture than traditional small molecule drugs, which may make them costlier than competing small molecule drugs.
Additionally, RNAi products do not readily cross the
so-called
blood brain barrier, are rapidly eliminated from circulating blood and, for various applications, are likely to require injection or implantation,
which will make them less convenient to administer than drugs administered orally. Key participants in the pharmaceutical marketplace, such as physicians, medical professionals working in large reference laboratories, public health laboratories and
hospitals, third-party payors and consumers may not accept products intended to improve therapeutic results based on our technologies. As a result, it may be more difficult for us to convince the medical community and third-party payors to accept
and use our products or to provide favorable reimbursement. If medical professionals working with large reference laboratories, public health laboratories and hospitals choose not to adopt and use our technologies, our products may not achieve
broader market acceptance.
Additionally, although we expect that we will have intellectual property protection for our technology,
certain governments may elect to deny patent protection for drugs targeting diseases with high unmet medical need (e.g., as in the case of HIV) and allow in their country internationally unauthorized generic competition. If this were to happen, our
commercial prospects for developing any such drugs would be substantially diminished in these countries.
We are subject to
significant competition and may not be able to compete successfully.
We believe that numerous companies are investigating or plan
to investigate a variety of proposed anti-scarring therapies or cell-based cancer immunotherapies in clinical trials or are working in the RNAi area generally. Many other companies are pursuing
non-RNAi-based
therapies for one or more fibrotic disease indications, including ocular scarring or other indications that we may seek to pursue. The companies include large and small pharmaceuticals, chemical and biotechnology companies, as well as universities,
government agencies and other private and public research organizations.
We do not believe that there are any companies developing
treatments for cutaneous warts that would be considered direct competitors with the Company, however, there are several existing treatments with which Samcyprone could potentially compete.
Most of these competitors have substantially greater research and development capabilities and financial, scientific, technical,
manufacturing, marketing, distribution and other resources than we have, and we may not be able to successfully compete with them. In addition, even if we are successful in developing our product candidates, in order to compete successfully we may
need to be first to market or to demonstrate that our products are superior to therapies based on different technologies. A number of our competitors have already commenced clinical testing of product candidates and may be more advanced than we are
in the process of developing products. If we are not first to market or are unable to demonstrate superiority, any products for which we are able to obtain approval may not be successful.
We are dependent on technologies we license, and if we lose the right to license such technologies or fail to license new technologies
in the future, our ability to develop new products would be harmed.
Many patents in the fields we are pursuing have already been
exclusively licensed to third parties, including our competitors. If any of our existing licenses are terminated, the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate
additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.
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We may be unable to protect our intellectual property rights licensed from other parties;
our intellectual property rights may be inadequate to prevent third parties from using our technologies or developing competing products; and we may need to license additional intellectual property from others.
Therapeutic applications of gene silencing technologies, formulations, delivery methods and other technologies that we license from third
parties are claimed in a number of pending patent applications, but there is no assurance that these applications will result in any issued patents or that those patents would withstand possible legal challenges or protect our technologies from
competition. The United States Patent and Trademark Office and patent granting authorities in other countries have upheld stringent standards for the RNAi patents that have been prosecuted so far. Consequently, pending patents that we have licensed
and those that we own may continue to experience long and difficult prosecution challenges and may ultimately issue with much narrower claims than those in the pending applications. Third parties may hold or seek to obtain additional patents that
could make it more difficult or impossible for us to develop products based on our technologies without obtaining a license to such patents, which licenses may not be available on attractive terms, or at all.
In addition, others may challenge the patents or patent applications that we currently license or may license in the future or that we own
and, as a result, these patents could be narrowed, invalidated or rendered unenforceable, which would negatively affect our ability to exclude others from using the technologies described in these patents. There is no assurance that these patent or
other pending applications or issued patents we license or that we own will withstand possible legal challenges. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United
States. Any patents issued to us or our licensors may not provide us with any competitive advantages, and there is no assurance that the patents of others will not have an adverse effect on our ability to do business or to continue to use our
technologies freely. Our efforts to enforce and maintain our intellectual property rights may not be successful and may result in substantial costs and diversion of management time. Even if our rights are valid, enforceable and broad in scope,
competitors may develop products based on technology that is not covered by our licenses or patents or patent applications that we own.
There is no guarantee that future licenses will be available from third parties for our product candidates on timely or satisfactory terms, or
at all. To the extent that we are required and are able to obtain multiple licenses from third parties to develop or commercialize a product candidate, the aggregate licensing fees and milestones and royalty payments made to these parties may
materially reduce our economic returns or even cause us to abandon development or commercialization of a product candidate.
Our success
depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.
The applications
based on RNAi technologies claim many different methods, compositions and processes relating to the discovery, development, delivery and commercialization of RNAi therapeutics. Because this field is so new, very few of these patent applications have
been fully processed by government patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to whom and with what claims. Although we are not aware of any blocking patents or other proprietary
rights, it is likely that there will be significant litigation and other proceedings, such as interference and opposition proceedings in various patent offices, relating to patent rights in the RNAi field. It is possible that we may become a party
to such proceedings.
We may not be able to obtain sufficient financing and may not be able to develop our product candidates.
We believe that our existing cash will likely be sufficient to fund our currently planned operations for at least the next 12
months. However, in the future, we may need to incur debt or issue equity in order to fund our planned expenditures as well as to make acquisitions and other investments. We cannot assure you that debt or equity financing will be available to us on
acceptable terms or at all. If we cannot, or are limited in the ability to, incur debt, issue equity or enter into strategic collaborations, we may be unable to fund the discovery and development of our product candidates, address gaps in our
product offerings or improve our technology.
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We anticipate that we will need to raise substantial amounts of money to fund a variety of future
activities integral to the development of our business, which may include but is not limited to the following:
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To conduct research and development to successfully develop our technologies;
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To obtain regulatory approval for our products;
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To file and prosecute patent applications and to defend and assess patents to protect our technologies;
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To retain qualified employees, particularly in light of intense competition for qualified scientists;
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To manufacture products ourselves or through third parties;
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To market our products, either through building our own sales and distribution capabilities or relying on third parties; and
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To acquire new technologies, licenses or products.
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If we cannot obtain additional financing
in the future, our operations may be restricted and we may ultimately be unable to continue to develop and potentially commercialize our product candidates.
Future financing may be obtained through, and future development efforts may be paid for by, the issuance of debt or equity, which may
have an adverse effect on our stockholders or may otherwise adversely affect our business.
If we raise funds through the issuance
of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders of our common stock in the event of a liquidation. In such event, there is a possibility that once all senior
claims are settled, there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise funds through the issuance of additional equity, whether through private placements or public offerings, such an issuance would
dilute your ownership in us.
The terms of debt securities may also impose restrictions on our operations, which may include limiting our
ability to incur additional indebtedness, to pay dividends on or repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios,
and our ability to satisfy such covenants may be affected by events outside of our control.
We expect to continue to incur
significant research and development expenses, which may make it difficult for us to attain profitability, and may lead to uncertainty as to our ability to continue as a going concern.
We expend substantial funds to develop our technologies, and additional substantial funds will be required for further research and
development, including preclinical testing and clinical trials of any product candidates, and to manufacture and market any products that are approved for commercial sale. Because the successful development of our products is uncertain, we are
unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate enough revenue, even if we are able to commercialize any of our product candidates, to become
profitable.
If we are unable to achieve or sustain profitability or to secure additional financing, we may not be able to meet our
obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our common stockholders losing their entire investment. There is no guarantee
that we will become profitable or secure additional financing. Our financial statements contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern.
Changes in our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our expansion plans, increased expenses, potential acquisitions or other events will all affect our ability to continue as a
going concern.
We will rely upon third parties for the manufacture of our clinical and cosmetic product candidates.
We do not have the facilities or expertise to manufacture supplies of any of our potential product candidates for clinical trials or for
consumer testing. Accordingly, we depend on a limited number of manufacturers to obtain supplies and we will need to either develop, contract for, or otherwise arrange for the necessary manufacturers for these supplies. If for any reason we are
unable to obtain the supplies for our potential product candidates, we would have to seek to obtain it from another major manufacturer. There is no assurance that we will be able to timely secure needed supply arrangements on satisfactory terms, or
at all. Our failure to secure these arrangements as needed could have a material adverse effect on our ability to complete the development of our product candidates or, if we obtain regulatory approval for our product candidates, to commercialize
them.
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We may not be able to establish or maintain the third-party relationships that are
necessary to develop or potentially commercialize some or all of our product candidates.
We expect to depend on collaborators,
partners, licensees, clinical research organizations and other third parties to support our discovery efforts, to formulate product candidates, to manufacture our product candidates and to conduct clinical trials for some or all of our product
candidates. We cannot guarantee that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and other third parties on favorable terms, if at all.
Our ability to successfully negotiate such agreements will depend on, among other things, potential partners evaluation of the superiority of our technology over competing technologies, the quality of the preclinical and clinical data that we
have generated and the perceived risks specific to developing our product candidates. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or
commercialize our product candidates. We cannot necessarily control the amount or timing of resources that our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot
guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion. We may not be able to readily terminate any such agreements with contract partners even if such contract partners do not fulfill their
obligations to us.
We are subject to potential liabilities from clinical testing and future product liability claims.
If any of our future products are alleged to be defective, they may expose us to claims for personal injury by subjects in clinical trials of
our products. If our non-cosmetic products are approved by the FDA, users may claim that such products caused unintended adverse effects. We will seek to obtain clinical trial insurance for clinical trials that we conduct, as well as liability
insurance for any products that we market. There is no assurance that we will be able to obtain insurance in the amounts we seek, or at all. We anticipate that licensees who develop our products will carry liability insurance covering the clinical
testing and marketing of those products. There is no assurance, however, that any insurance maintained by us or our licensees will prove adequate in the event of a claim against us. Even if claims asserted against us are unsuccessful, they may
divert managements attention from our operations and we may have to incur substantial costs to defend such claims.
Any drugs
we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material adverse effect on our business.
If approved, we intend to sell our products to physicians, plastic surgeons and dermatologists, as well as hospitals, oncologists and clinics
that receive reimbursement for the healthcare services they provide to their patients from third-party payors, such as Medicare, Medicaid and other domestic and international government programs, private insurance plans and managed care programs.
Most third-party payors may deny reimbursement if they determine that a medical product was not used in accordance with cost-effective treatment methods, as determined by the third-party payor, was used for an unapproved indication or if they
believe the cost of the product outweighs its benefits. Third-party payors also may refuse to reimburse for experimental procedures and devices. Furthermore, because our programs are still in development, we are unable at this time to determine
their cost-effectiveness and the level or method of reimbursement for them. Increasingly, the third-party payors who reimburse patients are requiring that drug companies provide them with predetermined discounts from list prices, and are challenging
the prices charged for medical products. If the price we are able to charge for any products we develop is inadequate in light of our development and other costs, our profitability could be adversely affected.
We currently expect that any drugs we develop may need to be administered under the supervision of a physician. Under currently applicable
law, drugs that are not usually self-administered may be eligible for coverage by the Medicare program if:
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They are incidental to a physicians services;
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They are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standard of medical practice;
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They are not excluded as immunizations; and
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They have been approved by the FDA.
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Insurers may refuse to provide insurance coverage for
newly approved drugs, including drugs in our clinical pipeline, or insurance coverage may be delayed or be more limited than the purpose for which the drugs are approved by the FDA. Moreover, eligibility for insurance coverage does not imply that
any drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and
may not be made permanent. Reimbursement may be based on payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by
government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon
Medicare coverage policy and payment limitations in setting their own reimbursement rates. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for new drugs that we develop
could have a material adverse effect on our operating results, our ability to raise capital needed to develop products and our overall financial condition.
Additionally, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of
reimbursement for medical products and services. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and price levels of our
products. If our customers are not reimbursed for our products, they may reduce or discontinue purchases of our products, which could have a material adverse effect on our business, financial condition and results of operations.
Comprehensive healthcare reform legislation, which became law in 2010, and any revisions to this legislation, could adversely affect our
business and financial condition. Among other provisions, the legislation provides that a biosimilar product may be approved by the FDA on the basis of analytical tests and certain clinical studies demonstrating that such product is
highly similar to an existing, approved product and that switching between an existing product and the biosimilar product will not result in diminished safety or efficacy. This abbreviated regulatory approval process may result in increased
competition if we are able to bring a product to market. The legislation also includes more stringent compliance programs for companies in various sectors of the life sciences industry with which we may need to comply and enhanced penalties for
non-compliance
with the new healthcare regulations. Complying with new regulations may divert management resources, and inadvertent failure to comply with new regulations may result in penalties being imposed on us.
Some states and localities have established drug importation programs for their citizens, and federal drug import legislation has been
introduced in Congress. The Medicare Prescription Drug Plan legislation, which became law in 2003, required the Secretary of Health and Human Services to promulgate regulations for drug reimportation from Canada into the United States under some
circumstances, including when the drugs are sold at a lower price than in the United States. The Secretary, however, retained the discretion not to implement a drug reimportation plan if the Secretary finds that the benefits do not outweigh the
costs, and has so far declined to approve a reimportation plan. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the
reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.
With the new U.S. administration and Congress, there may be additional legislative changes, including repeal and replacement of certain
provisions of the Affordable Care Act. It remains to be seen, however, precisely what new legislation will provide, when it will be enacted and what impact it will have on the availability of healthcare and containing or lowering the cost of
healthcare. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to
develop product candidates.
Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory
review. If we fail to comply with continuing U.S. and foreign regulations, we could lose our approvals to market drugs and our business would be materially and adversely affected.
Following regulatory approval of any drugs we may develop, we will remain subject to continuing regulatory review, including the review of
adverse drug experiences and clinical results that are reported after our drug products are
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made available to patients. This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make
any of our drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or
facility, including withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-market
information for all of our product candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product
recalls and seizures, operating restrictions and other adverse consequences.
If we fail to attract, hire and retain qualified
personnel, we may not be able to design, develop, market or sell our products or successfully manage our business.
Our business
prospects are dependent on our management team and all of our employees. The loss of any of our key employees, including Drs. Cauwenbergh, Pavco and Eliseev, who serve as our Chief Executive Officer, our Chief Development Officer and our Chief
Business Officer, respectively, or our inability to identify, attract, retain and integrate additional qualified key personnel, could make it difficult for us to manage our business successfully and achieve our business objectives.
Competition for skilled research, product development, regulatory and technical personnel is intense, and we may not be able to recruit and
retain the personnel we need. The loss of the services of any key research, product development, regulatory and technical personnel, or our inability to hire new personnel with the requisite skills, could restrict our ability to develop our product
candidates.
Risks Relating to Our Securities
The price of our common stock has been and may continue to be volatile.
The stock markets, in general, and the markets for drug delivery and pharmaceutical company stocks, in particular, have experienced extreme
volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the limited trading volume of our stock may
contribute to its volatility.
In the past, following periods of volatility in the market price of a particular companys securities,
litigation has often been brought against that company. If litigation of this type is brought against us, it could be extremely expensive and divert managements attention and the Companys resources.
We may not be able to regain compliance with the continued listing requirements of The Nasdaq Capital Market.
On February 2, 2017, we received written notice (the
Notification Letter
) from the Nasdaq Stock Market
(
Nasdaq
) notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires
listed securities to maintain a minimum bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.
Based on the closing bid price of our common stock for the 30 consecutive business days prior to the date of the Notification Letter, we no longer meet the minimum bid price requirement.
The Notification Letter does not impact our listing on The Nasdaq Capital Market at this time. The Notification Letter states that we have 180
calendar days, or until August 1, 2017, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive
business days at any time prior to August 1, 2017. In the event that we do not regain compliance by August 1, 2017, we may be eligible for additional time to reach compliance with the minimum bid price requirement. However, if we fail to
regain compliance with the minimum bid price listing requirement or fail to maintain compliance with all other applicable continued listing requirements and Nasdaq determines to delist our common stock, the delisting could adversely impact us by,
among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock; limiting our ability to issue additional securities in the future; and limiting our
ability to fund our operations.
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We have issued preferred stock in the past and possibly may issue more preferred stock in
the future, and the terms of the preferred stock may reduce the value of our common stock.
We are authorized to issue up to
10,000,000 shares of preferred stock in one or more series. There were no shares of our Series B Convertible Preferred Stock and 1,082,114 shares of Series C Convertible Preferred Stock issued and outstanding at March 15, 2017, respectively.
Our Board of Directors may determine the terms of future preferred stock offerings without further action by our stockholders. The issuance of our preferred stock could affect your rights or reduce the value of our outstanding preferred stock or
common stock. In particular, rights granted to holders of certain series of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and restrictions on our ability to merge with or
sell our assets to a third party.
We may acquire other businesses or form joint ventures that may be unsuccessful and could dilute
your ownership interest in the Company.
As part of our business strategy, we may pursue future acquisitions of other
complementary businesses and technology licensing arrangements. We also may pursue strategic alliances. We have limited experience with respect to acquiring other companies and with respect to the formation of collaborations, strategic alliances and
joint ventures. We may not be able to integrate such acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. We also could experience adverse effects on our reported results of operations from
acquisition related charges, amortization of acquired technology and other intangibles and impairment charges relating to write-offs of goodwill and other intangible assets from time to time following the acquisition. Integration of an acquired
company requires management resources that otherwise would be available for ongoing development of our existing business. We may not realize the anticipated benefits of any acquisition, technology license or strategic alliance. For example, in
January 2017, the Company acquired 100% of the outstanding capital stock of MirImmune. The assets and development programs acquired from MirImmune are at an early stage of development and will require a significant investment of time and capital if
we are to be successful in developing them. There is no assurance that we will be successful in developing such assets, and a failure to successfully develop such assets could diminish our prospects.
To finance future acquisitions, we may choose to issue shares of our common stock or preferred stock as consideration, which would dilute your
ownership interest in us. Alternatively, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may
result in dilution to our stockholders. Any future acquisitions by us also could result in large and immediate write-offs, the incurrence of contingent liabilities or amortization of expenses related to acquired intangible assets, any of which could
harm our operating results.
We do not anticipate paying cash dividends in the foreseeable future.
Our business requires significant funding. We currently plan to invest all available funds and future earnings in the development and growth
of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain for the foreseeable future.
Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of the
Company or changes in our management and, as a result, depress the trading price of our common stock.
Our certificate of
incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of the Company or changes in our management that the stockholders of the Company may deem advantageous. These provisions:
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Authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;
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Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
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Provide that the Board of Directors is expressly authorized to adopt, alter or repeal our bylaws; and
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Establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
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Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to
negotiate with our Board of Directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management team by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation
Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner.